DATE: February 2, 2011
Headnote National Policy 11-203 Process for Exemptive Relief Application in Multiple Jurisdictions – Application by foreign reporting issuer for a decision that it is not a reporting issuer under applicable securities laws – issuer has represented that Canadian resident shareholders beneficially own less than 2% of the issuer’s outstanding securities and represent less than 2% of total number of beneficial securityholders – issuer has made diligent enquiries to support beneficial ownership representations – no securities of the issuer trade on any market or exchange in Canada – issuer has not conducted a public or private financing in any jurisdiction in Canada since August 2008 and has no present intention of seeking public or private financing in any jurisdiction of Canada in the future – issuer’s securities listed on Hong Kong stock exchange – issuer is subject to continuous disclosure reporting requirements under Hong Kong securities laws – issuer has undertaken to continue to concurrently send or provide to its Canadian resident shareholders all disclosure material it is required to send or provide to Hong Kong resident shareholders under applicable Hong Kong securities laws – issuer has issued a press release announcing that it has applied to cease to be a reporting issuer in the Jurisdictions – requested relief granted. Applicable Legislative Provisions
Securities Act, R.S.O 1990, c.S.5, as am., ss. 1(10).
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO, ALBERTA AND BRITISH COLUMBIA (the Jurisdictions)
AND
IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF SINO DRAGON NEW ENERGY HOLDINGS LIMITED (the Filer)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that the Filer is not a reporting issuer (the Exemptive Relief Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a coordinated review application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the decision is the decision of the principal regulator and evidences the decision of each other Decision Maker.
Interpretation
Terms defined in National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
The Filer is a manufacturer and producer of zirconium chemicals.
The Filer was incorporated in 2000 under the laws of the Cayman Islands under the name “China Zirconium Limited.” Effective October 12, 2009, the Filer changed its name to “Sino Dragon New Energy Holdings Limited.”
The Filer’s head office is located at No. 68 Hongxin Road, Xushe Town, Yixing City, Jiangsu Province, People’s Republic of China. In addition to its head office, the Filer maintains an office in Hong Kong.
The Filer has no operations, employees or offices in Canada.
The authorized share capital of the Filer consists of 8,000,000,000 ordinary shares (Shares). As of January 12, 2011, there were 2,292,362,102 Shares issued and outstanding. The Filer does not have any issued and outstanding securities other than the Shares.
The Shares are listed on The Stock Exchange of Hong Kong Limited (HKEx). The Filer is not in default of any requirements of the HKEx, or applicable requirements of the Hong Kong securities regulatory authorities.
The Filer became a reporting issuer in each of the Jurisdictions upon filing a final prospectus and obtaining a final receipt therefor on August 1, 2008 (the Canadian Prospectus). The Filer is not a reporting issuer in any other jurisdiction in Canada.
The Filer issued 649,900 Shares in the Jurisdictions under the Canadian Prospectus. The Filer has not conducted a public or private financing in any jurisdiction in Canada subsequent to the offering under the Canadian Prospectus and the Filer has no present intention of seeking public or private financing in any jurisdiction in Canada in the future.
The Shares were listed on the Toronto Stock Exchange (TSX) on August 15, 2008. The Filer applied to voluntarily delist the Shares from the TSX on September 15, 2009 due to the administrative and legal costs of maintaining the listing and the low trading volume of the Shares on the TSX. The Filer’s voluntary delisting application was approved by the TSX on September 23, 2009.
The Shares ceased trading and the Filer was delisted from the TSX as of the close of trading on September 30, 2009. Therefore, since that time, the Filer has not taken any steps to indicate there is a market for its securities in Canada.
To the knowledge of the Filer, after diligent inquiry, residents of Canada do not directly or indirectly beneficially own more than 2% of each class or series of outstanding securities of the Filer worldwide. The due diligence conducted by the Filer in support of the foregoing representation is as follows:
(a) After the Filer was delisted from the TSX on September 30, 2009, registered and beneficial owners of the Shares were contacted and informed of the process to transfer their Shares to the HKEx. According to the Filer’s transfer agent in Hong Kong, Computershare Hong Kong Investor Services Ltd. (Computershare HK), there is no requirement to mail printed meeting materials to beneficial shareholders in Hong Kong. Meeting materials are sent only to security/broker firms holding Shares on behalf of beneficial owners. As such, Computershare HK has no access to the contact information regarding the Filer’s beneficial shareholders, including information about such beneficial owners’ addresses to determine residency, once the Shares are transferred to the Hong Kong branch share register.
(b) The Filer requested information on the Canadian Share ownership levels from its Canadian transfer agent, Computershare Investor Services Inc. (Computershare Canada), and from Computershare HK. As of January 12, 2011, five registered holders of Shares with Canadian addresses remained on the Canadian share register according to Computershare Canada. As of the same date, there was one registered security/broker firm with a Canadian address holding Shares on behalf of beneficial shareholders and one Canadian resident registered shareholder, listed on the Hong Kong share register. These seven Canadian resident registered shareholders held 830,100 Shares at that time, representing approximately 0.04% of the total number of outstanding Shares.
(c) Therefore, based on the information provided by Computershare Canada and Computershare HK, and assuming that:
(i) Canadian resident shareholders are listed only on the Canadian share register (with the exception of one registered security/broker firm with a Canadian address and one Canadian resident shareholder listed on the Hong Kong share register and included in the calculation below); and
(ii) the Canadian resident registered security/broker firms hold Shares only on behalf of Canadian resident beneficial shareholders;
the number of Shares beneficially owned by Canadian residents is approximately 0.04% of the total number of outstanding Shares of the Filer worldwide.
- To the knowledge of the Filer, after diligent enquiry, residents of Canada do not directly or indirectly comprise more than 2% of the total number of shareholders of the Filer worldwide. The due diligence conducted by the Filer in support of the foregoing representation is as follows:
(a) As of January 12, 2011, according to Computershare Canada and Computershare HK there were:
(i) three registered shareholders holding Shares in his/her own name with Canadian addresses listed on the Canadian share register;
(ii) two registered security/broker firms with Canadian addresses holding Shares on behalf of beneficial shareholders listed on the Canadian share register;
(iii) one registered security/broker firm with an American address listed on the Canadian share register;
(iv) one registered shareholder holding Shares in his/her own name with a Canadian address listed on the Hong Kong share register;
(v) one registered security/broker firm with a Canadian address listed on the Hong Kong share register;
(vi) 18 registered shareholders holding Shares in his/her own name with Hong Kong addresses listed on the Hong Kong share register; and
(vii) 206 registered security/broker firms with Hong Kong addresses holding Shares on behalf of beneficial shareholders listed on the Hong Kong share register.
(b) As described in paragraph 11(a) above, information concerning the number of shareholders beneficially holding Shares of the Filer in Hong Kong is difficult to ascertain and, without such information, determining the total number of shareholders beneficially holding Shares of the Filer worldwide is not possible.
(c) The Filer previously endeavoured to determine the number of Hong Kong resident shareholders beneficially holding Shares of the Filer by conducted the following due diligence:
(i) In September 2009, the Filer obtained a list from the Central Clearing and Settlement System (CCASS) disclosing the name and contact address of each of the registered security/broker firms in Hong Kong (CCASS Participants) holding Shares on behalf of the Filer’s beneficial shareholders.
(ii) The Filer sent letters to CCASS Participants holding approximately 86% of its Shares as of September 16, 2009 to request information regarding the Filer’s beneficial shareholders, including the beneficial shareholders’ addresses to determine residency. The Filer did not contact the remaining CCASS Participants as they only held approximately 5% of its Shares at that time, and the Filer concluded that information from such CCASS Participants would not contribute significantly to the determination of the number of Hong Kong resident shareholders beneficially holding Shares of the Filer (as of September 16, 2009, the remaining 9% of Shares were held directly by registered holders of the Shares on the Hong Kong share register (approximately 8%) and the Canadian share register (approximately 1%), respectively).
(iii) The Filer received only a minority of responses to the request letters it sent to the CCASS Participants and after such diligent enquiry was unable to determine the number of shareholders in Hong Kong beneficially holding its Shares. As a result, the Filer could not determine the total number of shareholders beneficially holding its Shares worldwide.
(iv) As a result, and with no other alternative options to determine the number of shareholders indirectly holding its Shares in Hong Kong, the Filer did not repeat this course of action in 2010.
(d) In November 2010, the Filer attempted to obtain information from Computershare Canada regarding the beneficial ownership of its Shares by the two registered security/broker firms on the Canadian share register but was advised by Computershare Canada that this information could not be provided because its intermediary, Broadridge Financial Services, Inc., no longer has access to this information as a result of the process whereby the Filer’s Shares were transferred to the HKEx.
(e) However, based on the information provided in paragraph 12(a) above, and assuming that Canadian resident shareholders are listed only on the Canadian share register (with the exception of the one Canadian resident shareholder listed on the Hong Kong share register), and assuming that one security/broker firm represents at least five beneficial shareholders, it is reasonable to conclude that:
(i) the total number shareholders beneficially holding Shares of the Filer is approximately 1,072 worldwide (i.e. approximately 210 registered security/broker firms x 5 = 1,050, plus 22 shareholders holding Shares in their own names); and
(ii) the total number of shareholders in Canada beneficially holding Shares of the Filer is approximately 19 (i.e. approximately 3 registered security/broker firms with Canadian addresses x 5 = 15, plus 4 shareholders with Canadian addresses holding Shares in their own names), which is 1.8% of the total number of beneficial shareholders of the Filer worldwide.
The Filer is governed by, and is in compliance with, corporate governance and disclosure standards imposed by the Hong Kong Securities and Futures Commission and the HKEx (collectively, the HK Rules). These standards, which include the publication of annual and interim financial statements, proxy materials and material change and timely disclosure reporting, are similar in nature and scope to the reporting requirements under National Instrument 51-102 Continuous Disclosure Obligations and are, pursuant to National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102), acceptable for the purposes of complying with the continuous disclosure requirements of the Jurisdictions.
The Filer has delivered all disclosure material required by applicable HK Rules to its Canadian shareholders in accordance with NI 71-102. Continuous disclosure materials mandated by the HK Rules are available to the Filer’s shareholders through the HKEx’s website at www.hkexnews.hk or the Filer’s website at www.chinazirconium.com.hk.
Upon granting of the Exemptive Relief Sought, the Filer undertakes to continue to send or provide to its Canadian shareholders all disclosure material that it is required to send or provide to Hong Kong resident holders of the Shares, in the same manner and at the same time that such material is required to be sent or provided to Hong Kong resident shareholders under applicable HK Rules.
On November 18, 2010, the Filer issued a press release announcing that it has applied to securities regulatory authorities for a decision that it is not a reporting issuer in the Jurisdictions, and that, as a consequence of such decision, if rendered, the Filer will no longer be a reporting issuer in any jurisdiction in Canada.
The Filer is not in default of any requirement of the securities legislation in any jurisdiction in Canada.
The Filer, upon the grant of the Exemptive Relief Sought, will no longer be a reporting issuer in any jurisdiction in Canada.
Decision
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemptive Relief Sought is granted.
“Carol S. Perry” “Vern Krishna”
Commissioner Commissioner
Ontario Securities Commission Ontario Securities Commission