NIN 95/16 - Amendments to Form 30 (Information Circular) [NIN - Rescinded]

The British Columbia Securities Commission is publishing amendments to Form 30 (Information Circular) to require improved disclosure by reporting issuers when preparing information circulars concerning reverse take-overs ("RTOs"), amalgamations, mergers, arrangements and reorganizations. These amendments, particularly those concerning RTO disclosure, are intended to ensure that security holders receive sufficient information to make reasoned judgments on issues brought before meetings of security holders. The amendments concerning amalgamations, mergers, arrangements and reorganizations bring British Columbia's disclosure requirements in line with those of Ontario.

The Superintendent of Brokers specifies, in accordance with section 158 of the Securities Act (the "Act"), amendments to item 11 of Form 30 to implement the new requirements. The amended item 11 of Form 30 is attached to this Notice.

Background

In January 1995, the Commission published for comment NIN#95/6 entitled "Draft Amendments to Form 30 and Additional Draft Amendments to Section 146 of the Securities Regulation". The Commission received three comment letters in response.

Section 146

In addition to comments on NIN#95/6, comments had also been received on section 146 in response to the Commission's package of proposed amendments to the Securities Regulation published on October 7, 1994. Amendments to section 146 are currently being examined in light of all comments received.

Form 30

The amendments to item 11 of Form 30 have been revised from the NIN#95/6 draft to reflect some of the comments received and to clarify certain provisions. Other areas of concern raised in the comment letters are discussed below.

The requirements concerning RTOs have been revised to require that the financial statements included in the information circular be approved by the directors, partners or the sole proprietor of the non-reporting issuer or of the vendor of the business to be acquired in the RTO. In addition, drafting changes were made to the section dealing with interim financial statements to make it easier to read. Drafting changes were also made to clarify the type of information that must be summarized in the press release to be issued by the reporting issuer once it has filed its Filing Statement or Statement of Material Facts with the Vancouver Stock Exchange ("VSE").

The requirements relating to amalgamations, mergers, arrangements or reorganizations have been revised to clarify that they apply only where the matter is submitted to security holder approval as a result of applicable corporate legislation. A reporting issuer undergoing a "reorganization" or "change of business", as defined in the VSE listings policies, would not be subject to these specific requirements unless that "reorganization" or "change of business" involved a corporate law transaction that would require such disclosure. Note, however, that the general rule set out in item 11, that matters submitted to a meeting of security holders must be described in sufficient detail to permit security holders to form a reasoned judgment concerning the matter, still applies to information circulars prepared in connection with such a "reorganization" or "change of business". Guidance as to what Commission staff will generally consider to be appropriate disclosure in this context can be found in the specific disclosure requirements relating to RTOs in item 11 of Form 30.

Some commentators expressed concern about having to prepare the information circular for a meeting of shareholders to approve an RTO or other corporate transaction at a relatively early stage in the transaction. General instruction one of the Form requires that the information contained in an information circular be as of a specified date, not be more than 30 days before the information is first sent to any security holder. As of that date, the information contained in the circular must be accurate and complete. Staff acknowledge that, because the transaction will still be subject to regulatory approval by the VSE, certain of the information ultimately contained in the Filing Statement or Statement of Material Facts may vary from the information included earlier in the circular. The critical requirement for the reporting issuer is that the information circular must not contain any statement that is a misrepresentation, at the time and in light of the circumstances under which it is made.

A concern had also been raised about potential timing difficulties for information circulars concerning RTOs given the requirements of National Policy Statement No. 41 ("NPS 41"). Staff believe that the nature of the RTO disclosure required in the amended Form 30, and the relief and waiver options available under NPS 41, minimize the likelihood of any serious timing problems.

Implementation

The amendments to item 11 of Form 30 are effective for information circulars dated on or after July 1, 1995. An information circular dated prior to July 1, 1995 may comply with either the current or the amended form.

Any amendments to section 146 will be implemented in conjunction with the Commission's package of proposed amendments to the Securities Regulation. The Commission intends to recommend to the government that section 146 be amended to require reporting issuers to file with the Commission a copy of any Filing Statement filed with the VSE in connection with an RTO. Reporting issuers are invited to file a copy of any RTO Filing Statement with the Commission before the amendments to section 146 are implemented.

DATED at Vancouver, British Columbia, on April 20, 1995.

Dean E. Holley
Superintendent of Brokers

Attachment

REF: NIN#94/15
NIN#95/6


AMENDMENTS TO FORM 30

Item 11 of Form 30 is revoked and the following substituted:

Item 11 - Particulars of Matters to be Acted Upon

If action is to be taken on any matter to be submitted to the meeting of security holders, other than the approval of financial statements, the substance of the matter or related groups of matters should be described, except to the extent described pursuant to the foregoing items, in sufficient detail to permit security holders to form a reasoned judgement concerning the matter.

Without limiting the generality of the foregoing, such matters include alterations of share capital, charter amendments, property acquisitions or dispositions, amalgamations, mergers, arrangements, reorganizations or reverse take-overs.

Amalgamation, Merger, Arrangement or Reorganization

Where an information circular is prepared in connection with a meeting of security holders at which action is to be taken under applicable corporate legislation in respect of an amalgamation, merger, arrangement or reorganization, pursuant to which securities are to be issued, offered in exchange or otherwise distributed, the information circular shall include the information prescribed by the form of prospectus appropriate for each issuer whose securities are being issued, offered in exchange or otherwise distributed in connection with the amalgamation, merger, arrangement or reorganization with appropriate modifications; this requirement does not apply to a reorganization where the number of outstanding securities of an issuer is changed into a different number of securities of the same class and series.

In addition, where an amalgamation, arrangement, merger or reorganization would result in the acquisition of a business by an issuer and that acquisition is material to the issuer, the information circular of that issuer shall include the financial information about the business to be acquired that would be included in a prospectus if the proceeds of the offering under the prospectus were to be applied, in whole or in part, directly or indirectly, to finance the acquisition of a business by a purchase of assets or shares.

Reverse Take-over

The requirements set out under the caption "Amalgamation, Merger, Arrangement or Reorganization" do not apply to an information circular prepared in connection with a meeting of security holders at which action is to be taken in respect of one or more transactions resulting in a reverse take-over ("RTO") as contemplated by the Vancouver Stock Exchange ("VSE") policy on RTO transactions.

In the case of an RTO, reference should be made to the prospectus form applicable to the non-reporting issuer or business to be acquired for the applicable disclosure requirements. The information included in the information circular must permit security holders to form a reasoned judgement concerning the transaction. The relevant prospectus form is

(a) Form 12A, where the non-reporting issuer is a junior industrial issuer or the business to be acquired would create a junior industrial issuer; or

(b) Form 14A, where the non-reporting issuer is a natural resource issuer or the business to be acquired would create a natural resource issuer.

For greater certainty, and without limiting the generality of the foregoing, where the relevant form of prospectus is Form 12A, the information circular must contain, with appropriate modifications, the information relating to the non-reporting issuer or business to be acquired called for by the following items of Form 12A:

(a) item 4.1 (name and incorporation);

(b) items 5.1 (description and general development), 5.3 (stated business objectives), 5.4 (milestones), 5.5 (acquisitions and dispositions), 5.6 (management) and 5.14 (administration);

(c) item 7(a) (risks related to the nature of the business);

(d) item 8 (directors, officers and promoters);

(e) items 10.1 (executive compensation), 10.2 (a) to (c) and (d)(i) (related party transactions), and 10.3 (proposed compensation);

(f) item 11.2(b) (options and other rights to purchase securities);

(g) item 18 (legal proceedings); and

(h) item 22 (other material facts).

Similarly, where the relevant form of prospectus is Form 14A, the information circular must contain, with appropriate modifications, the information relating to the non-reporting issuer or the business to be acquired called for by the following items of Form 14A:

(a) item 4.1 (name and incorporation);

(b) item 5.1 (description and general development);

(c) for mineral properties, items 6.1(location, description and acquisition), 6.2 (exploration and development history), 6.4 (proposed exploration and development program) and 6.5 (other properties);

(d) for oil and gas properties, items 6.7 (location, description and acquisition), 6.8 (production history), 6.9 (drilling activity), 6.11 (proposed exploration and development program) and 6.12 (other properties);

(e) item 7 (administration);

(f) item 9 (a) (risks related to the nature of the business);

(g) item 10 (directors, officers, promoters and other management);

(h) items 12.1 (executive compensation), 12.2(a) to (c) and (d) (i) (related party transactions), and 12.3 (proposed compensation);

(i) item 13.2(b) (options and other rights to purchase securities);

(j) item 22 (legal proceedings); and

(k) item 26 (other material facts).

In addition to the information required above under either Form 12A or Form 14A, the information circular must contain separate financial statements for the non-reporting issuer or for the business to be acquired prepared in accordance with Canadian generally accepted accounting principles and Local Policy Statement 3-02, except that financial statements need not be audited or reviewed. Interim financial statements are required to be included only where the date of the information circular is more than 120 days from the date of the most recent annual financial statements included in the information circular.

Any financial statements included in the information circular must be approved by

(a) the directors where the non-reporting issuer or the vendor of the business to be acquired is a corporation,

(b) the partners where the non-reporting issuer or the vendor of the business to be acquired is a partnership, or

(c) the sole proprietor where the non-reporting issuer or the vendor of the business to be acquired is a sole proprietorship.

The approval of the financial statements must be evidenced by the signature, or facsimile of the signature, of two directors or two partners duly authorized to evidence the approval, or of the sole proprietor, immediately above the typewritten or printed name of those directors or partners or that sole proprietor.

The information circular must disclose that a Filing Statement or a Statement of Material Facts with respect to the RTO containing full, true and plain disclosure of all material facts relating to the RTO, the listed issuer and the non-reporting issuer or the business to be acquired will be filed with the VSE.

The information circular must also disclose that a news release will be issued

(a) confirming that a Filing Statement or a Statement of Material Facts has been filed with the VSE with respect to the RTO and placed in the public file of the listed issuer,

(b) summarizing the information on the RTO, the listed issuer and the non-reporting issuer or the business to be acquired contained in the Filing Statement or Statement of Material Facts, and

(c) giving the name, address and telephone number of an officer of the listed issuer from whom a copy of the Filing Statement or Statement of Material Facts may be obtained free of charge.