Cease Trade Orders

CINAR Corporation [Sec. 171]

BCSECCOM #:
2004 BCSECCOM 119
Document Type:
Sec. 171
Published Date:
2004-02-24
Effective Date:
2004-02-24
Details:

2004 BCSECCOM 119

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2004 BCSECCOM 119


Revocation Order

CINAR Corporation

Section 171 of the Securities Act, R.S.B.C. 1996, c. 418


¶ 1 On April 5, 2001, the Executive Director ordered under section 164 of the Securities Act, R.S.B.C. 1996, c. 418 (the Order) that all trading in CINAR’s securities cease until it files the required records referred to in the Order.

¶ 2 CINAR has applied to the Executive Director for an order under section 171 of the Act to revoke the Order.

¶ 3 CINAR has represented to the Executive Director that:

1. CINAR is a corporation incorporated under the Canada Business Corporations Act (CBCA) and a reporting issuer (or equivalent) in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia and Newfoundland (the Reporting Jurisdictions). CINAR is not a reporting issuer in any Canadian jurisdiction other than the Reporting Jurisdictions. CINAR’s head office is located at 1055 René-Lévesque Blvd East, Montreal, Québec.

2. CINAR is an integrated entertainment and education company that develops, produces, markets and distributes high-quality, non-violent programming and supplemental education products for children, families and educators world-wide.

3. The authorized share capital of CINAR consists of an unlimited number of Variable Multiple Voting Shares (the Multiple Voting Shares), an unlimited number of Limited Voting Shares (the Limited Voting Shares) and an unlimited number of Preferred Shares, of which 5,233,402 Multiple Voting Shares and 34,735,998 Limited Voting Shares and no Preferred Shares were issued and outstanding as of January 30, 2004, (such outstanding shares collectively referred to as the CINAR Shares).

4. The CINAR Shares were listed on the Toronto Stock Exchange (TSX) and quoted on the Nasdaq National Market (Nasdaq). The TSX and Nasdaq halted trading in the CINAR Shares in March 2000. As at the close of business on August 30, 2001, the TSX de-listed the CINAR Shares as a result of CINAR’s failure to meet its listing requirements. Nasdaq also de-listed the CINAR Shares effective on August 2, 2000.

5. In the United States, the CINAR Shares trade only on the over-the-counter Pink Sheets Market. No securities of CINAR are traded on a marketplace (as defined in National Instrument 21-101 Marketplace Operation) in Canada.

6. The Executive Director issued the Order because CINAR failed to file current financial statements under Part 12 of the Securities Rules, B.C.Reg. 196/97.

7. CINAR remains in default of various continuous disclosure obligations under British Columbia securities law.

8. CINAR’s securities are currently subject to cease trade orders issued by the securities regulatory authorities in the provinces of Quebec, Manitoba, Saskatchewan, Alberta and Ontario (the CTO Jurisdictions). CINAR has concurrently applied for revocations of these cease trade orders.

9. On January 9, 2004, the Executive Director granted CINAR a partial revocation of the Order (the Partial Revocation Order) to permit certain trades and acts in furtherance of trades as part of CINAR’s plan of arrangement (the Arrangement) with 4113683 Canada Inc. (Newco). The securities regulatory authority in each CTO Jurisdiction also partially revoked its cease trade order to permit the completion of the Arrangement.

10. On October 30, 2003, CINAR and Newco entered into an agreement (the Arrangement Agreement) setting out the terms of the Arrangement pursuant to section 192 of theCBCA. The Arrangement involves the purchase by Newco of all of the issued and outstanding shares of CINAR followed by the amalgamation of Newco and CINAR, subject to receipt of all required approvals and the satisfaction of certain other conditions. Newco is a wholly owned subsidiary of 3918203 Canada Inc. (391 Canada), a private company with a small number of investors that include Michael Hirsh, Toper Taylor and TD Capital Canadian Private Equity Partners Fund.

11. On February 17, 2004, the Arrangement received the approval (by way of special resolutions) of the holders of each of the Multiple Voting Shares and the Limited Voting Shares, and on February 24, 2004 the Arrangement received final court approval (the Final Court Approval).

12. On 12:01 a.m. on the date (expected to be on or about March 1, 2004), on which a Certificate of Arrangement giving effect to the Arrangement is issued by the Director pursuant to section 192(7) of the CBCA (the Effective Time), all of the CINAR Shares will be acquired by Newco, and Newco and CINAR will be amalgamated. The amalgamation will result in the cancellation of all of the CINAR Shares and the conversion of all of the common shares of Newco, all of which are held by 391 Canada, into common shares of the amalgamated corporation (Amalco).

13. Following completion of the Arrangement, all of the outstanding securities of Amalco will be beneficially owned by 391 Canada.

14. Upon the completion of the Arrangement, Amalco will become a reporting issuer within the meaning set out in section 1(1) of the Act. Pursuant to section 186 of the CBCA and the terms of the Arrangement, an order against an amalgamating corporation may be enforced against the amalgamated corporation. Therefore, the Executive Director may have the power to enforce the Order to prevent trading in securities of Amalco.

15. The Partial Revocation Order varied the Order solely to permit trades in securities of CINAR that occurred as part of the Arrangement. A full revocation of the Order is required in order for 391 Canada to deal with its interest in Amalco including, without limitation, to use the shares of Amalco as security for loans obtained to finance the Arrangement.

16. CINAR has made an application under National Policy 12-201 (the MRRS Application) for an order that Amalco be deemed to no longer be a reporting issuer in each province, including British Columbia, in which it becomes a reporting issuer with a view to obtaining such order as soon as practicable following the Effective Time.
17. 391 Canada has undertaken, if the Arrangement is completed, to cause Amalco not to withdraw the MRRS Application and to diligently pursue a decision under the MRRS Application deeming Amalco to have ceased to be a reporting issuer as soon as practicable following the completion of the Arrangement based on the representations included in the MRRS Application and on the conditions set out in the draft decision document accompanying the MRRS Application (as supplemented by the written responses to the comments of the securities regulatory authorities on the MRRS Application up to the date of the Final Court Approval) with no additional representations, conditions or requirements being added thereto.
¶ 4 The Executive Director is satisfied that the following order is not prejudicial to the public interest.

¶ 5 Under section 171 of the Act, the Executive Director revokes the Order as of the Effective Time.

¶ 6 February 24, 2004




Larry Wilkins, CA
Manager, Corporate Finance