Corporate/Commercial Law - OCMT

The Ontario Securities Commission alleged that Oscar Furtado and his corporate entities defrauded investors in several real estate limited partnerships, traded securities without registration, and made misleading statements to the Commission.

The Capital Markets Tribunal found that Furtado perpetrated a securities fraud in five ways, including failing to disclose his intent to profit from a property acquisition, redeeming units contrary to representations, and misusing assets of other partnerships.

The Tribunal also found that Furtado made misleading statements to the Commission during its investigation.

However, the Tribunal dismissed the allegations that the respondents engaged in the business of trading securities without registration, finding they were raising capital for an underlying real estate business.

Riot Platforms, Inc., the largest shareholder of Bitfarms Ltd., applied to the Capital Markets Tribunal for an order under s. 127(1) of the Securities Act to cease trade a shareholder rights plan adopted by Bitfarms.

The plan featured a 15% trigger, which was below the 20% threshold established in the take-over bid regime.

Riot did not allege a contravention of Ontario securities law but argued the plan was contrary to the public interest.

The Tribunal clarified the standard for intervening without a contravention, holding that an applicant must demonstrate the conduct undermines clearly discernible animating principles of securities law in a real and substantial way, with a public dimension.

The Tribunal found that the 15% trigger undermined the predictability and certainty of the take-over bid regime.

As Bitfarms failed to demonstrate exceptional circumstances justifying the departure from the 20% threshold, the Tribunal concluded it was in the public interest to cease trade the plan.

Mithaq Canada Inc. applied to the Capital Markets Tribunal to cease trade a private placement by Aimia Inc., arguing it was an abusive defensive tactic designed to thwart Mithaq's take-over bid.

Mithaq also sought to set aside a decision of the Toronto Stock Exchange (TSX) that conditionally approved the private placement without requiring shareholder approval.

Aimia brought a cross-application to deny Mithaq the use of the 5% exemption for share purchases.

The Tribunal dismissed both applications.

It found that Aimia had a serious and immediate need for financing, and the private placement was negotiated largely before Mithaq's bid became imminent.

Although the private placement altered the bid dynamics, it was not clearly abusive.

The Tribunal also found no grounds to interfere with the TSX's decision, as the TSX did not err in principle and there was no compelling new evidence.

Finally, the Tribunal declined to alter the minimum tender condition or deny Mithaq the 5% exemption, finding no exceptional circumstances or lack of good faith.

Mithaq Canada Inc. applied to the Capital Markets Tribunal to cease trade a shareholder rights plan and a private placement adopted by Aimia Inc., alleging they were improper defensive tactics against Mithaq's unsolicited take-over bid.

Mithaq sought interim relief pending the full hearing.

The Tribunal ordered that the private placement be cease traded unless Aimia undertook that any securities issued under it would not be tendered to any alternative take-over bid or issuer bid.

The Tribunal dismissed Mithaq's requests for additional undertakings, including requiring Aimia to segregate the private placement proceeds or assume responsibility for investor breaches.

A minority shareholder of the respondent company brought an application under s. 127 of the Securities Act seeking to block a going-private transaction structured as a plan of arrangement.

The applicant alleged the controlling shareholders improperly relied on the 90 percent exemption from minority approval requirements by engaging in a multi-step strategy to dilute minority interests.

The Commission dismissed the application for standing, finding that the applicant delayed in bringing the application, failed to establish a prima facie case of abusive conduct, and had adequate alternative remedies under the CBCA to address concerns regarding price and fairness.

Aurora Cannabis Inc. launched a hostile take-over bid for CanniMed Therapeutics Inc., conditional on CanniMed abandoning its proposed acquisition of Newstrike Resources Ltd. Aurora applied to the Ontario Securities Commission and the Financial and Consumer Affairs Authority of Saskatchewan for exemptive relief to shorten the 105-day minimum deposit period for its bid and to cease-trade CanniMed's newly adopted shareholder rights plan.

CanniMed and its Special Committee brought cross-applications seeking to prohibit Aurora from using the 5% exemption for market purchases and to declare Aurora and certain locked-up shareholders as joint actors.

The panels held a joint hearing and determined that the 105-day minimum deposit period should not be shortened, as the Newstrike transaction was not an alternative transaction that extinguished shareholder interests.

The panels declined to prohibit Aurora from using the 5% exemption and found insufficient evidence that Aurora and the locked-up shareholders were acting jointly or in concert.

However, the panels found that Aurora had received material non-public information about CanniMed's acquisition plans, giving it a tactical advantage, and ordered Aurora to amend its take-over bid circular and news releases to disclose these circumstances.

Finally, the panels cease-traded CanniMed's shareholder rights plan, finding it to be an impermissible defensive tactic that interfered with the established take-over bid regime.

Hecla Mining Company launched an insider take-over bid for Dolly Varden Silver Corporation.

Hecla applied to the Ontario and British Columbia Securities Commissions to cease trade a private placement announced by Dolly Varden, arguing it was an abusive defensive tactic.

Dolly Varden cross-applied to cease trade Hecla's bid for failing to include a formal valuation as required for insider bids.

The Commissions held simultaneous hearings.

They dismissed Hecla's application, finding the private placement was instituted for bona fide business purposes, not as a defensive tactic.

The OSC granted Dolly Varden's application, finding Hecla did not qualify for an exemption from the formal valuation requirement because it had board representation at Dolly Varden within the preceding 12 months.

The BCSC dismissed Dolly Varden's application under its public interest jurisdiction.

The applicant, a minority shareholder, sought standing to bring an application under section 127 of the Securities Act to delay a special meeting and require corrective disclosure in a management information circular regarding a related party transaction.

The respondent brought a motion to deny standing.

The Commission granted the motion and denied standing, finding that the application raised no novel issues, the alleged disclosure deficiencies had already been widely debated in the market, and intervening at a late stage would unduly interfere with the justified expectations of market participants.

Parrish & Heimbecker, Limited (P&H) and Thirdcoast Limited filed cross-applications before the Ontario Securities Commission regarding P&H's take-over bid for Thirdcoast.

P&H sought to cease trade Thirdcoast's shareholder rights plan (poison pill), while Thirdcoast sought to cease trade shares subject to lock-up agreements entered into by P&H, alleging the bid was coercive and offered collateral benefits.

The Commission found the bid was not coercive and no prohibited collateral understanding existed.

The Commission granted P&H's application, permanently cease trading the rights plan, as it had served its purpose and no competing bid had emerged, and dismissed Thirdcoast's application.

Nunavut Iron Ore Acquisition Inc. applied to the Ontario Securities Commission for an order cease trading the shareholder rights plan of Baffinland Iron Mines Corporation.

Nunavut had made an unsolicited takeover bid for Baffinland, which was followed by a higher competing offer from ArcelorMittal supported by the Baffinland board.

The Commission found that the rights plan had served its purpose by facilitating an auction and generating a competing bid.

Maintaining the rights plan would only serve to eliminate the timing advantage of Nunavut's first-in-time offer and force an extension, potentially depriving shareholders of a revised offer.

The Commission concluded it was in the public interest to cease trade the rights plan immediately, allowing shareholders to decide between the competing offers.

Staff of the Ontario Securities Commission brought a hearing under section 127 of the Securities Act regarding Magna International Inc.'s proposed plan of arrangement to collapse its multiple voting share structure.

Staff alleged the management information circular lacked sufficient information and the transaction was contrary to the public interest.

The Commission found the proposed transaction was not abusive, but concluded the circular failed to provide shareholders with sufficient disclosure to make an informed decision, particularly given the lack of a board recommendation and the transaction's nature as a related party transaction.

The Commission ordered that the circular be amended to include specific material information, including financial analysis and alternatives considered by the special committee, before the shareholder vote could proceed.

Pala Investments Holdings Limited and its subsidiary applied to the Ontario Securities Commission for an order to cease trade a shareholder rights plan (poison pill) adopted by the board of Neo Material Technologies Inc. in response to Pala's hostile partial take-over bid.

The Commission dismissed the application, finding that the board had acted in accordance with its fiduciary duties to protect the long-term interests of the corporation, and that an overwhelming majority of Neo's shareholders had made an informed decision to approve the rights plan in the face of the outstanding bid.

The Commission concluded it was not in the public interest to interfere with the board's decision or the shareholders' ratification at this time.

The Ontario Securities Commission held a hearing to consider a settlement agreement between Staff and Research In Motion Limited (RIM) and several of its directors and officers regarding the improper backdating and repricing of stock options over a ten-year period.

The misconduct resulted in an undisclosed benefit of approximately $66 million and misleading public disclosure.

The Commission approved the settlement agreement, finding it to be in the public interest.

The settlement included substantial financial contributions to RIM, administrative penalties totaling $8 million, costs of $1.05 million, reprimands, and various prohibitions and educational requirements for the individual respondents.

Pala Investments Holdings Limited and its subsidiary applied to the Ontario Securities Commission for an order to cease trade the shareholder rights plans of Neo Material Technologies Inc. The application was brought in the context of Pala's takeover bid for Neo.

The Commission dismissed the application, finding that the Second Shareholder Rights Plan was adopted by the Neo Board in response to the Pala Offer, was approved by an overwhelming majority of Neo shareholders, and there was no evidence of coercion or that the Board did not act in the best interests of the corporation.

The Commission concluded it was not in the public interest to grant the relief sought at this time.

The Special Committee of Patheon Inc. applied to the Ontario Securities Commission for relief regarding an unsolicited take-over bid by JLL Patheon Holdings, LLC.

The Special Committee alleged that a voting agreement between JLL and a group of minority shareholders (the MOVA Group) violated the identical consideration and collateral benefit provisions of the Securities Act.

JLL proposed to terminate the voting agreement and extend the offer.

The Commission dismissed the Special Committee's application subject to conditions, including that JLL terminate the voting agreement, extend the offer for at least 15 days, and certify that no new agreement with the MOVA Group would be entered into for 120 days following the expiry of the offer.

Yamana Gold Inc. brought an application to cease-trade the shareholder rights plan (poison pill) of Meridian Gold Inc. amid a hostile takeover bid.

The Ontario Securities Commission determined that Meridian's board had sufficient time to respond to the bid and assess any competing proposals.

The Commission ordered the poison pill cease-traded effective September 11, 2007, on the condition that Yamana extended its bid to the same date.

Teck Cominco Limited applied to the Ontario Securities Commission for an order to cease trade any securities issued under Inco Limited's shareholder rights plan.

The parties consented to an order lifting the rights plan against the Teck bid effective August 16, 2006.

The Commission determined it was in the public interest to lift the rights plan not only against the Teck bid, but against all potential bidders, to ensure an unrestricted auction and allow shareholders to evaluate all offers.