Insights

The practice of law is changing every day, and the effect of changing legislation on businesses is significant. We write about recent developments in the world of tax & business law, keeping a watchful eye on the changing landscape for our clients. See what we’re thinking about, and what your business should be looking out for.

Business Law

CSA Proposes New Rule on Non-GAAP and Other Financial Measures Disclosure

The Canadian Securities Administrators (the “CSA”) have published for comment Proposed National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure (the “Proposed Instrument”). The Proposed Instrument sets out prescribed disclosure requirements for non-GAAP financial measures and other financial measures (i.e. segment measures, capital management measures, and supplementary financial measures). There is no indication of an intended effective date but the proposed instrument is substantively similar to, although quite a bit more exhaustive than, their current guidance on the matter contained CSA Staff Notice 52-306 (Revised) Non-GAAP Financial Measures (“SN 52-306”). Consequently, I speculate that it may become effective by the...

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Business Law

Everyone Revokes the Northwest Exemption Except Alberta and Saskatchewan

This article updates a previous article written by myself and Adam Rock dated June 9, 2016 entitled “Finder’s Fees – Permitted, Recommended and Prohibited Activities”. The Northwest Exemption is a conditional registration exemption currently in place in Western Canada often relied upon by “finders” to receive fees for their services in introducing investors to companies looking to raise money. However, on August 15, 2018, the securities regulatory authorities of British Columbia, Manitoba, Nunavut, the Northwest Territories, and Yukon announced that they will revoke the “Northwestern Exemption” in their jurisdictions effective on April 30, 2019. And both Alberta and Saskatchewan have...

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Business Law

ASC Expands Prospectus Exemptions for Distributions to Purchasers Outside Alberta

The Alberta Securities Commission (ASC) recently updated ASC Rule 72-501 Distributions to Purchasers Outside Alberta. This new rule significantly expands upon the exemptions available to an Alberta issuer where the offering materially complies with the securities laws of the foreign jurisdiction. In addition, the new rule contains a prospectus exemption to facilitate Alberta issuers using the offering memorandum prospectus exemption to more readily raise capital from investors in other jurisdictions of Canada.  The new rule is very similar, but not identical to, the new rule on this subject matter adopted earlier this year in Ontario. Key Prospectus Exemptions for Distributions...

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Business Law

Canadian Companies Need to Assess Their “Foreign Private Issuer” Status for SEC Reporting Purposes

Canadian companies wishing to access the US capital markets from time to time, and that have historically qualified as a “foreign private issuer” under US federal securities laws, need to annually assess whether they continue to meet the tests to qualify as a “foreign private issuer”.  Under US federal securities laws, “foreign private issuers” are exempt from US registration and continuous disclosure requirements. If a foreign company does not continue to qualify as a foreign private issuer, it becomes subject to the same registration and disclosure requirements applicable to domestic US entities.  A foreign company must determine its status as...

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Business Law

CSA Staff Says Most Coin/Token Offerings Are Securities

On June 11, 2018, the Canadian Securities Administrators (CSA) provided guidance on when an offering of cryptocurrencies such as coins or tokens, including ones that are commonly referred to as “utility tokens”, will be offering of securities. This is important because if the coin or token is considered a security, then the person issuing the coin or token must comply with provincial securities laws when doing so (i.e. file and clear a prospectus with securities regulators or rely on an exemption from those prospectus requirements). Failure to do so could give rise to statutory and civil liability including a requirement...

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Litigation

Letter of Credit Security and the “Autonomy Principle”

In commerce, parties often provide security in the form of letters of credit. A party (the “promisor”) may provide security for performance of its obligations under a commercial transaction (“underlying contract”) with the other party (the “promisee”) by procuring a letter of credit (“LOC”) from a bank.  The LOC would stipulate that a certain amount of money is to be released by the bank to the promisee/beneficiary if the promisor defaults in the underlying contract.  There would therefore be two different relationships at play: 1) that between the promisor and promisee in the underlying contract and 2) that between the...

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Business Law

OSC Provides Guidance on Hostile Take-Over Bids No Reduction of Minimum Bid Periods, Hard Lock-up Agreements are OK and Shareholder Rights Plans are Useless

Click here to view in PDF. On March 15, 2018, the Ontario Securities Commission released the rationale behind its decisions on various applications submitted to it as a result of the hostile bid by Aurora Cannabis Inc. for CanniMed Therapeutics Inc. This decision provides important guidance to market participants and the legal community on the application of the new take-over bid regime to the 105 day minimum deposit period, hard lock-up agreements and the joint actor test, and shareholder rights plans. Executive Summary: 1. Minimum 105 Day Deposit Period: Securities commissions will be reluctant to shorten the minimum 105 day...

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Business Law

Coming Soon – Mandatory Privacy Breach Reporting and Record-Keeping

Click here to view in PDF. Be aware that, effective November 1, 2018, the provisions of Canada’s Digital Privacy Act dealing with privacy breach notification and breach record keeping will come into force. Reporting Under these provisions, organizations will be required to: report to the Office of the Privacy Commissioner of Canada (OPC), and notify affected individuals and relevant third parties (in certain circumstances) about “breaches of security safeguards” that pose a “real risk of significant harm” to affected individuals. An organization will also be required to notify any other organization or government institution if it believes the other body...

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Business Law

A Reminder for D&O’s re: Civil Liability for Secondary Market Disclosure

Click here to view in PDF. Investors that purchase the securities of a Canadian public company on the secondary market (i.e. on a stock exchange) may bring claims against the company and its directors and officers for (i) a misrepresentation in a document or in a public oral statement or (ii) a failure to make timely disclosure of a material change. This article provides a very simplified refresher course on those potential civil liabilities. Note that this is not a comprehensive summary and you are encouraged to consult with appropriate legal counsel if any of these potential claims could apply...

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Business Law

Canadian Disclosure Requirements for US Marijuana Issuers

Click here to view in PDF. Many jurisdictions in the United States now permit the use and sale of marijuana within a regulatory framework. Consequently, several Canadian public companies currently have, or are in the process of developing, marijuana-related activities in such U.S. states (U.S. Marijuana Issuers). However, marijuana continues to be listed as a controlled substance under U.S. federal law. As such, marijuana-related practices or activities, including the cultivation, possession or distribution of marijuana, are illegal under U.S. federal law.  This is a significant risk factor, and raises concerns about the disclosure requirements under Canadian securities laws, for U.S....

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