LPS 3-27 - System For Shorter Hold Periods With An Annual Information Form And Exemption For Certain Distributions Outside British Columbia [Rescinded]
| Published Date: | 1998-08-28 |
|---|---|
| Effective Date: | 1998-10-01 |
| Rescinded Date: | 2001-11-30 |
PART 1 PURPOSE AND IMPLEMENTATION
1.1 Purpose - This local policy statement discusses the availability of an exemption for (i) offerings of non-convertible debt in the Eurobond market under BOR#97/11 (the "Eurobond BOR"), (ii) shorter hold periods under BOR#98/7 (the "SHAIF BOR") and (iii) offerings of securities to purchasers outside British Columbia under BOR#98/8 (the "Distribution BOR"), in each case where certain requirements are met.
1.2 Effective Date - This local policy statement comes into effect on October 1, 1998 and replaces Interim Local Policy Statement 3-27.
PART 2 DEFINITIONS
2.1 Defined Terms - In this local policy statement
"AIF" means an annual information form prepared in accordance with the provisions of Appendix A to NPS 47 or the form required under any successor instrument or any alternative form permitted under section 5.8 of this local policy statement;
"Canadian securities regulatory authorities" shall be defined in accordance with National Instrument 14-101;
"current AIF" means
(a) during the period of 140 days following an issuer’s most recently completed financial year
(i) if an issuer’s AIF for its most recently completed financial year has been filed in accordance with section 5.3 or under NPS 47, the AIF of the issuer for that financial year, or
(ii) if an issuer’s AIF for its most recently completed financial year has not been filed in accordance with section 5.3 or under NPS 47, the AIF of the issuer for its immediately preceding financial year provided that AIF has been filed in accordance with section 5.3 or under NPS 47, and
(b) at any other time, the AIF of the issuer for its most recently completed financial year provided it has been filed in accordance with section 5.3 or under NPS 47;
"JCP information circular" means an information circular filed and accepted by the Alberta Stock Exchange in connection with a "major transaction" under the JCP rule;
"JCP rule" means Alberta Securities Commission Rule 46-501 - "Junior Capital Pool Offerings;"
"NPS 2A" means National Policy Statement No. 2A or any successor instrument;
"NPS 2B" means National Policy Statement No. 2B or any successor instrument;
"NPS 47" means National Policy Statement No. 47 or any successor instrument;
"POP issuer" means an issuer that meets the eligibility criteria required to participate in the POP System and that has a current AIF as defined in NPS 47;
"recognized market" means the Vancouver Stock Exchange, the Alberta Stock Exchange, The Toronto Stock Exchange, the Montreal Exchange, the New York Stock Exchange, the American Stock Exchange, the London Stock Exchange, the NASDAQ National Market and NASDAQ Small Cap Market or any other market recognized by the Commission under section 4.3;
"regulator" shall be defined in accordance with National Instrument 14-101;
"reserves" means ore, proven reserves, or proved reserves as defined in NPS 2A or NPS 2B;
"SEC" means the Securities and Exchange Commission of the United States of America;
"SecuritiesAct" means the Securities Act, R.S.B.C. 1996, c. 418;
"Securities Rules" means the Securities Rules, R.B.C. Reg. 194/97;
"VCP information circular" means an information circular filed and accepted by the Vancouver Stock Exchange in connection with a "qualifying transaction" under the VCP policy;
"VCP policy" means the Vancouver Stock Exchange’s Policy 30 - "Venture Capital Pool Companies"; and
"1934 Act" means the Securities Exchange Act of 1934 of the United States of America.
2.2 Terms Defined in Legislation - Terms defined in the Securities Act, the Securities Rules and the Interpretation Act, R.S.B.C 1996, c. 238, and used in this local policy statement have the same meaning as in the Securities Act, the Securities Rules and the Interpretation Act.
PART 3 REGISTRATION AND PROSPECTUS EXEMPTIONS FOR PURCHASERS OUTSIDE BRITISH COLUMBIA
3.1 Eurobond Offerings - The Eurobond BOR provides, in the case of non-convertible debt securities, an exemption from the registration and prospectus provisions of the SecuritiesAct where the conditions set out in the Eurobond BOR are complied with. The effect of the blanket order is to reduce the hold period for certain non-convertible debt securities sold to persons outside of Canada from 12 months to 40 days. This exemption is only available where a genuine market (as defined in the Eurobond BOR) exists for the non-convertible debt security outside Canada and is primarily intended to facilitate Eurobond financings by British Columbia issuers. Persons offering debt securities that will trade on a market other than the Eurobond market may apply to the Commission or the Executive Director to have the market on which that debt trades recognized as a genuine market. Issuers offering non-convertible debt entitled to this exemption are not required to legend the certificates representing the debt securities but are required to take the steps set out in paragraph 1(d) to (f) of the Eurobond BOR.
3.2 Other Securities Distributed to Purchasers Outside British Columbia The Distribution BOR provides an exemption from the registration and prospectus provisions of the Securities Act for distributions of securities to purchasers outside British Columbia. This exemption is in addition to other available exemptions under the Securities Act and SecuritiesRules that may be relied on by an issuer making an offering of securities. The Distribution BOR is only available for issuers that have securities listed on a recognized market and comply with the conditions set out in the Distribution BOR. Issuers whose securities are listed on an exchange other than a recognized market and who want to take advantage of the exemption provided by the Distribution BOR may apply to the Commission or the Executive Director to have the market on which those securities trade recognized for the purpose of the Distribution BOR.
In addition to the requirement to legend the certificates representing the securities, issuers should consider whether to take any additional steps discussed in NIN#97/48 to keep the securities from being subsequently resold to British Columbia residents until after the expiry of the hold period set out in the Distribution BOR.
Issuers are reminded that the distribution must also be made in compliance with the laws of the jurisdiction in which the purchaser is resident and the rules and policies of the recognized market on which the securities are listed or quoted. Responsibility for compliance with securities legislation of the jurisdiction in which the purchaser is resident remains with issuers and their advisors. In circumstances where the issuer has not complied with the laws of the jurisdiction in which the purchaser is resident, the Commission is prepared to take appropriate enforcement proceedings against the issuer or its directors and officers directly or in co-operation with securities regulatory authorities of the other jurisdiction.
PART 4 SHAIF - GENERAL REQUIREMENTS
4.1 Shorter Hold Period - The SHAIF BOR reduces the hold period under sections 142 and 143 of the Securities Rules for distributions of securities of qualifying issuers as defined in the SHAIF BOR, from 12 months to 4 months where the issuer files an AIF and complies with the other conditions of the SHAIF BOR. However, it does not operate to exempt these distributions from any of the other provisions of sections 142 and 143 of the Securities Rules, and issuers are reminded that any resales of securities subject to the SHAIF BOR must comply with all other resale provisions of the SecuritiesAct and Securities Rules.
4.2 Revenue and Expenditure Tests for Qualifying Issuers - In order to meet the definition of qualifying issuer as set out in the SHAIF BOR, an issuer must meet certain revenue or expenditure tests. For a non-resource issuer, the expenditures must be directly related to the development of the business described in the AIF. Expenditures directly related to the development of the business do not include such general and administrative expenses as head office rent, management fees, legal or accounting fees, travel, promotion or investor relations expenditures.
4.3 Recognized Market - To be a qualifying issuer, an issuer must have its securities listed on a recognized market. Issuers whose securities are only quoted on the Canadian Dealer Network or on a bulletin board are not considered qualifying issuers. Issuers whose securities are listed on an exchange other than a recognized market and who want to take advantage of the shorter hold period provided by the SHAIF BOR may apply to the Commission or the Executive Director to have the market on which those securities trade recognized for the purpose of the SHAIF BOR.
4.4 Certificate - An issuer relying on the SHAIF BOR must sign a certificate at the date of the distribution certifying, among other things, that it is a qualifying issuer. The certificate must be retained by the issuer for a period of 6 years. The Executive Director may at any time after the distribution require the issuer to produce a copy of the certificate.
4.5 Convertible Securities - An issuer that has issued convertible securities is eligible to offer purchasers the shorter hold period provided by the SHAIF BOR provided that it was a qualifying issuer as defined in the SHAIF BOR, at the date of issuance of the convertible securities and has complied with this local policy statement and the SHAIF BOR prior to the date of the conversion of the securities. In those circumstances, the shorter hold period would commence from the date of the issuance of the convertible securities. Issuers should note that the Executive Director may exercise the discretionary power described in section 5.5 and advise the issuer that it is not eligible to offer purchasers the shorter hold period if the issuer was not a qualifying issuer as defined in the SHAIF BOR, at the date of issuance of the convertible securities.
PART 5 SHAIF - FILING REQUIREMENTS AND REVIEW PROCEDURES
5.1 Filing of AIF - A reporting issuer may at any time file an AIF, provided it meets the definition of qualifying issuer set out in the SHAIF BOR. Filing under the SHAIF BOR is entirely voluntary. However, only issuers that have filed the required AIF will be eligible to offer purchasers the shorter hold period provided by the SHAIF BOR.
5.2 Renewal of AIF - To remain eligible to offer purchasers the shorter hold period provided by the SHAIF BOR, an issuer that has filed an AIF is required to file a current AIF and supporting documents within 140 days from the end of each financial year.
5.3 Confirmation of Filing of AIF - The Executive Director will forward to the issuer a written confirmation of filing a current AIF within 10 business days of the date the AIF is filed with the Commission. This confirmation does not mean the Commission has passed on the merits or the content of the AIF and does not preclude review of the AIF, which is subject to review at any time.
5.4 POP Issuers - The filing requirements and review procedures set out in this local policy statement do not apply to POP issuers, as POP issuers will be expected to comply with, and be governed by, the filing requirements and review procedures of NPS 47.
5.5 Discretionary Powers- Notwithstanding that an issuer may satisfy the eligibility criteria of the SHAIF BOR, the Executive Director may advise the issuer that it will not accept the current AIF for filing pursuant to the SHAIF BOR. In addition, as indicated in the SHAIF BOR, the Executive Director may, at any time prior to a distribution of securities, advise the issuer that it is no longer eligible to offer purchasers the shorter hold period provided by the SHAIF BOR. For example, the Executive Director may exercise this power where the issuer has disposed of the business or resource property that entitled the issuer to be a qualified issuer as defined in the SHAIF BOR. In either case, the Executive Director will provide the issuer with reasons for the proposed decision and an opportunity to be heard.
5.6 Review of AIF- An issuer’s AIF is subject to selective review, and, as a result, changes may need to be made to the AIF as required by the Commission or the Executive Director. An issuer’s AIF may be selectively reviewed before or after the issuance of the confirmation referred to in section 5.3. If the AIF is reviewed before a distribution of securities, the issuer may not be eligible to offer purchasers the shorter hold period provided by the SHAIF BOR until the issuer has made the necessary changes to the AIF. If the AIF is reviewed after a distribution of securities and is not in the required form, the issuer will no longer be eligible to rely on the SHAIF BOR to shorten the hold period for any further distributions of securities. In addition, any of a wide range of compliance action may be taken, from requiring the next AIF to be filed correctly, or a clarifying press release to be issued, to more serious actions such as issuing a cease trade order against the issuer’s securities, or initiating appropriate enforcement proceedings against the issuer or its directors and officers.
5.7 Loss of Eligibility - Where an issuer does not file a current AIF within 140 days from the end of the financial year as set out in section 5.2, the Executive Director will consider that the issuer has ceased to be eligible to rely on the SHAIF BOR to shorten the hold period for any new issuance of securities until the issuer again satisfies the applicable eligibility criteria set out in the SHAIF BOR, including filing a current AIF. Securities that have been issued and are subject to the SHAIF BOR will remain subject to the shorter hold period provided by the SHAIF BOR notwithstanding that the issuer subsequently ceases to be eligible to rely on the SHAIF BOR.
5.8 Alternative Forms of AIF
(a) Prospectus - An issuer that has filed a prospectus, other than a prospectus filed under the JCP rule or the VCP policy, and received a receipt from the Executive Director or from a Canadian securities regulatory authority or regulator in another jurisdiction, may elect to use that prospectus as an alternative form of AIF for the financial year of the most recent year end financial statements included in the prospectus.
(b) OSC Policy Statement No. 5.10 - An issuer that has filed an AIF under Ontario Securities Commission Policy Statement No. 5.10 may elect to use that AIF as an alternative form of AIF.
(c) JCP or VCP information circular - An issuer may elect to use a JCP or VCP information circular as an alternative form of AIF for the financial year of the most recent year end financial statements included in the information circular.
(d) U.S. Registrant - An issuer that has securities registered with the SEC may satisfy the requirement for filing an AIF by filing a current annual report on Form 10-K or on Form 20-F filed with the SEC pursuant to the 1934 Act. Issuers filing Forms 10-K or Forms 20-F must file the relevant form with the Commission within the earlier of the time periods required by this local policy statement and the 1934 Act.
Issuers are reminded that the shorter hold period provided by the SHAIF BOR will only be available to issuers that are reporting issuers in British Columbia and that satisfy the other eligibility requirements of the SHAIF BOR, including the requirement that the issuer be a qualifying issuer.
5.9 Notice - If an issuer elects to use an alternative form of AIF under section 5.8, the issuer must file a notice with the Commission directed to the attention of the Director, Corporate Finance. The notice should identify the date of the document being used as an alternative form of AIF, the date of the issuer’s year end, the date of the financial statements included in the document and, if the document is a prospectus, the date of the receipt of the prospectus. Refer to section 5.11 for filing procedures for issuers filing through SEDAR.
5.10 Fees - An issuer filing a current AIF or a notice under section 5.9, other than a notice relating to a prospectus for which the Executive Director has issued a receipt, must pay the filing fee required by item 18 of section 22 of the Securities Regulation R.B.C. Reg. 196/97. An issuer, other than a foreign issuer, must pay the filing fee through SEDAR by an electronic payment authorized at the same time as the issuer files its AIF or notice. Foreign issuers that have not elected to file through SEDAR must send a cheque for the filing fee payable to the British Columbia Securities Commission.
5.11 Filing Through SEDAR - National Instrument 13-101 relating to SEDAR applies to Canadian issuers and foreign issuers who elect to file through SEDAR. These issuers must file certain documents, including a non-POP AIF, through SEDAR. Currently, the AIF would be filed under "Securities Offerings - Other Filings". The issuer should name the filing "SHAIF AIF". Where an issuer elects to use an alternative form of AIF that has previously been filed through SEDAR, the issuer is not required to refile the document for the purposes of the SHAIF BOR. While notices under section 5.9 are not required to be filed through SEDAR, the Commission encourages issuers to do so under "Securities Offerings - Other Filings". The issuer should name the filing "SHAIF Notice". It is anticipated that SEDAR will be amended within the next year to provide for a specific filing type for SHAIF filings.
5.12 Supporting Documents - For the purpose of the SHAIF BOR, the Commission requires that a non-POP issuer file the following supporting documents with its current AIF:
(a) signed consent letter(s) from any professional person(s) named in the current AIF in the form prescribed by section 106(3) of the Securities Rules,
(b) where a natural resource issuer is filing an AIF disclosing reserves and the reserves are represented as being based on estimates prepared or reviewed by an independent engineer or other qualified person, a signed copy of the technical or engineering report of that engineer or qualified person on each of its properties that are material to the issuer and for which reserves are disclosed in accordance with NPS 2A or NPS 2B and Form 54 or 55, as the case may be, and
(c) a certificate in the form prescribed by section 110 of the Securities Rules.
5.13 Requests for Additional Information- In addition to the documents required by the Commission as set out in section 5.12, the Executive Director may require other documents to be filed in order to allow the Executive Director to determine whether the Executive Director should exercise the discretionary power set out in section 5.5.
5.14 Substantial Transaction - As set out in paragraph 1(a)(v) of the SHAIF BOR, if an issuer has made a substantial transaction since the date of its most recent AIF and still wants to be eligible to rely on the SHAIF BOR, it must file a material change report disclosing the substantial transaction. In addition to the information required to be included in a material change report, the issuer must also disclose the effect of the substantial transaction on the business of the issuer. Issuers should ensure that the disclosure of the substantial transaction and its effect on the business of the issuer be sufficiently complete to enable a reader to appreciate the significance of the transaction without reference to other material.
The filing of a material change report disclosing the substantial transaction for the purposes of remaining eligible to rely on the SHAIF BOR, does not relieve an issuer from its obligation to file a material change report in other circumstances where appropriate. Issuers should note that the Executive Director may exercise the discretionary power described in section 5.5 where the issuer has sold or discontinued the business or sold or abandoned the resource property or interest in the resource property that entitled the issuer to be a qualified issuer as defined in the SHAIF BOR.
The Commission considers a substantial transaction to be one where
(a) in the case of a purchase,
(i) the consideration paid for the acquired business, resource property or interest in the resource property is greater than 20% of the total assets of the issuer as reported in the issuer’s audited financial statements relating to its current AIF, or
(ii) the revenue for the most recent year of the acquired business, resource property or interest in the resource property is greater than 20% of the total revenues of the issuer as reported in the issuer’s audited financial statements relating to its current AIF;
(b) in the case of a sale,
(i) the selling price of the business, resource property or interest in the resource property being sold, is greater than 20% of the total assets of the issuer as reported in the issuer’s audited financial statements relating to its current AIF, or
(ii) the total revenue of the business, resource property or interest in the resource property being sold, as included in the issuer’s audited financial statements relating to its current AIF, is greater than 20% of the total revenues of the issuer as reported in the issuer’s audited financial statements relating to its current AIF;
(c) in the case of a discontinuance or abandonment,
(i) the book value of the business, resource property or interest in the resource property being discontinued or abandoned is greater than 20% of the total assets of the issuer as reported in the issuer’s audited financial statements relating to its current AIF, or
(ii) the revenue of the business, resource property or interest in the resource property being discontinued or abandoned, as included in the issuer’s audited financial statements relating to its current AIF, is greater than 20% of the total revenues of the issuer as reported in the issuer’s audited financial statements relating to its current AIF.
5.15 Currency of Information in AIF - An issuer must include in its current AIF information as at the end of its most recently completed financial year. However, where material events or conditions arise after the end of the issuer’s most recently completed financial year and before the date of the AIF, an issuer must update the information in its AIF to reflect these events or conditions. What is material is a matter of judgement and should generally be determined in relation to its significance to investors, analysts and other users of the information.
PART 6 RESALES OUTSIDE BRITISH COLUMBIA DURING HOLD PERIOD
A purchaser resident outside British Columbia purchasing securities distributed under the Eurobond BOR or the Distribution BOR, or holding securities subject to the SHAIF BOR, may resell the securities during the hold period (whether the shorter hold periods set out in the Eurobond BOR or the SHAIF BOR, or the regular hold period set out in sections 142 and 143 of the Securities Rules) outside British Columbia, provided that the securities are not resold to a person in British Columbia or through a market in British Columbia. The issue of resales outside British Columbia during a hold period is discussed in further detail in NIN#97/48. Issuers should be aware that the legend on the certificate representing the security distributed under the Distribution BOR or subject to the SHAIF BOR, or as required by the Securities Rules, may not be removed until the expiry of the applicable hold period even if the security is resold outside British Columbia during the hold period.
DATED at Vancouver, British Columbia, on August 27, 1998.
Douglas M. Hyndman
Chair