This article was written by David Hunter, Nalin Sahni and George McKibbon (McKibbon Wakefield Inc.).

As part of the federal budget, the government has proposed a complete overhaul of federal environmental assessment in Canada. The repeal and re-enactment of the Canadian Environmental Assessment Act (“CEAA”) and amendments to other federal environmental legislation amount to the most significant change in federal environmental assessment (“EA”) since the legislation was first created decades ago. These changes are vast and their full impact on the mining industry, particularly in Ontario, will not be known for years to come.

Over the next few weeks, the FMC Mining Group will analyze and comment on the proposed amendments and their impact on environmental assessments related to mining in Ontario. These commentaries will of course take into consideration the recent changes to Ontario’s Mining Act, Far North Act and Aboriginal consultation requirements.

Though complex, the amendments will have three major impacts:

1. Federal EAs will be more limited in scope and will apply to fewer projects.
2. More discretion for the Minister of the Environment and Cabinet in the EA process.
3. Huge downloading of EA responsibilities to the provinces.

In this first article, we provide a general overview of the proposed amendments relevant to miners. Future articles, will discuss particular subjects in detail including public participation, Aboriginal consultation, broad changes to the Fisheries Act, and harmonization with provincial environmental assessment processes.

Projects Requiring an Environmental Assessment

The former list of federal actions that trigger a formal environmental assessment (usually a permit) has been eliminated. EAs are only required if the project is designated by regulation. This change should make it much clearer which projects require an environmental assessment though it can be amended at any time by Cabinet.

Activities that are “incidental” to designated projects (possibly road access, transmission lines, air strips, etc.) must also be covered by the EA. Since what is “incidental” to a project is not defined by CEAA, this may the subject of much debate.

Who Conducts the Environmental Assessment?

If mining projects are included in the list of projects designated as requiring a federal EA, conducting the EA will be the responsibility of the Canadian Environmental Assessment Agency or a review panel established by the Minister of the Environment (the “Minister”). The exception here would be uranium mining projects. The Canadian Nuclear Safety Commission will continue to have lead responsibility for environmental assessment of uranium mines.

Types of Environmental Assessments and Timelines

The CEAA amendments will eliminate the concept of comprehensive study reports. There will now be only two levels of federal environmental assessment – “standard EA’s” (similar to current screening level studies) and EA’s performed by review panels. Standard EAs must be completed within 365 days, and review panels must complete their assessment within 24 months of receiving a complete environmental impact report from the proponent. Note that these times lines are not fixed but can be extended up to 3 months at the discretion of the Minister or indefinitely by Cabinet. Public participation in a review panel hearing will be limited to those “directly affected” or who have relevant expertise. Non-governmental organizations seeking to intervene in EAs may find it difficult to obtain standing to participate in review panel proceedings.

Harmonization with Provincial Environmental Assessments

The new CEAA is trying to move towards a “one project, one review” system. Federal EA process for standard EAs can be replaced by a provincial EA if the Minister is of the opinion that the provincial environmental assessment act would be an “appropriate substitute” and the province requests the substitution. Panel reviews cannot be substituted by a provincial process but the new CEAA continues to allow for a joint federal-provincial panel review.

The provincial EA process does not have to be as rigorous as the federal assessment though the same factors must be considered. The Minister can also approve the substitution of a provincial EA after a provincial EA has been completed. It would appear that all current federal-provincial harmonization agreements will have to be rewritten from scratch. Given that these agreements have typically taken years to negotiate, achieving a true a “one project, one review” system may take a considerable period of time. Eventually, however, these changes could remove unnecessary duplication in EAs.

Scope of Environmental Assessments
The purpose of CEAA has been significantly altered. Formerly, the purpose was to ensure that projects did not have significant adverse environmental effects that could not be justified. This purpose has been reduced such that projects should not have significant adverse environmental effects only upon the components of the environment within federal jurisdiction. This could generate debate and uncertainty as to the types of effects covered by federal EAs.

Further, only enumerated environmental effects need to be taken into account. Cabinet alone can add or remove a component of the natural environmental that must be assessed. Coupled with the changes to the Fisheries Act to focus on the protection of commercial, recreational and Aboriginal fisheries, this means that many mining projects may no longer require federal EAs and may be primarily governed by provincial EA processes. The definition of what constitutes a commercial, recreation or Aboriginal fishery will be the subject of debate.

While the scope and purpose of federal assessments has generally been narrowed, the assessment of environmental effects on Aboriginal peoples has been given increased focus. Amendments relating to Aboriginal peoples are especially significant when combined with the proposed amendments to Ontario’s Mining Act regulations and the new requirements under the Far North Act. FMC will prepare a commentary devoted entirely to this subject.

On April 30, 2012, the Canadian Securities Administrators (the “CSA”) announced the official designation of DBRS Limited, Fitch, Inc., Moody’s Canada Inc. and Standard & Poor’s Rating Services (Canada) as Designated Rating Organizations (“DROs”) under National Instrument NI 25-101 Designated Rating Organizations (“NI 25-101”).

NI 25-101, which came into force on April 20, 2012, established a regulatory framework for the oversight of credit rating organizations by permitting them to apply for DRO status. The CSA designation orders make each of the DROs subject to regulation under applicable Canadian securities laws.

On May 10, 2010, the Canadian Securities Administrators (except Ontario) (the “CSA”) announced the adoption of Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets (the “OTC Rule”). The OTC Rule establishes certain disclosure obligations for issuers with securities quoted on the U.S. OTC market if those issuers are found to have a significant connection to Canada. According to the CSA, the rule discourages the manufacture and sale in a Canadian jurisdiction of U.S. OTC quoted shell companies that can be used for abusive purposes.

Under the OTC Rule, certain Canadian continuous disclosure requirements would apply to OTC issuers if the issuer falls into one or more of the following categories: (i) the issuer’s business has been directed or administered in or from Canada; (ii) promotional activities have been carried on in or form Canada; or (iii) the issuer distributed a security to a person resident in Canada before obtaining a ticker symbol, and that security becomes an OTC-quoted security.

An OTC issuer subject to this rule would be required to comply with the continuous disclosure obligations applicable to venture issuers. In addition, OTC issuers subject to the rule will be required to file annual information forms.

The OTC Rule will come into effect on July 31, 2012.

On April 26, 2012, the Canadian Securities Administrators (“CSA”) published two staff notices addressing disclosure requirements related to the prospectus exemptions found under National Instrument 45-106 – Prospectus and Registration Exemptions (“NI 45-106”). The notices are aimed at improving compliance by issuers, underwriters and their advisors and assisting market participants in avoiding deficiencies in their NI 45-106-related filings.

In CSA Staff Notice 45-308 – Guidance for Preparing and Filing Reports of Exempt Distribution, the CSA provides guidance relating to reports of exempt distribution filed in accordance with Form 45-106F1. Specifically, the notice highlights a number of issues observed by the CSA and clarifies requirements in respect of such topics as filing deadlines, filing fees, improper reliance on unavailable exemptions, failure to include a complete list of purchasers and failure to disclose all commissions and finder’s fees.

In Multilateral CSA Staff Notice 45-309 – Guidance for Preparing and Filing an Offering Memorandum, the CSA addresses compliance with the rules relating to offering memoranda (“OM”). The CSA highlights that issuers must ensure that an OM is in the correct form, does not contain any misrepresentations and provides sufficient information to enable a prospective purchaser to make an informed investment decision. Issues identified by the CSA include the failure to update the OM when distributions are ongoing, using an incorrect form of update and inadequately disclosing the issuer’s business. While the OM exemption is not available in Ontario, the guidance in Staff Notice 45-309 applies to Ontario-based issuers distributing securities in other jurisdictions under the OM exemption.

Each Notice confirms that responsibility for compliance with NI 45-106 rests with the issuer, that the use of a prospectus exemption under NI 45-106 is subject to regulatory oversight and monitoring and that identified non-compliance may result in corrective action where appropriate.

On March 20, 2012, TMX Group announced its support for, and cooperation with, OSC’s review of emerging market (“EM”) issuers. In addition, the Toronto Stock Exchange and TSX Venture Exchange initiated parallel consultations with various market participants, issuers and other market stakeholders over the last number of months. Based on this review and consultation, TMX Group prepared and is expected to provide additional guidance to EM issuers, to complement existing rules and working practices. Such guidance may be subject to further regulatory consultation and review by securities commissions.

Kevan Cowan, President, TSX Markets and Group Head of Equities, TMX, said:

“While provincial securities regulators are the primary authority overseeing reporting issuers, TMX Group takes its responsibility and public interest mandate very seriously. With the growth of emerging market economies, issuers and investors from these markets are expected to increasingly seek opportunity in Canada and other developed economies around the world. The work currently being conducted by TMX Group is part of our ongoing efforts to enhance the quality and integrity of Canada’s capital markets, a key competitive advantage both for us and for Canada.”

On March 20, 2012 the Ontario Securities Commission (“OSC” or the “Commission”) released a staff notice summarizing the findings of the Commission’s review of emerging market (“EM”) issuers. With the growing importance of EM issuers to the Ontario economy, OSC’s review was prompted by recent concerns involving certain high profile EM issuers. In summary, the review articulated four main areas of concern:

 (1) Concerns regarding issuer governance and related disclosure: OSC’s review yielded recommendations for improved corporate governance practices and better disclosure regarding corporate structure and risk factors. The OSC also recommended that EM issuers maintain appropriate books and records in Canada, and consider both minimum local language competency and Canadian director residency;

(2) Concerns regarding the audit function for an EM issuer’s annual financial statements: The Commission’s recommendations included, among others, facilitating access to audit working papers of Ontario reporting issuers, and examining whether suitability standards for auditors should be developed;

(3) Concerns regarding adequacy of the due diligence process conducted by underwriters in offerings of securities by EM issuers: OSC review recommended that a transparent set of requirements and best practices for the conduct of due diligence by underwriters be established; and

(4) Concerns regarding the exchange listing process. The Commission’s review recommended that exchanges review their current listing and approval requirements with a view to determine whether more stringent listing requirements would be appropriate for EM issuers.

CSA issues prospectus disclosure guidance for issuers with short-term liquidity concerns or raising insufficient proceeds

On March 2, 2012, the Canadian Securities Administrators (CSA) issued a notice setting out the CSA’s approach regarding disclosure of the financial condition of an issuer and the sufficiency of proceeds in the context of a prospectus offering.

The notice is intended for issuers that have filed a prospectus and either (i) it appears that the prospectus inadequately discloses the issuer’s financial condition and going concern risk or (ii) there is adequate disclosure about the issuer’s financial condition, but it appears that the proceeds from the proposed offering may be insufficient to accomplish the stated purpose of the offering. In these circumstances, a receipt for a prospectus may not be issued.

The CSA identified five areas in which the staff may raise comments where it identifies concerns in respect to an issuer’s financial condition and/or sufficiency of proceeds: (i) missing information regarding offering amount and pricing, (ii) offering structure, (iii) use of proceeds disclosure, (iv) risk factors disclosure and (v) representations to support ability to continue operations. For each of these areas, the notice identifies disclosure that will likely be required before the issuer receives a receipt for a final prospectus. However, for issuers with real short-term liquidity concerns, it is possible that a receipt may not be issued, regardless of disclosure.

The notice does not set out a specific test to determine under what circumstances the proceeds will be considered insufficient or when an issuer will be deemed to not have sufficient funds to continue as a going concern. As a practical matter, it would appear that the determination as to the sufficiency of proceeds to achieve the purposes identified in the prospectus will often be clear. In respect of issuer with liquidity concerns, the notice provides general guidance based on the type of issuer in question:

• Exploration stage issuer:  Sufficient to reach completion of next phase of a project
• Development stage issuer:  Sufficient to achieve the issuer’s next significant milestone
• Research & Development issuer:  Sufficient to achieve progress on the development of a key product
• Issuer with active operations:  Ability to continue operations for the short term

A copy of the notice is available here.

On March 7, 2012, the Ontario Securities Commission, the Quebec’s Authorité des Marches Financiers and the British Columbia Securities Commission entered into a Supervisory Memorandum of Understanding (Supervisory MOU) with the European Security Markets Authority (ESMA) concerning the regulatory cooperation in the supervision of credit rating agencies that operate in both the European Union and Canada. The Supervisory MOU is subject to the approval of the Minister of Finance and if approved, it will become effective April 20, 2012.

Since 2006, the Government has been working to streamline the review process for major economic projects so that projects proceed in a timely fashion while protecting the environment. For example, in 2010 the Government amended the Canadian Environmental Assessment Act to allow assessments to start sooner and reduce duplication, and created participant funding programs to ensure meaningful public engagement in the review process.

These steps have made a difference, but more needs to be done. Currently, companies undertaking major economic projects must navigate a complex maze of regulatory requirements and processes. Approval processes can be long and unpredictable. Delays and red tape often plague projects with few environmental risks. Under the current system, thousands of smaller projects with little or no risk to the environment are caught up in the federal environmental review process. The types of small projects that can be needlessly subjected to lengthy reviews include construction of a new pumping house for the expansion of a maple syrup plant, and the replacement of an existing culvert under a causeway. By forcing these thousands of low-risk projects to go through the review process, the current system draws resources away from projects that have the greatest impact on the environment. This approach is not economically sound or environmentally beneficial.

Read Full Article

On February 29, 2012, the Ontario Securities Commission (“OSC”) released a Strategic Plan detailing how the OSC intends to “stay ahead of the evolving, complex and dynamic environment of today’s global capital markets.”

The OSC Strategic Plan includes six key initiatives, as follows: (i) expanding the OSC’s research and analytic capability to be able to respond to and keep pace with market developments and investor concerns and to support policy-making by creating a dedicated Research and Analysis Group; (ii) engaging investors more effectively by creating an Office of the Investor to strengthen the OSC’s focus on investor engagement; (iii) improving internal policy coordination and priority setting by establishing an internal Policy Coordination Committee; (iv) aligning all operations and programs with defined OSC goals and priorities and developing and reporting on key performance indicators; (v) improving risk identification and management by establishing an Emerging Risk; and (vi) delivering excellence in the execution of operations.

A copy of the OSC’s Strategic Plan can be found here.

Effective February 29, 2012, the TSX Venture Exchange (“TSXV”) has amended Policies 1.1 and 3.2 for the purposes of addressing certain inconsistencies with applicable securities laws and enhancing the clarity of existing policy requirements.

Of particular interest are the changes to the definition of “Exchange Hold Period” to more properly reflect the circumstances in which a TSXV hold period and the corresponding TSXV legend are applicable to a security. The amendments to Policy 3.2 also clarify that if the securities are issued into a direct registration or book-entry system (such as CDS) or the purchaser of the securities does not otherwise receive a physical certificate representing the securities, the Issuer must ensure that the purchaser receives a written notice containing the applicable TSXV legend. The amendments also clarify the applicable “Exchange Hold Period” in respect of securities which are convertible, exercisable or exchangeable into shares listed on the TSXV.

This article was written by Mark Evans and Michael Beeforth.

Introduction

The Ontario Divisional Court’s recent decision in Deeb v IIROC, 2012 ONSC 1014 (CanLII) will be of interest to securities law practitioners with clients operating in Ontario, as it speaks to the ability (or inability) of respondents to circumvent the disciplinary process of the Investment Industry Regulatory Organisation of Canada (IIROC) by means of an application for judicial review. Deeb confirms that, in line with previous decisions, IIROC derives its authority from the contractual relationships with its members and not from statute, and that when an individual or firm contractually submits to IIROC’s jurisdiction, it is bound by that commitment and will be unable to bypass IIROC’s disciplinary procedures by proceeding directly to the civil courts.

Background

IIROC is a self-regulatory organisation that regulates investment dealers in Canada. IIROC is recognised as a self-regulatory organisation by the Ontario Securities Commission (OSC) pursuant to the Ontario Securities Act (RSO 1990, c S.5), which allows persons or companies affected by a direction, decision, order or ruling made by IIROC to apply to the OSC for a hearing and review of the relevant direction, decision, order or ruling. Despite being recognised by the OSC, IIROC is an independent body and receives its funding from its members.

Hampton Securities Limited is a dealer member of IIROC. Peter Michael Deeb, the president and chief executive officer of Hampton, is registered as an ‘approved person’ with IIROC. Both agreed to be bound by IIROC’s rules and bylaws and submitted to IIROC’s jurisdiction. Specifically, in its April 2008 membership application, Hampton stated that it “submits to the jurisdiction of IIROC”, and that it “agrees that IIROC is entitled to exercise such jurisdiction over the applicant and its approved persons with respect to any matter, facts, actions or circumstances existing or arising prior to, as at, or after the date” on which it became a member.

In late 2009 IIROC commenced an investigation into both Deeb and Hampton on the basis of three anonymous complaint letters received by IIROC, which were shown but not produced to them. The investigation led to a business conduct review of Hampton in 2010, which resulted in a business conduct report describing three matters relating to Hampton’s conduct.

Subsequent to the release of the business conduct report, on September 1 2011 IIROC issued a notice of hearing pursuant to its rules naming Deeb as a respondent in a disciplinary hearing. An alert concerning the notice of hearing was posted on the IIROC’s website and distributed to its members. Hampton and Deeb alleged that they experienced several deleterious consequences as a result, including loss of business to Hampton, loss of Hampton’s staff and the inability of Deeb to open a bank account.

On November 3 2011 the applicants commenced an application in the Ontario Divisional Court under the Judicial Review Procedure Act (RSO 1990, c J.1), seeking an order quashing IIROC’s notice of hearing and compelling it to retract its business conduct report, produce the three anonymous complaint letters and set aside the close supervision by IIROC to which Deeb had previously consented. IIROC subsequently moved to quash the application for judicial review.

Decision to quash application for judicial review

The test on a motion to quash an application for judicial review in Ontario is whether it is plain and obvious that the application cannot succeed or, alternatively, that it is beyond doubt that the application will fail. On its motion, IIROC submitted that the application should be quashed for two reasons:

• There was no jurisdiction for the court to hear the application under the Judicial Review Procedure Act; and

• The application was premature as the applicants had proceeded directly to the divisional court without pursuing relief before an IIROC hearing panel.

In granting IIROC’s motion and quashing the application, Justice Pepall held that IIROC had met the plain and obvious test on both issues.

Lack of jurisdiction

Section 2(1) of the Judicial Review Procedure Act provides that an application for judicial review may request any relief that the applicant would be entitled to in any:

• proceedings by way of application for an order in the nature of mandamus, prohibition or certiorari; or

• proceedings by way of an action for a declaration or for an injunction, or both, in relation to the exercise, refusal to exercise or proposed or purported exercise of a statutory power.

The plain language of the act indicates that the judicial review jurisdiction under the second category is limited to exercises of ‘statutory power’, while case law has established that the jurisdiction under the first category is limited to exercises of ‘state power’.

In accepting IIROC’s submission that its disciplinary jurisdiction over the applicants flowed from the contractual commitments made by its members, the court held that IIROC was not created by and derived no authority from statute, and that it did not exercise any state power other than narrow delegated powers that were not engaged in the current case. Accordingly, disciplinary investigations or steps initiated by IIROC were properly overseen by IIROC and were not the subject of judicial review under the act.

The court also rejected the applicants’ argument that IIROC derived its regulatory authority from the OSC’s recognition order, referring to the Ontario Court of Appeal’s decision in Taub v Investment Dealers Association of Canada, 2009 ONCA 628 (CanLII), which specifically confirmed that “[IIROC’s] duties are not determined by statute and… recognition by the OSC does not transform [IIROC] into a government actor”.

Prematurity

The court agreed with IIROC’s second submission, holding that in the event that its decision concerning jurisdiction was incorrect, the application was nonetheless premature as there were ongoing proceedings before a properly constituted IIROC hearing panel. The hearing panel was properly the decision maker of first instance in the context of IIROC’s disciplinary proceedings and should decide the merits of any requests made by parties to those proceedings. Finally, the court held that there were no exceptional or extraordinary circumstances that justified the exercise of its discretion to permit the application to be heard despite the ongoing IIROC proceedings.

Comment

The divisional court’s decision in Deeb follows the Ontario Court of Appeal’s ruling in Taub that IIROC’s jurisdiction over its members is grounded in contract and not in either statute or in IIROC’s recognition as a self-regulatory organisation by the province’s securities commission. Accordingly, one should expect that the courts in Ontario will continue to respect IIROC’s jurisdiction in regards to disciplinary proceedings over its members (and former members) and, absent extraordinary circumstances, will not intervene in such proceedings at the preliminary stages through applications for judicial review.

This article was written by David Hunter, Nalin Sahni, and environmental planner George McKibbon of McKibbon Wakefield Inc.

Economist Don Drummond recently released a sweeping report (the “Drummond Report”) on rethinking Provincial governance and Ontario’s economy. Miners should take note: the Drummond Report calls for increased mining taxes and user fees and “a new paradigm for environmental and natural resource programs,” licensing, and services that could both hinder and simplify mining development and operations.

Transformation is an important theme in our continuing series on streamlining the current mine development system. In our last article, we discussed the Draft Class Environmental Assessment for Mining and how the licensing system could be improved (See February 9th posting). Today, we discuss the changes that miners should expect from the Drummond Report, if implemented.

Increased Mining Taxes and User Fees

The Drummond Report recommends that Ontario: scrap the resource tax credit, review the mining tax system to ensure Ontario is appropriately compensated, and charge mines for any water used. Business taxes in Ontario have been significantly reduced and tax credits and reduced mining taxes are no longer necessary to encourage investment. Charging for water withdrawals could raise significant revenue and would encourage water conservation. However, the increased costs from these taxes and fees on the mining industry could be substantial. The Drummond Report also recommends that Ontario consider additional mining taxes dedicated for Aboriginal development if mining companies do not fund Aboriginal peoples’ economic participation in the “Ring of Fire”.

Government Should Recover the Full Cost of Resource Licensing

The Drummond Report recommends that the Ministry of the Environment (the “MOE”) and the Ministry of Natural Resources (the “MNR”) raise fees to fully recover the review and administration costs of environmental, land use, and resource licensing. While this is not likely to be problem for the MOE, it isn’t clear if this can be accomplished for approvals under MNR’s Public Lands Act (the “PLA”) for mine related infrastructure approvals such as roads and transmission lines.

Risk-Based Environmental and Natural Resource Approvals

While the MOE is already moving to a risk-based approvals system, MNR’s approvals continue to be based on policies developed under the PLA. Unlike environmental permitting or municipal land use decision-making, there isn’t a wide body of experience for establishing risk-based policies or approvals under the PLA. Acting on this recommendation will be challenging for MNR.

One Project, One Environmental Assessment

The Drummond Report recommends that there should be only one environmental assessment per project with no duplication between the Federal and Provincial governments. As with current renewable energy approvals, environmental assessments should facilitate development by addressing the other approvals mines require such as roads and transmission lines. A consolidated environmental assessment process could create a win-win for miners and environmentalists by trading minimum environmental standards for mines (good for enviros) for an expedited process that lets mining companies get all the permits they need fast (good for miners). Though not mentioned in the Drummond Report, the Municipal Class Environmental Assessment used for municipal infrastructure could also serve as a useful model that provides for the integration of Planning Act and Environmental Assessment Act approvals provided consistent notice and analytical processes are followed.

In our February 9th posting, we discussed how a “one-stop-shop” approach for mining projects could significantly speed project development while increasing environmental protection but would require significant coordination between government ministries. The challenge for the MNR will be to establish objective, science based principles for issuing approvals.

Increased Used Polluter-Pay Principle for Contaminated Sites

The Drummond Report recommends that Ontario expand the financial assurance system to ensure the funds provided in advance are sufficient to pay for any cleanup required. This could lead to proponents of advanced exploration and mining projects being forced to provide larger sums up front in the form of a bond or letter of credit.

While the polluter-pay principle is enshrined in Ontario law, in practice the Parties that contaminate land or fail to property close mines often go out of business or become insolvent and the government is left to pay for the clean up. The MOE and the Ministry of Northern Development and Mines often require companies to provide financial assurance though the amount required is often insufficient to pay for the full cleanup cost. While the financial assurance system can be improved, it is unlikely to cover all cleanup costs since it is impossible to determine how much a cleanup will cost in advance. The Drummond Report also recommends that Ontario follow the approach of the U.S. Superfund and tax mining and other industries to create a pool of money to cover any unfunded clean up costs.

Conclusion

If fully implemented the Drummond Report could create several new taxes and user fees for mining companies. While creating a “one-stop-shop” for approvals and environmental assessments will require significant coordination between Ontario Ministries, it could greatly speed the mine development process. While we hope this occurs, it should not be expected. We will keep you apprised of the implementation of the Drummond Report’s recommendations in future articles.

Note: The Drummond Report fails mention that oil and chemical tax that paid for the U.S. Superfund has been removed by the U.S. Congress. The Superfund is now paid out of general revenues and is no longer an example of a government recovering cleanup costs from industry as stated by the Drummond Report.

On February 3, 2012, the TSX announced the adoption of amendments to Parts I, IV and VI as well as Appendix H of the TSX Company Manual (the “Amendments”). As discussed in a previous post, the Amendments introduce a Due Bill initiative which will help “improve the accuracy and timeliness of the valuation reporting of clients’ holdings when securities undergo certain material corporate events”.

The TSX did not receive any comments in response to its Request for Comments issued on December 22, 2011 and has not made any changes since that publication. The Ontario Securities Commission has approved the Amendments.

Although the Amendments became effective on February 3, 2012, Due Bills will not be used by the TSX until the Due Bill process is implemented by CDS. A public notice will be issued at that time.

Earlier this month, the Ontario Securities Commission, Quebec Autorité des marchés financiers, the Alberta Securities Commission and the British Columbia Securities Commission entered into a Memorandum of Understanding with the Australian Securities and Investments Commission (ASIC).

The MOU provides for consultation, cooperation and information-sharing in the day-to-day supervision of regulated entities in both jurisdictions. In that regard, it complements previous agreements with the ASIC relating to enforcement.

In particular, the MOU provides a framework for information sharing in a number of areas including:

• the initial application by a regulated entity for registration that is registered in the other jurisdiction;
• ongoing supervision and oversight of cross-border regulated entities; and
• regulatory or supervisory actions or approvals that may impact the operations of the entity in the other jurisdiction.

The MOU also provides that “where practicable and reasonable” the securities commissions will give advance notice (or as soon as possible thereafter) of:

• regulatory changes that may have a significant impact on the operations, activities, or reputation of a cross-border regulated entity;
• material events such as changes in the ownership, operating environment, operations, financial resources, management, or systems and control of a cross-border regulated entity that could adversely and directly affect that cross-border regulated entity; and
• enforcement or regulatory actions or sanctions.

In addition, the MOU provides a framework for cross-border examinations of regulated entities located in the other authority’s jurisdiction.  The securities commissions will work collaboratively to facilitate on-site visits, may conduct joint investigations, and will share relevant examination reports or compliance reviews.

In Ontario, the MOU is subject to the approval of the Minister of Finance. If approval is granted, the MOU will take effect in Ontario on April 17, 2012.

David Hunter, Senior Counsel at FMC, will be reprising his role as lecturer in environmental law at Shanghai’s East China University of Politics and Law in May 2012. This course is part of the law and economics program at the Graduate School and will be co-taught with Professor Jinhau Cheng. David also lectured at the university in September 2011.

This article was written by Sandy Walker and Patrick Robert.

Beef producers, financial institutions, energy and resource companies, educators, researchers, uranium producers, canola growers, mining investors and pandas…

Question: What do they all have in common?

Answer: Each of them may benefit from Canadian Prime Minister Harper’s recent visit to China.

In the view of some seasoned China-watchers, the Prime Minister’s trip may be remembered as the most important visit by a Canadian prime minister in a decade for the sheer volume and depth of bilateral commitments and agreements achieved, including 23 agreements between Canadian and Chinese companies generating a reported $3 billion (not to mention China’s agreement to loan two giant pandas to Canada).

Though the U.S. continues to be Canada’s number one trading partner, China is its second most important by far and is anticipated to become even more so as China is expected to become the world’s largest economy by 2020. Canadian investment in China is at a record high, having increased by 38 percent over 2009 levels.

The four day visit by the Prime Minister included meetings with the highest level of Chinese Government officials: President Hu Jintao, Chairman of the Standing Committee of the National People’s Congress Wu Bangguo, and Premier Wen Jiabao. The Prime Minister’s entourage included business leaders from companies such as Bell, TELUS, Cameco and Bombardier and the Prime Minister attended and addressed the 5th Canada-China Business Forum put on by the Canada-China Business Council (CCBC). (See photograph of Michel Brunet, FMC’s Chair, and Peter Harder, President of the CCBC and FMC Senior Policy Advisor, Government Relations with Prime Minister Harper.)

Probably the signal accomplishment was the conclusion of substantive negotiations on the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA), an accord that has been in the works for the past 18 years and is expected to be among the strongest such agreements China has signed with foreign countries. Although the accord must still undergo internal approval processes in the two countries (including being presented to Parliament in Canada), the safeguards it provides for Canadian investors in China are significant. For example, the agreement provides Canadian investors with recourse against public policy actions by the Chinese government that are detrimental to their investments. As a result, investors would, to some degree, be shielded from unpredictable and arbitrary actions that may impede Canadian investment in China.

A second accomplishment is an agreement permitting Canadian uranium producers to export nuclear fuels and advanced nuclear technologies to China, the world’s largest energy consumer. This supplements the Agreement between the Government of Canada and the Government of the People’s Republic of China for Co-operation in the Peaceful Uses of Nuclear Energy of 1994. The Canadian Canada’s nuclear energy industry is significant, generating approximately $6.6 billion in annual revenue and $1.2 billion in exports each year. This agreement will level the playing field for Canadian uranium producers vis-à-vis other countries such as Australia and Kazakhstan which already benefit from such agreements.

The visit also generated the renewal or establishment of a raft of memoranda of understanding in a number of areas, including energy, fisheries, food inspection, natural resources and education. There will also be increased technical cooperation between Canadian and Chinese experts in research, technology and innovation.

The Canadian Government also regards developing increased trade in energy as crucial as Asian markets are both strategic significant and geographically accessible. In fact, the Prime Minister repeatedly stressed the importance of diversification of energy exports – away from reliance on the United States in view of the continued controversy dogging completion of the Keystone XL Pipeline project – and growth in the Asia Pacific region.

Both Prime Minister Harper and Premier Wen referred to the joint feasibility study underway to examine the potential of a free trade agreement. This study will report to both governments in the spring and could lead to the launching of free trade negotiations – which would undoubtedly be a long and challenging process. Any such negotiations would parallel multilateral talks under the Trans-Pacific Partnership which Canada is seeking to join and in which China has not yet indicated a willingness to participate.

Canada’s embrace of an Asian orientation will not occur without some detractors. For example, a free trade agreement would likely threaten Canadian agricultural supply management schemes.

Nevertheless, Harper’s achievements in China on this trip may well be viewed in the coming years as building the foundation for a new and wider bridge between Canada and China. Of course only time will tell if the promise of this visit materializes into concrete channels for trade and investment flows.

This article highlights significant developments in foreign investment review in Canada over the past year.

Post Potash Anxiety Lifts in 2012?

In the immediate aftermath of the Canadian Government’s rejection of BHP Billiton’s bid for Potash Corporation of Saskatchewan, foreign investors questioned whether there would be a sea-change in Canada’s previous openness to foreign investment. While the failed bid by the LSE for the TMX removed the possibility of another potential rejection, foreign investors, including SOEs, have not been dissuaded from investing in Canada. Despite this, a run at Canadian icons such as Research In Motion could again thrust into the public arena questions of foreign ownership of “national champions” or in “strategic” sectors. As a result, potential acquirors of such targets will need to develop strategies at an early stage to address government and public relations in order to pre-empt, or at least mitigate, any public backlash.

Chinese SOE Investments Approved

The Canadian Government approved a number of state-owned investments in 2011, including Sinopec’s proposed acquisition of Daylight Energy, a Canadian oil and gas company, and CNOOC’s acquisition of oil sands company, OPTI Canada. CNOOC acquired OPTI’s 35 percent working interest in Long Lake and three other project areas located in the Athabasca region of northeastern Alberta. Both investments would have been subject to the Government’s guidelines on state-owned investors which consider the SOE’s corporate governance and commercial orientation in assessing whether the transaction would be of “net benefit” to Canada.

Enforcement of Investment Canada Undertakings

In 2010 the Canadian Government sued US Steel for alleged non-compliance with its employment and production undertakings. This represented the first time an investor has been taken to court over a failure to comply with undertakings. In December 2011 US Steel settled the dispute with the Canadian Government, committing to make additional capital investments in its Canadian facilities and to operate certain Canadian plants until 2015.

The US Steel case underscores both that the Canadian Government will enforce undertakings in appropriate circumstances (although variations are still possible) and that when formulating 3 or 5 year commitments in relation to an acquisition, foreign investors must carefully consider their ability to meet such undertakings in light of the vagaries of economic conditions. Investors should also proactively manage public and government relations when compliance with undertakings proves difficult.

Review of Investment Canada Act

After its rejection of BHP Billiton’s bid for Potash Corporation of Saskatchewan, the Canadian Government indicated its openness to review the Investment Canada Act. In the winter of 2011, the Parliamentary Standing Committee on Industry, Science and Technology invited foreign investment experts to speak about their views on the statute and the review process. However, there has been no public indication since the Government majority win in the May 2011 federal election that the Government intends to resume scrutiny of the foreign investment review process.

Review Threshold Increases

It is expected that the threshold for review for WTO investors will be $330 million for the year 2012. The official threshold will be published in the Canada Gazette in early 2012. However, what may be of greater interest to foreign investors is whether the Canadian Government finally implements regulations bringing into force amendments made to the Investment Canada Act three years ago. These amendments would raise the review threshold to $600 million in the target’s “enterprise value” for the two years following implementation, to $800 million in the subsequent two years and to $1 billion thereafter (indexed to inflation), thereby reducing the number of investments that are subject to review.

This article was written by David Hunter, Nalin Sahni, and environmental planner George McKibbon of McKibbon Wakefield Inc.

The Ministry of Northern Development and Mines (“MNDM”) has released the revised Draft Class Environmental Assessment for Mining (the “Mining Class EA”) for public comment until February 21, 2012*. The Mining Class EA replaces two declaration orders on discretionary land tenure decision-making and mine rehabilitation**. While the main purpose behind the Mining Class EA is to reduce the environmental impact of mining, those that hoped this document would help resolve competing land use issues and facilitate mining exploration and development may be disappointed. 

Rather than reducing uncertainty by creating a clear set of workable rules to balance environmental protection and mining development, MNDM has left all major components of the Mining Class EA up to their discretion. Over the next few months we will release a series of articles on whether increased government discretion will advance both environmental protection and mining development, but in the meantime we wanted to discuss Mining Class EA and the basic issues of concern.

The Mining Class EA sets up a system to assess and mitigate the environmental and social impacts of mining projects that are “predictable and manageable”. The Mining Class EA only covers mine rehabilitation activities or actions that require MNDM discretion such as granting: some mining and surface rights, title to Crown lands for mining, or permission for the removal of bulk ore samples for testing. The Mining Class EA does not cover non-discretionary decisions such as prospecting, staking and the granting of mining claims and leases. It is unclear if prospecting, staking and exploration will still be exempt from the Mining Class EA when MNDM issues new regulations on Aboriginal consultation and mining exploration licensing later in 2012 (See our Jan. 12 post).

Since the Mining Class EA is limited only to MNDM discretionary decisions, the environmental assessment may not incorporate all circumstances that exist on the ground. MNDM staff may be tempted to exercise their discretion to broaden their review and look at decisions made under other legislation. This could create an additional risk for miners by bringing in land tenure decisions made under the Public Lands Act or the Planning Act (for organized municipalities) in to the environmental assessment process.

Projects covered by the Mining Class EA are categorized from A to D with environmental effects ranging from none (Category A) to significant (Category D). With larger potential environmental impacts comes a more onerous process with greater consultation requirements and the creation of a detailed Environmental Study Report.

Projects that have high enough impacts that are not “predictable and manageable” cannot be covered under the Mining Class EA. These projects are subject to the more stringent and time-consuming individual environmental assessment under the Environmental Assessment Act (Category E) and any person can request that a project be “bumped-up” from a Mining Class EA to an individual assessment.

The problem with this “predictable and manageable” standard is that mining is inherently unpredictable. Miners won’t know the environmental impact of the tailings or the value of their ore in the ground until they dig it up. It is unclear how MNDM will use their discretion to interpret this “predictable and manageable” standard but given the difference between the shorter Mining Class EA process and the potential large delays with an individual assessment there is the potential for lawsuits on this issue in the near future.

The Mining Class EA represents a real missed opportunity to create a win-win for both environmentalists and miners. This could have been accomplished by limiting government discretion, streamlining the mining development process, and by coordinating the planning and land tenure requirements between the Mining, Public Lands and Planning Acts. A more robust Mining Class EA would trade minimum environmental standards for mines (good for enviros) for an expedited process that lets mining companies get all the permits they need fast (good for miners). Instead, the Mining Class EA creates a new cumbersome process for miners that fails to address the other permits needed for basic mining infrastructure under the Planning Act, the Public Lands Act and the Far North Act.

While creating a “one-stop-shop” for miners would require better communication between MNDM, the Ministry of Natural Resources and others, it would greatly facilitate the mining development process. In the next few months, we will release a series of articles on the current mine development process and how the Ontario government could streamline the system.

*A Class Environmental Assessment for Activities of the Ministry of Northern Development and Mines under the Mining Act – Draft, January 23, 2012. Available at: http://www.mndm.gov.on.ca/mines/mineral_development_and_lands_branch/ea/default_e.asp.

**See Declaration Orders MNDM-3 for Discretionary Mining Land Grants and MNDM-4 for Abandoned Mine Hazard Rehabilitation.

Effective January 27, 2012, the United States Securities and Exchange Commission (“SEC”) has adopted new rules outlining how publicly traded mining companies must disclose in their quarterly and annual reports the mine safety information required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The new rule is applicable to foreign private issuers and to Canadian issuers reporting under the US-Canadian multijurisdictional disclosure system. The disclosure, however, only applies in respect of mines located in the United States.

The information required by the new SEC rules, which is required to be disclosed on a mine-by-mine basis, includes:

• Significant and substantial violations of mandatory health or safety standards under the Federal Mine Safety and Health Act of 1977 (“Mine Act”) for which the operator received a citation from the Mine Safety and Health Administration (“MSHA”).
• Information regarding citations and orders for unwarrantable failure of the mine operator to comply with the Mine Act.
• Imminent danger orders issued under the Mine Act.
• The dollar value of proposed assessments from the MSHA.
• Notices from the MSHA of a pattern of violations or potential to have a pattern of violations under the Mine Act.
• Pending legal actions before the Federal Mine Safety and Health Review Commission.
• Mining-related fatalities.

Additional information can be found here. For a copy of the new SEC rule please visit http://www.sec.gov/rules/final/2011/33-9286.pdf

On January 27, 2012, the Investment Industry Regulatory Organization of Canada (IIROC) issued Notice 12-0029, providing guidance in connection with the processes that must be followed to obtain exemption from, or an interpretation of, a provision of the Universal Market Integrity Rules (UMIR). IIROC guidelines state that such requests may be sought by electronic means, through email, and by telephone. A request must generally be accompanied by certain contextual information, including facts giving rise to same. IIROC staff will follow up with a written ruling in cases where an exemption request has been allowed or denied. The notice also provides guidance as to circumstances under which IIROC may grant an exemption with respect to requests that a dealer be able to act as principal or agent in respect of an “off-marketplace” trade. Generally, the granting of such exemptions depends on whether the execution of the trade on a marketplace would be disruptive of a fair and orderly market or impractical.

Effective October 3, 2011, the British Columbia Securities Commission adopted a new form for reports of exempt distribution, Form 45-106F6 British Columbia Report of Exempt Distribution. An issuer distributing securities in British Columbia under certain prospectus exemptions is required to use the new Form 45-106F6 for distributions occurring on or after October 3, 2011. On December 9, 2011, the Commission ordered, under BC Instrument BCI 45-533 Exemptions from Form 45-106F6 requirements, that certain issuers and underwriters are exempt from Form 45-106F6 requirements. Certain of these exemptions allow certain issuers and underwriters to file the old Form 45-106F1 Report of Exempt Distribution, while others relieve issuers and underwriters from the insider information requirements in item 4 of Form 45-106F6.

Exemptions in BCI 45-533 include:

• investment funds;
• non-reporting issuers, provided that the distribution is made only to permitted clients;
• foreign public issuers, subsidiaries of foreign public issuers and subsidiaries of reporting issuers; and
• non-reporting issuers (re: certain insider information, provided they complete the table in item 4 of Form 45-106F6 for each director, executive officer, control person and promoter of the issuer).

Some of the above exemptions are also available to underwriters distributing securities of non-reporting issuers. Issuers or underwriters wanting to rely on any such exemptions must ensure that they comply with the specific terms and conditions set out in the particular exemption.

This is the last post in my series dealing with suggestions for the corporate secretary when drafting board minutes. In this post, I deal with process issues relating to the protection of board minutes from unnecessary production.

For my post with an overview of all of the suggestions, click Writing Board Minutes for Peace of Mind. For my posts dealing with the first four issues in detail, click The “Front Page of the Newspaper” Test, Keep the Purposes Front and Centre, Draft to Minimize Unnecessary Production, and Draft to Protect Privilege and Confidentiality.

Circulation of Minutes

There are a number of process issues that can undermine a corporation’s attempt to protect corporate minutes from production. An obvious process issue is how broadly the minutes are circulated. If board minutes are widely circulated or routinely made available to third parties, then it should not be surprising if a court concludes that there is no confidentiality to protect, notwithstanding how many assertions of confidentiality and privilege are contained in the board minutes.

Confidentiality Designations

Another obvious but over-looked process issue arises because directors typically receive a significant amount of briefing material prior to a board meeting, which will later be appended to the board minutes. This material may include documents that are confidential or privileged. If the material is subject to third-party confidentiality obligations, consideration should be given to marking that material as “subject to confidentiality obligations.” If the material is privileged, the documents should be marked so that the claim for privilege is evident on the face of the document.

In-House Counsel as Corporate Secretary

A more complicated issue arises with the cross-appointment of in-house corporate counsel to the corporate secretary role. This is frequently the case, particularly in smaller organizations. However, this raises complications. For example, when in-house corporate counsel takes notes at the board meeting, it is not evident that these notes being taken in the role of a lawyer whom the board has asked to participate in or to monitor the meeting for the purpose of giving legal advice and, therefore, the notes are privileged. More likely, these notes are the notes of an officer of the corporation whose responsibility includes ensuring that minutes of the meeting are prepared and, therefore, without a claim to privilege.

It is prudent for in-house counsel to maintain two sets of notes when attending board meetings. Notes that are being taken as corporate secretary for the purpose, for example, of preparing or vetting the minutes, should be taken separately from those prepared for the purpose of following up on items as corporate counsel or as preparation for giving legal advice.

Draft Minutes and Notes

Another process issue concerns whether to retain draft minutes, the source notes from which the minutes are prepared, and notes prepared by directors. Very few of us are excellent note-takers.  A notation may reflect a private thought or capture only half of the thought.  The notes may simply be our way of paying attention and not meant to record accurately what occurred.  If available for production, these documents may be cast doubt on the accuracy, integrity and completeness of the board minutes.

Although routine destruction is a possibility, the corporation and its officers and directors must be careful not to engage in spoliation (the intentional destruction of evidence). Documents that are relevant to a litigious matter should be preserved as soon as litigation is reasonably anticipated. This may be before any demand is made or any claim is asserted.

There is no avoiding the reality that the destruction of notes and drafts is a sensitive topic and fraught with danger.  Even if innocently done, the destruction of notes and drafts can simply look bad.  A more practical approach is to avoid creating unnecessary notes and drafts in the first place.

The corporate secretary can avoid multiple drafts and source notes by using a template that prompts the corporate secretary to take notes that contain the appropriate details for the minutes (but without a blow-by-blow of the meeting).  This will require less revision to put into an appropriate form of minute of the meeting. There is also less chance of something being omitted innocently in the final minute due to editing that an adversary might seize on as evidence of manipulation of the board minute.

When dealing with a particularly sensitive matter, board members might be reminded that if they take notes, they should take care to prepare accurate and complete notes.  If the practice in such circumstances if for the minutes to be prepared and circulated shortly after the meeting for an initial review (and then inserted in the board packages at a later date for approval), directors may find it unnecessary to take personal notes since they will have the opportunity to conduct a review while the matter is fresh in their minds.  The contemporaneous preparation and review of the minutes can only serve to enhance their reliability.

Conclusion

There is no glamour in preparing board minutes and they are often put on the “back burner.” Apart from the statutory requirement in almost all Canadian jurisdictions to keep these records, board minutes are a critical piece of documentary evidence when there is a challenge to the conduct of directors. Careful preparation of board minutes is worth the effort. Moreover, with some care, the preparation of board minutes may also subsequently assist a litigator in persuading a court that the board minute or a portion of the board minute should be protected from disclosure either to the adversary or to the public in general.

The Ontario Securities Commission (OSC) today published information regarding the OSC’s authority to impose monetary sanctions and an update on how the collection of those sanctions has proceeded.

The OSC has the authority to impose a range of sanctions on individuals and companies for violations of securities law or conduct that is contrary to the public interest in Ontario. Sanctions are imposed either at the conclusion of a contested proceeding or as part of a settlement reached between the respondent and OSC staff and approved by the OSC.

The purpose of the Commission’s sanction powers is to deter future wrongdoing in the capital markets. One of the OSC’s powers is to impose monetary sanctions for breaches of Ontario securities law and the OSC has exercised this authority since 2005. Monetary sanctions include administrative penalties and disgorgement orders. In imposing administrative penalties, the OSC may order a person or company found to have breached securities law to pay up to $1 million for each failure to comply.

Further details may be found here.

This article was written by David Hunter and Nalin Sahni.

In December 2011, the Ministry of Northern Development and Mines (“MNDM”) issued a Request for Proposals (“RFP”) for the delivery of new Aboriginal education program on mineral exploration and development.

It would be expected that this education program would cover the important new Mining Act regulations on Aboriginal consultation and the licensing of exploration activities that are scheduled to come in to force in 2012 (see Jan. 12th post regarding the Wahgoshig First Nation decision). These regulations are necessary to establish the foundation for mining development and to hopefully avoid conflicts between Aboriginal communities and mining companies as occurred between the Wahgoshig First Nation and Solid Gold Resource Corp. The regulations must help clarify the relationship between the Mining Act and Far North Act that prohibits mining activities in Ontario’s far north until community plans are developed.

However, the content of the workshops appears to be more of an introduction to the mining industry in Ontario with topics such as “Minerals in Your Life.” This seems to be a missed opportunity to solicit Aboriginal views on the adequacy of the new prospecting and exploration regulations. Given the timelines, another more substantive consultation is not likely to occur until the regulations are in force.

The United States Securities and Exchange Commission (“SEC”) has recently adopted amendments to the accredited investor standards in the rules under the Securities Act of 1933 (“U.S. Securities Act”) in order to conform to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Effective February 27, 2012, the definition of “accredited investor” in the rules under the U.S. Securities Act will exclude the value of a person’s primary residence for purposes of determining whether the person qualifies as an “accredited investor” on the basis of having a net worth in excess of US$1 million.

The accredited investor exemption in Canada may also be subject to amendment in the near future. As discussed in a previous post, the Canadian Securities Administrators (“CSA”) are in the process of reviewing certain prospectus exemptions, including the accredited investor exemption and the $150,000 minimum amount exemption. In connection with the CSA’s review, the Ontario Securities Commission (“OSC”) has announced three upcoming roundtable discussions to obtain input from investors, issuers, registrants and professional advisors as to whether any changes to the prospectus exemptions may be appropriate. The roundtable discussions will take place on February 2, February 8 and February 13, 2012.

The Ontario Securities Commission (“OSC”) is currently considering two significant policy initiatives affecting mergers & acquisition transactions in Canada. As discussed in a previous post, the first initiative relates to a possible standalone rule in respect of poison pills. The second policy initiative discussed in the recent OSC panel discussion held at the Toronto Board of Trade would amend the existing rules governing related party transactions in order to address current “process defects” in conflict management and to provide additional protections for minority shareholders.

Under the draft proposal, an issuer contemplating a related party transaction would be required to establish a special committee of independent directors, which committee would be required to negotiate or supervise the negotiation of the transaction terms and evaluate the fairness of the transaction. The special committee would be required to either (i) recommend that the board support and that shareholders vote in favour of the transaction, or (ii) deem the transaction to be fair to shareholders notwithstanding that the special committee does not make a recommendation in favour of the transaction. The determination by the special committee would be supported by full disclosure regarding the committee’s procedure and reasoning. The new regime would also lower the transaction value triggering a shareholder vote from the current threshold of 25% of market capitalization of the issuer to 10% of market capitalization of the issuer.

According to Mr. Naizam Kanji, Deputy Director of Corporate Finance at the OSC, the proposal could also include a clarification and broadening of the scope of the definition of related party transactions.

This is the fifth post in my series dealing with suggestions for the corporate secretary when drafting board minutes.  In this post, I discuss suggestions for drafting to protect privilege and confidentiality.  To access my first post containing an overview of all of the suggestions, click Writing Board Minutes for Peace of Mind.  For my posts dealing with the first three issues in detail, click The “Front Page of the Newspaper” Test, Keep the Purposes Front and Centre and Draft to Minimize Unnecessary Production.

Drafting to Assist the Litigator
Even though the corporate secretary should presume that minutes of board meetings may be produced in litigation, the corporate secretary can take steps to assist the company’s litigator in defending against production on the basis of privilege or confidentiality. The argument for protection against disclosure will be more persuasive if the minutes appear on their face to be privileged or confidential, since a judge may inspect the minutes before making a ruling.

Therefore, the most important of step is to ensure that the minutes contain the elements that satisfy the legal test for privilege or confidentiality. To do that, the corporate secretary should be familiar with and watchful for three types of privilege when preparing board minutes: (a) solicitor-client privilege; (b) litigation privilege; and (c) common law privilege.

Solicitor-Client Privilege
Solicitor-client privilege applies to confidential communications between a lawyer and his or her client for the purpose of seeking lawful legal advice. 

When external counsel attend a board meeting it is usually obvious that the advice given by external counsel is subject to solicitor-client privilege. However, the role of in-house corporate counsel at board meetings presents complications. It may not be obvious whether corporate counsel is providing legal advice or business advice, particularly if in-house counsel attends regularly in more than one capacity. For example, corporate counsel may report on an environmental compliance issue. It may not be obvious whether in-house counsel gave the report as part of legal advice or as the compliance officer of the corporation.

To enhance the likelihood that solicitor-client privilege will be recognized and maintained, consideration should be given to identifying in the minutes that the board “received confidential legal advice” from the lawyer (whether external counsel or in-house corporate counsel).

Another complication may arise because other persons are in attendance when the advice is being given, such as financial advisors or other invited guests.  It has been said that confidentiality is the sine qua non of solicitor-client privilege. With some exceptions (discussed below), the attendance of third parties may destroy a claim that the advice given was confidential.

If there are observers or other participants at the board meeting, those persons should be requested to absent themselves for the portion of the meeting dealing with the legal advice.  The board minutes should reflect that those persons were not in attendance during that portion of the meeting.

From time to time, the presence of observers or participants, such as financial advisors, may be necessary because they are part of the “team” dealing with the issue on which legal advice is being given. Courts in Ontario, at least, accept that privilege may not be lost in these circumstances.  It is prudent to get legal advice to see if the criteria for protecting privilege will be met.  As a general rule, if privilege is available, the board minutes should reflect the role of those third parties and why the board requested that those persons remain in attendance during the receipt and discussion of legal advice.

Litigation Privilege
Another important type of privilege is litigation privilege. Litigation privilege is a zone of privacy in which a litigant may prepare its case “without adversarial interference and without premature disclosure.” Every litigant (whether represented by a lawyer or not) is entitled to litigation privilege. Unlike solicitor-client privilege, litigation privilege covers non-confidential communications with third parties and documents of a non-communicative nature (such as draft argument and research). Litigation privilege will only attach to those documents and communications whose dominant purpose is to respond to actual or apprehended litigation.

The applicability of litigation privilege is usually clear once litigation has been commenced.  However, in the run-up to litigation, it is prudent to note that the board was considering an isuse that was apprehended to be litigious.  Be aware, however, that once litigation is contemplated, there are document preservation responsibilities for the corporation.

If litigation privilege is available, the minutes should reflect that the dominant purpose of the agenda item is to receive a confidential report from management regarding potential or actual litigation and for the directors to discuss and to prepare for or to respond to the litigation. If third parties are present, the purpose of their attendance should be noted. For example, financial or other advisers may be present to assist the directors with evaluating or preparing a response to the real or apprehended litigation.

Common Law Privilege
Common law privilege is a residual category of privilege from disclosure. It is available on a case-by-case basis after the court considers the following criteria:

(a) The communications originate in a confidence that they will not be disclosed.

(b) This confidence is essential to the full and satisfactory maintenance of the relationship between the parties.

(c) The relationship is one, which in the opinion of the community, ought to be sedulously fostered.

(d) The injury to the relationship by the disclosure of the communications is greater than the benefit gained in the litigation process.

Common law privilege may be available when the board is conducting an investigation, such as, for example, in response to a whistle-blower complaint.

The court exercises significant discretion when deciding whether common law privilege is available. Legal advice should be sought when dealing with matters such as an internal investigation arising out of a whistle-blower complaint or other matters that might attract common law privilege so that the corporate secretary has guidance on how to manage these types of activities.

The guidelines with respect to confidentiality and third-party participation discussed above in connection with solicitor-client and litigation privilege apply equally to common law privilege.  In addition, it would be prudent for the minutes to reflect the board’s consideration of the importance of confidentiality to the matter being addressed and the board’s concerns with respect to any breach of confidentiality. For example, if a third-party investigator is reporting to the board on an investigation, the board should consider (and the minutes should reflect) the importance of confidentiality to the integrity of the investigation and the harm that could occur to the organization and the investigation if confidentiality is not maintained, such as, for example, employees may be less willing to speak with the investigator about the potential misconduct of a colleague or supervisor if confidentiality is not assured.

Confidentiality or Sealing Orders
Another litigation issue that corporate secretaries should consider is the potential availability of a confidentiality order or a sealing order in the event that the minutes are required to be produced. In general, a confidentiality order restricts the persons with whom documents and information are to be shared and applies only to the parties and any specific third parties who are involved in the litigation process (such as experts). A confidentiality order will often contain a protocol requiring a standard form confidentiality agreement, restricting onward sharing of information, and requiring the destruction of the information when it is no longer necessary to be kept by the third party. A sealing order prevents records in the court file from becoming public. In Ontario, subsection 137(2) of the Courts of Justice Act provides the authority for a sealing order. Subsection 137(2) provides that the court “may order that any document filed in a civil proceeding before it be treated as confidential, sealed and not form part of the public record.” The trend has been for courts to restrict the availability of these orders, given the importance of the openness of judicial proceedings.

However, in many business-to-business contracts, organizations will require confidentiality agreements as an essential term of the relationship. These terms are so frequently required that they have become part of the boilerplate of most commercial agreements. At any given time, an organization may have in its possession, power and control, significant amounts of information received from contracting parties to whom the organization owes duties of confidence. Conversely, the organization may have placed significant confidential information into the hands of third parties who are restricted from using that confidential information for non-approved purposes so long as the information is not in the public domain. If the information is disclosed during discovery, it will be at risk of public disclosure in a court proceeding.

The Supreme Court of Canada has suggested that this type of obligation is one that might qualify as an “important commercial interest” worthy of protection by court order.  Again, this is an area in which the corporate secretary should get legal advice in advance of the board meeting.

As a general rule, board minutes should expressly identify that matters presented to the board or discussed by the directors are subject to third-party confidentiality obligations. If the matters being discussed are not subject to third-party confidentiality obligations but are of significant commercial interest, reference to the fact that what is discussed is material non-public information or a trade secret or a potential patent issue should be recorded in the minutes. If observers or participants are present, they should be reminded of their confidentiality obligations and this reminder should be recorded in the minutes.

This article was written by David Hunter and Nalin Sahni.

The Wahgoshig First Nation (“WFN”) in Northern Ontario has obtained an injunction to temporarily stop Solid Gold Resources Corp. (“Solid Gold”), a junior mining company, from drilling on their First Nation Treaty lands. In a decision released last week (2011 ONSC 7708 (CanLII)), Justice Brown of the Ontario Superior Court halted all exploration activities for at least 120 days after finding that Solid Gold had repeatedly failed to respond to consultation requests from both WFN and the Ontario Government.

While this decision should not come as a surprise to knowledgeable observers, it is important for three reasons:

1. It confirms that as yet there is no Aboriginal veto over mining exploration activities;
2. It highlights problems with the Crown’s practice of delegating the consultation to proponents and
3. It reiterates that the “free entry” mining system in Ontario is limited by Aboriginal consultation.

Companies that are not mindful of Aboriginal concerns will see their business plans delayed or cancelled.

To review the entire article, please click here.

In a recent panel discussion at the Toronto Board of Trade, Naizam Kanji, Deputy Director of Corporate Finance at the Ontario Securities Commission (the “OSC”) stated that the OSC is currently considering the implementation of a standalone rule in respect of poison pills.

Currently, poison pills are reviewed on a case by case basis, an approach which Mr. Kanji described as “problematic”. Under the new regime, poison pills would be removed from the current defensive tactics policy (NP 62-202) and companies would be permitted to use poison pills to block unsolicited bids provided that the poison pills were approved by shareholders at the most recent annual general meeting or in the face of an unsolicited bid. The new regime would allow poison pills to remain unchallenged provided that the necessary shareholder approval had been obtained and shareholders would be permitted to remove poison pills on a vote in favour of doing so.

On December 23, 2011, the Ontario Securities Commission (the “OSC”) announced that the Minister of Finance approved the Memorandum of Understanding (the “MOU”) between the OSC and the United States Financial Industry Regulatory Authority, Inc. (“FINRA”) pursuant to section 143.10 of the Securities Act (Ontario). As discussed in a previous post, the MOU is intended to facilitate the exchange of information between the OSC and FINRA on firms and individuals that are under their common supervision, with a focus on enforcement-related matters.

The MOU came into effect in Ontario on December 13, 2011.

This is the fourth post in a series on drafting board minutes.  In my first post, I outlined a number suggestions for the corporate secretary charged with drafting board minutes. In the second post, I discussed the “Front of the Newspaper” Test. In the third post, I discussed ”Keeping the Purposes Front and Centre.”  In particular, I commented on the importance of board minutes in litigation in that post.   In this post, I expand on the issue of board minutes in litigation by discussing how the corporate secretary might assist litigation counsel in limiting production of board minutes.

Discovery and Confidentiality

The discovery process during litigation is a major intrusion on (1) a corporation’s ability to protect the confidentiality of its data (and that of other individuals or entities with which it has contracted) and (2) the corporation’s ability to ensure orderly disclosure to the market in accordance with good business judgment and with securities laws.

For example, only one part of a board minute for a meeting may be relevant to litigation. However, very often the whole the board minute must be produced. As a result, sensitive or embarrassing information on unrelated matters may end up disclosed even though they are irrelevant to the issues in the litigation.

For example, minutes of a mining company might, for example, contain references to confidential information regarding labour relations, cost estimates, drilling results, community, aboriginal and governmental negotiations, reports on permitting, and discussions with potential suitors. In addition, board minutes may refer to confidential information obtained from another company under a confidentiality agreement. 

Much of the foregoing information may be irrelevant to the actual issues involved in the litigation.  It may also be be misleading without the context of other documents, prior board minutes or subsequent board minutes. The company may rely on a deemed undertaking of the other party not to use the information for any purpose other than the litigation.  However, there will be no restriction on the other party (short of court order or mutual consent) from filing the document as an exhibit in the legal proceedings.  If that should occur, the board minute will be available for anyone to review.

One of the problems for the corporate secretary is that courts in Canada have not universally accepted the ability of a litigant to ”redact” a document for relevance.  The process of obliterating a document to omit privilege parts (redacting) is well-accepted.  However, the same process of obliterating sensitive but irrelevant material has not become sufficiently accepted that the corporate secretary can rely on the availability of that practice when drafting board minutes.

Form of Board Minutes

The good news for the corporate secretary of a Canadian company is that there is significant legislative latitude with respect to the form of board minutes.  This allows for some creativity in severing minutes to minimize production of irrelevant information when dealing with sensitive issues.

The Canada Business Corporations Act, for example, provides that minutes, like all corporate records, may be maintained “in a bound or loose-leaf form or in a photographic film form, or may be entered or recorded by any system of mechanical or electronic data processing or any other information storage device that is capable of reproducing any required information in intelligible written form within a reasonable time” (s. 22(1)). Apart from that broad requirement, the corporation is free to determine the structure and form of its board minutes.

The Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Newfoundland, Yukon, Northwest Territories, and Nunavut provisions are either identical or substantially the same. Nova Scotia limits the form of board minutes to bound or loose-leaf documents. Legislation in Prince Edward Island provides no guidance on the form of the minutes although reference to the books of the company suggests a printed form. The Québec Business Corporations Act requires that the “corporation must be able to reproduce, in intelligible form and within a reasonable time” the information contained in the records it is required to maintain under the statute (s. 37).

Accordingly, there is some latitude for corporate secretaries to devise record-keeping practices to ensure that sensitive, non-routine deliberations are recorded in separate stand-alone documents. One way to accomplish this is to call two or more meetings of the board to be held sequentially. This practice will be too cumbersome to be manageable as a general corporate governance practice. However, it might be considered when dealing with one or more highly sensitive matters. One meeting can deal with routine or non-sensitive items and then adjourned. Sensitive items may be dealt with sequentially in separate meetings called to order to deal with those specific items.  In this way, the meetings are stand-alone meetings with their own separate minutes. Only the minutes dealing with the relevant meeting should be produced in the litigation.

Another possibility is to draft minutes in such a way that there are main minutes and supplementary minutes. The main minutes would state that the next item on the agenda was, for example, a report on drilling results and a notation that confidential minutes for that portion of the meeting are kept separately in supplementary minutes. If corporate secretaries adopt a numbering system for corporate minutes, this should not create any difficulty in the organization of the board minute book. The downside to this approach is that a court could conclude that the separate minutes have been incorporated by reference and must be produced. However, referring to the confidentiality rationale for the separate minutes and the irrelevance of the separate minutes to the issues in the proceeding may assist the corporation in resisting production of irrelevant material.

These are not the only possibilities. Depending on the nature of the company’s business and the typical format of its board meetings, there may be other effective means of drafting to limit production.

The Toronto Stock Exchange has published proposed changes to Parts I, IV and VI of the TSX Company Manual (the “Manual”), and in Appendix H of the Manual (the “Amendments”). The Amendments are being published for a 30-day comment period. Comments should be in writing and delivered by January 23, 2012 to the TSX. The Amendments are to primarily put a Due Bill Tracking System into practice for TSX listed companies.

A Due Bill process is being introduced in Canada to help improve the accuracy and timeliness of the valuation reporting of clients’ holdings when securities undergo certain material corporate events. Due Bills are entitlements which attach to listed securities undergoing certain material corporate events. Due Bills attach to such securities between the second trading day prior to the record date and payment date, for trading purposes, to allow listed securities to carry their appropriate value until the entitlement has been paid. Further details are available at the TSX website.

Issuers will begin filing their first IFRS-compliant annual financial statements in the first quarter of 2012. In order to help with the transition, the OSC released a list of key elements required under the new regime, along with helpful tips on making the reporting transition.

The list includes tips in regards to deadlines, required disclosure and changes in accounting policies.

On December 22, 2011, the Supreme Court of Canada released a ruling on the proposed federal Securities Act, and by extension, the formation of a national securities regime. The ruling comes after the Government of Canada has sought an advisory opinion from the Court as to whether the proposed federal Securities Act falls within the legislative authority of the Parliament of Canada. The Supreme Court ruled that the proposed Act as presently drafted is not valid under the general branch of the federal power to regulate trade and commerce under s. 91(2) of the Constitution Act, 1867.

Further to its Notice of Proposed Changes of October 14, 2011, the TSX and the TMX have proposed the implementation of a “Cancel on Disconnect” functionality to allow for the automated cancellation of orders in the event of involuntary loss of connectivity between the TMX and the client site. According to the TSX and TMX, this functionality, which will be available for all gateway sessions connecting to TSX, TSXV and TMX Select, will assist traders in mitigating risks associated with having open orders exposed in their books that cannot be managed when there is an involuntary loss of connectivity.

The TSX and TMX received no comments on its October 14, 2011 proposal and have announced that they are expected to publish a notice indicating the intended implementation date of the proposed functionality.

On December 8, 2011, the United States Securities and Exchange Commission (the “SEC”) announced a new policy to the effect that, subject to certain exceptions discussed below, foreign private will no longer be able to submit initial registration statements to the SEC on a confidential basis.

Under the prior policy, foreign private issuers had the ability to submit registration statements (and amendments) to the SEC on a non-public basis in connection with their first time registration, permitting the SEC to review and comment on disclosure, and the issuer to respond to the SEC’s comments before making a public filing through the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.

As of December 8, 2011, the SEC will review initial registration statements submitted by foreign private issuers on a confidential basis only if the foreign private issuer is either:

• a foreign government registering its securities;

• listed or concurrently listing on a non-U.S. securities exchange;

• being privatized by a foreign government; or

• a foreign private issuer that can demonstrate that the public filing of an initial registration statement would conflict with the law of an applicable foreign jurisdiction.

The SEC will continue to assess use of this procedure and will make changes in the future.

In my first post in this series on board minutes, I set out five suggestions for the corporate secretary charged with drafting board minutes.  In a previous post, I discussed the first suggestion in more detail–the “Front of the Newspaper” Test.  In this post, I discuss the purposes of board minutes and then set out some suggestions for keeping those purposes in the foreground when drafting these important corporate records.

The Purposes

The primary purpose of board minutes is to function as a corporate record of the deliberations, decisions and resolutions of the directors. However, board minutes are not simply of relevance to the archivist or corporate counsel conducting a minute book review. From a litigation perspective, a board minute is documentary evidence of whether and how the directors fulfilled their duties to (1) manage or supervise the management of the business and affairs of the corporation, (2) act in the best interests of the corporation, and (3) exercise due care. As one judge has said, directors wishing to defend themselves against allegations of a breach of duty ought to be prepared to document their deliberations or conclusions. If directors do not do so sufficiently and accurately, they must accept that adverse inferences may be drawn against them.

Canadian courts are predisposed to be deferential to business decisions of directors. The so-called “business judgment rule” operates to shield the decisions of directors from microscopic examination with the benefit of perfect hindsight. However, the decisions of directors are still examined. In order for directors to claim the benefit of the business judgment rule, they should be able to demonstrate that their decisions have been made honestly, prudently, in good faith and on reasonable grounds.

Board minutes are a crucial contemporary record of the board’s decision-making process. If drafted appropriately, board minutes can be powerful documentary evidence that a decision was made prudently and on reasonable grounds and in the context of a sound process. Accordingly, board minutes should provide compelling documentary evidence to support the application of the business judgment rule. The minutes should demonstrate that:

• The directors exercised their judgment in an informed and independent fashion.
• The directors engaged in a process of analysis of the situation.
• The directors acted with reasonable grounds to believe the decisions was in the best interests of the company.

How the Purposes affect the Content

Appropriately drafted board minutes will keep front and centre the purposes of (1) being an accurate and reliable corporate record and (2) establishing the prerequisites to the “business judgment rule”. To do this, board minutes should set out clearly the problem on which the board was deliberating, the range of options that the board concluded were reasonably available, the advice obtained from financial and legal advisors appropriately retained and consulted in the circumstances, information obtained from management, and consideration of any conflicts of interest.

Narrative detail is important in minutes to provide context for the directors’ decisions. However, this does not mean creating a verbatim transcript of what the directors discussed. The narrative detail should be a high-level summary of the matters discussed, with a focus on recording the board’s process, including such elements as the length of time, extent of consultations and information received by the directors during and prior to the board meeting. It is not sufficient to record that the board “had a detailed and lengthy discussion of the issues involved”. These types of minutes do nothing to facilitate record-keeping or to establish objective evidence of the board’s prudence and diligence.

Instead, board minutes with appropriate detail will provide a reader (who was not in attendance and who is unfamiliar with the activities of the board) with the following information:

• The origin of any important issues before the board, if that is not be clear from the minutes of previous meetings.
• The substance of the matters discussed with respect to those issues and a summary of any discussions that occurred informally between meetings.
• Any questions asked of management, external consultants, advisors and experts, and the responses given by them.
• The concerns raised by board members and the responses to those concerns.
• The factors taken into account in arriving at the decision made by the board.
• The specific decision made by the board and the text of any resolution.
• Formalities with respect to the decision or resolution, such as who moved a motion and whether the vote was unanimous.
• Any conditions, limitations or qualifications made with respect to the decision or to the power given to management to implement the decision.
• Whether and when management was expected to report to the board with respect to the implementation of the decision.
• The approximate length of time spent discussing the matter.

It is unnecessary in most cases for the minutes to address which director asked a particular question or had a particular concern. Ultimately, the board makes a decision as a body. If a director wishes to dissent from a decision, that dissent should be recorded. If the dissenting director requests it, a concise basis for the dissent may be entered into the minutes.

In the next post in this series, I will examine drafting suggestions to avoid unnecessary production in litigation.

In its November 2011 Issuer Update Newsletter (the “Newsletter”), the Toronto Stock Exchange (the “Exchange”) provides guidance to issuers regarding the news release process and approvals for material and non-material news releases, as outlined in the timely disclosure policy found in sections 406 to 423.4 of the TSX Company Manual.

Specifically, the Exchange clarifies that issuers must send a copy of all news releases to the Investment Industry Regulatory Organization of Canada – Market Surveillance (“IIROC”) via SecureFile or by fax, regardless of whether the news release contains material information or non-material information. However, the need to obtain pre-approval of the issuer’s news release from IIROC depends on both whether the news release contains material information and on the intended time of dissemination of the news release. The following chart, reproduced from the Newsletter, sets out the various disclosure requirements:

The Exchange will provide guidance regarding the slightly different disclosure requirements applicable to TSX Venture Exchange issuers in its next Issuer Update.

On December 8, 2011, the Ontario Securities Commission (the “Commission”) issued a Notice of Approval (the “Notice”) recognizing each of Alpha Trading Systems Limited Partnership (“Alpha LP”) and Alpha Exchange Inc. (“Alpha Exchange”, and together with Alpha LP, “Alpha”) as an exchange. Alpha currently operates as an alternative trading system, facilitating the trading of equity securities listed on the Toronto Stock Exchange and the TSX Venture Exchange through a transparent, continuous matching platform.

The Notice references an application by the Maple Group Acquisition Corporation (“Maple”) for recognition as an exchange in connection with its proposal to acquire TMX Group Inc. and create an integrated group of businesses that provide trading, clearing, settlement and depository services (which proposal is summarized in an earlier post). Following the proposed acquisition of TMX Group Inc., Maple intends to acquire Alpha LP and Alpha Trading Systems Inc. and maintain multiple trading platforms.

The recognition of each of Alpha LP and Alpha Exchange as an exchange is effective as at the later of February 1, 2012 and the date on which the operations of Alpha ATS Limited Partnership have been legally transferred to Alpha Exchange. The Commission will publish a notice confirming the effective date.

The British Columbia Court of Appeal (the “Court”) has ruled that the British Columbia Securities Commission (the “BCSC”) has the jurisdiction to adjudicate enforcement proceedings against a person who trades on the TSX Venture Exchange (the “Exchange”) regardless of their location. This decision provides an appellate level court precedent upholding a broad approach to the jurisdictional scope of the BCSC’s enforcement activities and could have wide ranging impacts on extraterritorial securities regulatory enforcement actions in Canada.

READ FULL ARTICLE

On October 31, 2011, various amendments to Form 51-102F6 – Statement of Executive Compensation (“Form 51-102F6”) applying to financial years ending on or after October 31, 2011, came into force. The amendments are intended to improve the information issuers provide investors relating to key risks, governance and compensation matters.

This article highlights three of the material amendments to the compensation discussion and analysis disclosure required by Form 51-102F6.

READ FULL ARTICLE

On October 21, 2011, the Ontario Securities Commission (“OSC”) published OSC Staff Notice 15-704 (the “Notice”) requesting comments on proposed enforcement initiatives aimed at resolving enforcement matters more efficiently and effectively. Such initiatives include, among other things, a new program for explicit No-Enforcement Action Agreements with respect to market participants who self-report and remediate immediately, a new No-Contest Settlement Program wherein a cooperating market participant may resolve their enforcement matter without admitting facts or non-compliance, a clarified process for self-reporting which would ensure that all parties are informed on how best to self-report and the remedial options available to those who do self-report, and the establishment of a system for enhanced disclosure of credit granted for cooperation.

The Notice summarizes, among other things, each of the planned enforcement initiatives, discusses the need for an incentive based process that will encourage self-reporting among market participants, highlights the concern of concurrent civil litigation among persons and companies contacted during an investigation for documents and testimony, and provides further information about the comment process.

The comment period is open until December 20, 2011.

In an earlier post, I summarized five suggestions for writing board minutes for peace of mind. In this post, I will discuss one of those suggestions in greater detail: Using the “Front Page of the Newspaper Test”. But first, let’s set the legal scene.

The Legal Scene

The Canada Business Corporations Act (“CBCA”) and, with one exception, all other business corporation statutes in Canada, prescribe that corporations maintain board minutes as part of the corporation’s records.

Maintaining minutes of board meetings would be prudent even if they were not statutorily required. Failing to accurately record the board’s deliberations in appropriate detail may lead to adverse inferences regarding whether directors have fulfilled their duties. Nevertheless, there is a natural tension between providing sufficient detail to avoid any adverse inference being drawn against the directors and a lingering apprehension that an innocuous record might, with hindsight, be twisted out of context in litigation.

The “Front Page of the Newspaper” Test

It goes without saying that board minutes must be accurate. However, in considering the level of detail, the format of the minutes and the words chosen to describe the business of the meeting, the corporate secretary should consider how the board minutes would look on the front-page of the newspaper.

The primary audience of board minutes is normally the directors, subsequent directors appointed to the board, and third parties conducting minute book reviews in connection with major transactions.

In the ordinary course, shareholders and creditors do not have an automatic right to inspect board minutes. Neither the CBCA nor any other Canadian business corporation statute requires a company to provide access to board minutes to shareholders, creditors or non-officer or non-director stakeholders. British Columbia is perhaps unique in that the British Columbia Business Corporations Act provides that the articles of the corporation might allow shareholders or other persons a right of access to board minutes.

However, from a litigation perspective, the primary audience will be the adversary in the litigation and, most importantly, the trier of fact in any judicial or arbitral proceeding. If litigation is commenced, board minutes are difficult to protect from disclosure if the minutes contain information that is relevant to the dispute. Canadian courts, particularly in Ontario, may be reluctant to accede to claims of confidentiality. It is well-entrenched in Ontario, for example, that corporate minutes do not enjoy any special protection in litigation from production and discovery. Moreover, and perhaps most problematic, some judges have ruled that redaction (deletion) of portions of documents, including minutes, for relevance is not permitted. This may mean that the whole of the board minute must be produced even if only a portion of it is relevant to the dispute.

Even outside of the litigation context, there are situations where board minutes may become producible. For example, board minutes might become producible under a personal information access request under privacy legislation to the extent that the board minute contains information about the requester.

In future posts, I will discuss how, in very limited cases, it may be possible to protect privileged or highly confidential commercial information and strategies to limit what is produced.

However, in many cases it may be very difficult to protect the minutes from public disclosure. If entered into the court record, they will be there for every competitor or interested person to read and to copy. Therefore, the “front page of the newspaper” test is the most prudent starting point when drafting and editing board minutes.

Should Canada do better to become a leader of innovation in electronic communication with security holders, including the delivery of documents, given the apparent Canadian propensity to spend our time online?

According to a March 2011 Globe & Mail report, Canadians spend more time online than the residents of any other country.  It seems Canadians don’t just spend more time, Canadians spend almost double the average. 

Earlier this month, the Canadian Securities Administrators announced changes to National Policy 11-201, Delivery of Documents by Electronic Means.  The comment period yielded only eight submissions, suggesting, perhaps, that there is no great urgency to making electronic delivery the standard.

The changes to NP 11-201 are meant to alert market participants to e-commerce legislation and other laws that may affect the electronic delivery of documents, to simply the guidance regarding security holder consents, and to reduce technology-related references.  NP 11-201 applies to “prospectuses, financial statements, trade confirmations, account statements and proxy-related materials that are delivered by securities industry participants or those acting on their behalf, such as transfer agents.” 

NP 11-201 continues to provide that (subject to any other laws), electronic delivery will satisfy delivery requirements in securities legislation if each of the following are met:

 1. The recipient of the document receives notice that the document has been, or will be, delivered electronically.

 2. The recipient of the document has easy access to the document.

 3. The document that is received by the recipient is the same as the document delivered by the deliverer (that is, the document is reasonably secure from being tampered with during delivery).

 4. The deliverer of the document has evidence that the document has been delivered.

NP 11-201 cautions that if any one of these components is absent, the effectiveness of the delivery may be uncertain.

NP 11-201 also cautions that electronic commerce legislation may require the consent of a recipient to electronic delivery.  NP 11-201 also states that without express consent, it may be more difficult to demonstrate that the intended recipient had notice of, and access to, the document, and that the intended recipient actually received the document.  However, in simplifying guidance on consent requirements, the sample express consent form has been eliminated from NP 11-201.  This consent form had been identified by the Securities Transfer Association of Canada (STAC) as a barrier to increasing demand for electronic delivery.   

Given the consequences of a finding that documents required to be delivered under securities laws and regulations were not properly delivered, it is unlikely that we will see a great rush to electronic delivery with these changes to NP 11-201.  In addition, any concerted effort to move to electronic delivery must comply with Canada’s Anti-Spam Legislation (CASL), which is likely to come into force next year.

Five years has passed since the Task Force to Modernize Securities Legislation in Canada published commissioned research study by Professor Dimity Kingsford Smith regarding Importing the e-World into Canadian Securities Regulation.  Canada has not progressed very far in terms of developing electronic delivery as a standard method of delivery.  The question is why?

As STAC points out, the complexities of obtaining consent is part of the explanation.  This has been partially remedied by NP 11-201 .  The issue of establishing delivery is also part of the explanation.  The revision to NP 11-201 has clarified the issuer’s responsibilities to have internal processes showing that delivery was attempted.  However, NP 11-201 also requires that the issuer must attempt other delivery methods (presumably mail) if the issuer receives a delivery failure notification, notwithstanding consent to delivery by electronic means. 

Another issue might simply be that demand is not there for electronic documents delivered in currently available formats.  We must be cautious of drawing inferences but broad statistical evidence from Statistics Canada surveys suggests that the percentage of at-home internet users who report conducting investment research online has remained relatively stagnant from 2005 to 2009 with less than 1/3 reporting that they engaged in that activity.  Online bill paying, by contrast, grew throughout that period. 

The current inflexibility with respect to the form of the electronic version of documents might contribute to low take up of electronic delivery.  NP 11-201 permits flexibility in technical format.  However, electronic documents must essentially follow the prescribed forms for paper documents.  One of the great advantages of electronic documents is the ability to layer information so that the user can review information on a graduated basis.  If participants are limited essentially to an electronic version of a massive printed document, this curbs innovation as well as ease of use.

Of course, any move to electronic delivery as a standard must ensure that investors have access (and timely access) to equivalent information.  There are, after all, significant regional differences in home internet usage rates.  Home internet usage by residents of British Columbia was reported to be 16 percentage points higher than in New Brunswick according to an October 2011 Financial Post article.

The Canadian Securities Administrators have published for comment significant proposed changes to their rules and policies governing the pre-marketing and marketing of prospectus offerings, other than mutual fund offerings. The changes, if enacted, would loosen some of the current restrictions that limit the marketing activities of investment dealers involved in public offerings and clarify the positions of the regulators in certain areas.

A summary of the main proposals is set out below. Reference should be made to this link for further details:

http://www.osc.gov.on.ca/en/SecuritiesLaw_rule_20111125_41-101_rfc-pro-amd-pre-marketing.htm

“Testing of the Waters” Pre-marketing Exemption for IPO Issuers

Investment dealers would be allowed to communicate with “permitted institutional investors” to determine interest in a potential initial public offering, subject to certain conditions related to confidentiality and record keeping. The definition of a “permitted institutional investor” would include a number of the types of institutional investors that are “accredited investors” for purposes of prospectus exemptions under Canadian securities laws. The new accommodation would not be available for issuers that are already public companies in a foreign jurisdiction.

Bought Deal Exemption Changes and Clarifications

An issuer and underwriter would be permitted to amend their bought deal agreement to increase the size of the offering under certain conditions. The increase would be limited to a specified percentage of the original size of the offering, but that percentage has not been determined by the regulators yet. The preliminary prospectus would still have to be filed and receipted within four business days of the original agreement, and the enlarged offering would have to be at the same price as the original offering. It is also proposed that additional underwriters would be allowed to join the bought deal syndicate under specified conditions and that the pre-marketing exemption for bought deals would not be available if the bought deal agreement contained a market-out clause.

Additional Guidance on When a Distribution Commences

It is proposed that additional guidance will be provided as to when the securities regulators consider a distribution of securities to have commenced, triggering the marketing restrictions. In particular, the current policy’s concept of discussions of “sufficient specificity” between an underwriter and an issuer would be expanded upon with examples.

Term Sheet for Bought Deals Before Filing of Preliminary Prospectus

Investment dealers would be permitted to provide a term sheet to permitted institutional investors between the time of the announcement of a bought deal and time of the filing of the preliminary prospectus if the term sheet contained only information that was in the bought deal press release or the issuer’s continuous disclosure record, and certain other conditions were met. The term sheet would have to be filed with the securities regulators before its use but would not be made public on SEDAR until the preliminary prospectus was receipted.

Term Sheet During Waiting Period

Investment dealers would be permitted to provide a term sheet to prospective purchasers during the period between the issuance of the preliminary and final prospectus receipts (the “waiting period”) to provide for a greater range of marketing communications. This term sheet would be required to contain only information that was also in the preliminary prospectus, and there would be additional conditions to its use. The term sheet would have to be filed on SEDAR before its use.

Green Sheets

Investment dealers would continue to be permitted to provide traditional green sheets to their registered representatives during the waiting period, but green sheets distributed to the public would be considered “term sheets” and would be subject to the prescribed conditions to the use of term sheets.

Road Shows

Specific requirements would be prescribed for road shows held during the waiting period. All information in a road show would have to be contained in the preliminary prospectus, except for comparables (information that compares the issuer to other issuers) in the case of a road show confined to permitted institutional investors. Written materials distributed to prospective purchasers at a road show would be subject to the same rules that would apply to term sheets, except for comparables in the case of a road show confined to permitted institutional investors. Among other things, this would mean that the materials would have to be filed on SEDAR before they were distributed.

Marketing after the Final Prospectus Receipt

Term sheets and road shows following the issuance of a receipt for the final prospectus would be subject to requirements similar to those that applied during the waiting period.

The Canadian Securities Administrators will accept comments on the proposals until February 23, 2012.

Board meeting minutes are statutorily required by nearly all business corporation statutes in Canada. More importantly, maintaining board minutes is prudent. Failing to accurately record the board’s deliberations with appropriate detail may lead to adverse inferences regarding whether directors have fulfilled their duties. Nevertheless, there is a natural tension between providing sufficient detail to avoid any adverse inference being drawn against the directors and a lingering apprehension that an innocuous record might, with hindsight, be twisted out of context in litigation. And, of course, drafting well-written and well-structured board minutes is time consuming!

Here are five litigation-driven suggestions that the corporate secretary may wish to consider when preparing minutes. In upcoming posts, I’ll dive deeper into each of these suggestions.

1. Use the “Front Page of the Newspaper” Test. There is no substitute for writing board minutes with a critical eye. As I’ll discuss in upcoming posts, the corporate secretary should not assume that the minutes will remain confidential if litigation ensues. Assume that the minutes will be read by an adversary and could be accessible to the public generally. This seems obvious but is often forgotten.

2. Keep the Purposes Front and Centre. Board minutes are a key record of the deliberations, decisions and resolutions of the directors. But more than that, they are documentary evidence of whether the directors have acted honestly, prudently and in good faith. Board minutes should demonstrate that the directors acted in the best interests of the company, made an informed decision in an independent fashion, had reasonable grounds for the decision, and conducted a reasonable analysis of the situation.

3. Draft to Minimize Unnecessary Production. Even though only one part of a minute of a meeting may be relevant in litigation, there is a good chance that the entirety of the board minute will be produced as a “document”. As I’ll discuss in upcoming posts, the flexibility provided by the business corporation statutes means that there are a number of strategies the corporate secretary can take to ensure that sensitive deliberations are recorded in separate documents.

4. Draft to Protect Privilege and Confidentiality. Well-drafted board minutes can assist litigators in seeking to protect portions of minutes from disclosure on the basis of privilege or confidentiality. It is important that the minutes reflect the criteria necessary for privilege or confidentiality. The corporate secretary should be aware of the test for solicitor-client privilege, litigation privilege, common law privilege and sealing orders for confidential information (each of which will be discussed in upcoming posts) and reflect those elements in the minutes.

5. Be Alert to Process Issues. Process issues can undermine the corporation’s attempt to protect board minutes. The cross-appointment of in-house counsel to the office of corporate secretary may result in the notes of counsel not being considered privileged. Retaining source notes or directors taking personal notes may result in alternative records of the meeting that can be used to challenge the accuracy, integrity and completeness of the board minutes. As discussed in our article, routine destruction is a possibility but the corporation and its directors must be careful to avoid spoliation of evidence if litigation is anticipated.

The Ontario Securities Commission (OSC) and the U.S. Financial Industry Regulatory Authority (FINRA) entered into a Memorandum of Understanding (MOU) earlier this month. FINRA is the largest regulator of securities firms doing business in the U.S. The MOU is intended to facilitate the OSC and FINRA exchanging information on firms and individuals that are under their common supervision. The MOU is subject to approval by the Ontario Minister of Finance.

In the past, Canadian recipients of FINRA inquiries into trading activities sometimes declined to provide information on the basis that FINRA was not empowered to collect this information in Canada. The MOU provides for unsolicited and solicited information sharing. Under the terms of the MOU, the OSC and FINRA may share unsolicited information that they believe would be helpful to the other authority in their regulatory activities. In addition, the OSC and FINRA will endeavour to provide full assistance to each other in obtaining information that may be maintained by or available to them through their regulatory activities (including in their regulatory supervision of other authorities). Requests for assistance will be assessed on a case-by-case basis.

The type of information shared between these authorities may include “trading activities, the registration and licensing information of supervised individuals or bodies, their disciplinary history, and with respect to supervisory examination and inspections, the substance of inspection reports (any and all issues identified and addressed during such examinations or inspections, actions (and action plans) taken in response to issues identified, and all outstanding issues), information on the transactions (name of client buy side/sell side, name of intermediary, and reason for operation),” and any other information mutually agreed upon by FINRA and the OSC.

Two important exceptions to information sharing are: (a) where a criminal proceeding relating to the same facts against the same persons has already been commenced in the jurisdiction from which the request is made; and (b) the same persons have already been the subject of final punitive sanctions (unless the requesting authority can demonstrate that the relief or sanctions sought would not be of the same nature or duplicative of those imposed by the other requested authority).

On November 10, 2011, the Canadian Securities Administrators (the “CSA”) announced that they are reviewing the $150,000 minimum amount prospectus exemption and the accredited investor prospectus exemption.

The review has been initiated as a result of the global financial crisis and recent international regulatory developments. The CSA is engaging in the consultation to identify any issues that stakeholders may have about the use of the exemptions and to obtain information that will assist in deciding whether changes to the exemptions are necessary or appropriate.

READ FULL ARTICLE

Mushkegowuk Grand Council Chief Stan Louttit stated, at a Mining Ready Conference on October 26, 2011, that mining companies must go beyond consultation and obtain consent before work can proceed on the James Bay Treaty lands.

The James Bay Treaty – Treaty Number 9 was negotiated in 1905 and 1906. The Adhesions were negotiated in 1929 and 1930. The Treaty and the Adhesions were notable because they were negotiated and signed by the Province of Ontario and the Federal Government . The Treaty and the Adhesions cover those lands from the height of land – north of Thunder Bay to the Artic and from James Bay to the Manitoba border. Historically the Province of Ontario has absolutely controlled and regulated mining and forestry in this area. Subject to recent Supreme Court decisions both the federal and provincial governments are required to consult with First Nations before issuing any permits e.g. under the Mining Act for exploration and advanced activities. There have been numerous altercations and Court appearances of these matters – usually driven by the duty to consult. Another set of concerns will emerge driven by Nishnawbe Aski Nation and the Tribal Councils. Essentially the First Nations have begun to assert that the Treaty Number 9 and the Adhesions were not properly signed.

It should be expected that the First Nations will seek to ” re negotiate ” the Treaty and assert that there should be limited if any government regulation in the James Bay Treaty area and that there must be prior approval from the First Nations before provincial approvals, if any.

http://www.thesudburystar.com/ArticleDisplay.aspx?archive=true&e=3348600

http://www.timminspress.com/ArticleDisplay.aspx?archive=true&e=3347769

Yesterday the TMX Group confirmed that, as of September 30, TSX and TSXV together had more new listings in 2011 than any other exchange group in the world. To September 30, 2011, the TSX and TSXV saw 318 new listings, including 32 graduates from TSXV to TSX. This makes a “three-peat” for the TMX as they have led the world in new listings for three consecutive years.

The TMX Group ranked ahead of second place Shenzhen Stock Exchange, with 201 new listings, and Deutsche Börse at third, with 176 new listings.

We are pleased to pass along our congratulations to the TSX and TSXV and to our newly listed clients!

For the full story please see http://exchange.tmx.com/2011/11/08/leading-the-world-in-new-listings/

As part of the Government of Canada’s plan to regulate carbon emissions, sector by sector, the Government of Canada recently released the Draft Reduction of Carbon Dioxide Emissions from Coal‐Fired Generation of Electricity Regulations (the “Draft Regulations”). In summary, the Draft Regulations aim to phase out the use of coal‐fired generation units, unless such units are associated with carbon capture storage systems (“CCS”) that enable such generation units to meet the intensity limits set by the Draft Regulations. This raises issues for domestic coal producers that supply coal‐fired electrical energy generation units.

The Draft Regulations
The Draft Regulations apply to coal‐fired electricity generation units that have been characterized as either (i) old, (ii) new, or (iii) existing:
• “Old unit” means a unit that has reached the end of its useful life but continues to produce electricity. Generally speaking, end of useful life is defined as the later of 45 years from the commission date or the end of their power purchase agreement applying to that unit.
• “New unit” means a unit, other than an old unit, whose commissioning date is on or after July 1, 2015.
• “Existing unit” means a unit that is not an old unit (so has not reached the end of its useful life) and is not a new unit (so had a commissioning date before July 1, 2015).

To read the complete article click here.

As part of this proposed national instrument, I note that a resulting amendment is being proposed to National Instrument 43 101 (“NI 43 101”) with respect to a filing of a short form prospectus.

As you are no doubt aware, the recent changes to NI 43 101 allowed for filing of the short form prospectus without a current report being filed so long as the report was subsequently filed within a specified period of time.  The proposal under NI 51 103 to amend this provision only for venture issuers imposes a difficult situation in that venture issuers would be forced to comply with this provision whereas an issuer on the TSX would not.

One of the intentions of the amendment to NI 43 101 was to allow short form prospectuses, which are done often on a very short timeline, to take place in order that an issuer can take advantage of a financing which might not be available if it were forced to file a technical report where there had been a material change to a material property prior to a receipt being issued.

It seems that this proposed provision would take away that advantage to an issuer in the event that it were to file a short form prospectus and the proposed amendment to NI 43 101 would hardly be conducive to assisting issuers to raise capital. This is likely to result in lost opportunities for junior issuers to raise capital particularly when it is difficult enough to do in the current capital markets for such issues.

To view complete proposal click here.

On October 7, 2011, the Ontario Securities Commission (“OSC”) published a Notice and Request for Comment (the “Notice”) on the Application by Maple Group Acquisition Corporation (“Maple”), a consortium of Canadian investment dealers, pension funds and other institutional investors, to acquire TMX Group Inc., Alpha Trading Systems Limited Partnership, Alpha Trading Systems Inc., the Canadian Depository for Securities Limited and, indirectly, CDS Clearing and Depository Services Inc. Maple is proposing to create an integrated group of businesses that provide trading, clearing, settlement and depository services for a broad array of financial instruments. The Alberta and B.C. Securities Commissions have also published a Joint Notice and Request for Comment seeking input on the Application.

The Notice summarizes the Maple proposal, highlights key issues that may arise from the proposed acquisition and provides information about the comment process.

The comment period is open until November 7, 2011. The OSC intends to hold a policy hearing in December 2011 to give members of the public who have submitted written comments an opportunity to clarify or expand on their written submissions.

On September 13, 2011, the securities regulators in Alberta, Ontario, Québec, Nova Scotia, New Brunswick and the Northwest Territories published Multilateral Staff Notice 51-336 (the “Notice”) identifying concerns regarding issuers who use mass advertising through various media, including television, social media, internet, radio and print.

Specifically, the Notice highlights a practice, primarily by junior issuers, of using brief television advertisements that highlight positive aspects of the issuer’s business or its prospects and the issuer’s stock symbol (or in the case of unlisted issuers, contact information for investment enquiries). The Notice sets out the view of securities regulators that mass advertisements for the purpose of promoting interest in an issuer’s securities may be contrary to securities legislation and/or be misleading to investors, as well as the concern that such advertisements do not reflect positively on the Canadian capital markets.

The Notice confirms that securities regulators will continue to monitor advertisements by issuers and may take regulatory action where appropriate.

On September 28, 2011, the Canadian Securities Administrators (“CSA”) published Staff Notice 31-329 (the “Notice”) issuing orders from several CSA members to provide relief from certain provisions in respect of National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31-103”).

Since NI 31-103 came into force, the CSA received applications for exemptive relief of certain provisions of NI 31-103. The Notice outlines orders issued or extended by certain CSA members related to the following:

• the requirement to register when trading in short-term debt instruments;
• the restrictions on the registration exemptions for international dealers and international advisers in sections 8.18 [international dealer] and 8.26 [international adviser] of NI 31-103; and
• the requirement in section 14.2(1) of NI 31-103 to provide relationship disclosure information.

The Notice summarizes the orders and related staff positions that have been issued by CSA members in connection with NI 31-103. The Notice also outlines the staff positions of certain CSA members who did not issue similar orders in connection with the above noted provisions of NI 31-103.

On September 29, 2011, the Canadian Securities Administrators published Staff Notice 41-306 (the “Notice”) in response to inquiries about the financial information that must be included in a prospectus during the time of an issuer’s transition to IFRS. The purpose of the Notice is to outline the requirements with respect to Q1 IFRS transition information – being the opening statement of financial position as at the date of transition to IFRS, including IFRS 1 reconciliations for the date of transition to the most recent annual period.

The Notice provides insight on the differences between the financial disclosure requirements for Q1 IFRS transition information in an initial public offering (“IPO”) prospectus as opposed to a short form or non-IPO long form prospectus.

Specifically, the Notice confirms that Q1 IFRS transition information is required to be included in all IPO prospectuses but not in short form prospectuses or non-IPO long form prospectuses. As such, an issuer filing an IPO prospectus with Q2 or Q3 interim financials is still required to include either Q1 IFRS transition information or the entire Q1 IFRS financial report. The Notice also discusses accounting principles for financial statements in prospectuses filed in the first year after transition.

The Canadian Securities Administrators (“CSA”) published, on July 15, 2011, proposed amendments to NI 41 101, General Prospectus Requirements and Companion Policy 41 101CP to NI 41 101 together with other miscellaneous amendments to related instruments. The 90 day comment period expires October 15, 2011.

One of the proposals is to further extend the requirement to file a non issuer “submission to the jurisdiction, and appointment of an agent for service” form to all foreign experts including qualified persons. It should be noted that these persons are already liable under the CSA statutory liability regime for misrepresentations in the prospectus that are derived from the report, opinion or statement.

The proposed amendments to submit to the jurisdiction would also apply to all foreign directors of an issuer.

To read the complete article click here.

On October 5th, 2011, the Australian Securities Exchange (“ASX”) issued a consultation paper in respect of requirements for public reporting of exploration information, Mineral Resources, Ore Reserves and production targets for listed mining companies. The review seeks to enhance the quality of, and confidence in, reported information and promote thorough, balanced and consistent disclosure. The ASX is seeking comments by January 27, 2012.

The resource industry continues to be a significant factor on the ASX and in the Australian marketplace with

• approximately 45% of the number of listed ASX companies being involved in mining and oil and gas,
• a market capitalization of $365 billion and $78 billion, in the mining and oil and gas sectors respectively, as at August 31, 2011, and
• more than 400 new junior resource company floats during the past 5 years.

The British Columbia Securities Commission (the “BCSC”) has adopted amendments (the “Amendments”) to National Instrument 45-106 – Prospectus and Registration Exemption (NI 45-106), which will take effect on October 3, 2011. Among the implemented changes, the Amendments will introduce the following:

• Form 45-106F6 British Columbia Report of Exempt Distribution (the “New BC Form”). The New BC Form will replace the existing form, Form 45-106F1 Report of Exempt Distribution (“Form 45-106F1”);
• amendments to National Instrument 45-106 Prospectus and Registration Exemptions (the rule amendments);
• amendments to Companion Policy 45-106CP (the policy amendments); and
• consequential amendments to BC Companion Policy 13-502CP Electronic filing of reports of exempt distribution.

The BC Form will distinguish British Columbia from other Canadian jurisdictions, which will continue to use Form 45-106F1, thereby requiring an issuer or underwriter to file a separate form in British Columbia for exempt distributions that take place in British Columbia and one or more other jurisdictions of Canada.

However, pursuant to two concurrent orders from the BCSC published on September 23, 2011, certain exemptions to the Amendments have been adopted including:

• an exemption from the New BC Form for investment funds and foreign issuers; and
• an exemption for use of information by representatives of the media.

A copy of the New BC Form is available on the BCSC website.

Copies of the two BCSC orders referenced above are available on the BCSC website:

45-533 Exemption from Form 45-106F6 requirements for investment funds and foreign public issuers

45-532 Exemption for use of information by representatives of the media

Effective September 9, 2011, the TSX Venture Exchange (“TSXV”) has implemented a new Form 2A Personal Information Form (the “New PIF”) and Form 2C1 Declaration (the “New Declaration”) which, subject to a transition period, will replace the existing Form 2A (the “Old PIF”) and Form 2C1 (the “Old Declaration”). The New PIF and New Declaration have been harmonized with the Toronto Stock Exchange’s (“TSX”) new form of Personal Information Form (TSX Form 4) and Declaration (TSX Form 4B), which are also being implemented effective September 9, 2011.

The TSXV will continue to accept the Old PIF and Old Declaration from filers until December 31, 2011.

The New PIF and New Declaration are available on the TSXV’s website.

The Canadian Securities Administrators (CSA) have adopted amendments to Form 51-102F6 – Statement of Executive Compensation which will apply in respect of financial years ending on or after October 31, 2011. The amendments come largely as a result of CSA Staff’s targeted compliance review of executive compensation disclosure and recent international developments in the area of executive compensation. The amendments range from drafting changes to clarify existing disclosure requirements to new substantive requirements. The substantive amendments to Form 51-102F6 include:

• requiring a company that relies on the exemption from disclosing performance goals or similar conditions in its Compensation Discussion and Analysis (CD&A) on the basis that disclosure would “seriously prejudice the interests of the company” to explicitly state that it is relying on the exemption and explain why disclosing the relevant performance goals or similar conditions would seriously prejudice the company’s interests;
• requiring companies to disclose whether the board of directors has considered the implications of the risks associated with the company’s compensation policies and practices;
• requiring companies to disclose whether any named executive officer (NEO) or director is permitted to purchase financial instruments that are designed to hedge or offset a decrease in the market value of equity securities granted as compensation or held, directly or indirectly, by the NEO or director;
• requiring increased disclosure of information about compensation advisors retained by the company, including a description of the advisor’s mandate, any other work performed for the company and a breakdown of all fees paid to compensation advisors for each service provided; and
• requiring companies to disclose the methodology used to calculate grant date fair value of all equity-based awards, including key assumptions and estimates used for each calculation and why the company chose that methodology, regardless of whether there are any differences with the accounting fair value.

On September 19, 2011, the UK Takeover Panel implemented significant amendments to the UK Takeover Code. While the amendments sought to give increased power to the boards of target companies, some commentators have criticized the new rules for making UK M&A less appealing.

Key changes to the Code include:

• requiring a target company to name a potential bidder with whom it is in talks or from which a takeover approach has been received by making a “possible offer” announcement;
• the imposition of a shortened “put up or shut up” timetable which requires the announcement of a fully financed firm offer (or a statement that no offer will be made) by a potential bidder within 28 days from the “possible offer” announcement identifying that bidder; and
• the banning of common deal protection measures, including break fees.

The new amendments to the Code contrast starkly with the Canadian takeover market, in which confidentiality is commonly maintained until the announcement of a definitive business combination agreement and deal protection measures are utilized in almost all negotiated transactions.

The full text of the Code can be found on the UK Takeover Panel’s website.