May 28, 2020
In the Matter of the Securities Legislation of Ontario (the Jurisdiction)
and
In the Matter of the Process for Exemptive Relief Applications in Multiple Jurisdictions
and
In the Matter of Canopy Growth Corporation (the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation). Under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), the Filer is required to file restated interim financial reports prepared in accordance with the generally accepted accounting principles in the United States that the U.S. Securities and Exchange Commission (the SEC) has identified as having substantial authoritative support, as supplemented by Regulation S-X and Regulation S-B under the 1934 Act (U.S. GAAP) for the interim periods since its most recently completed financial year for which annual financial statements have been filed (the Restated Interim Financial Reports) on or before the deadline for the Filer to file its audited annual financial statements for the year ended March 31, 2020 (the Annual Financial Statements), being June 1, 2020 (the Deadline).
The Filer is requesting relief from the requirement to file the Restated Interim Financial Reports on or before the Deadline in accordance with subsection 4.3(4)(d) of NI 51-102 (the Exemption Sought), provided that Filer files the Restated Interim Financial Reports and related management’s discussion and analysis (MD&A) on or before July 16, 2020, being 45 days following the Deadline.
The principal regulator in the Jurisdiction has also received a request from the Filer for a decision that the application and this decision (together, the Confidential Material) be kept confidential and not be made public until the earlier of: (i) the date the Filer advises the principal regulator that there is no longer any need for the Confidential Material to remain confidential; and (ii) the Deadline, being June 1, 2020 (the Confidentiality Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Newfoundland and Labrador, New Brunswick, Nova Scotia and Prince Edward Island.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 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 corporation existing under the Canada Business Corporations Act. The head and register office of the Filer is located at 1 Hershey Drive, Smiths Falls, Ontario K7A 0A8.
The common shares of the Filer are listed on the Toronto Stock Exchange under the symbol “WEED” and are also listed on the New York Stock Exchange under the symbol “CGC”.
The Filer is a reporting issuer in each province of Canada, other than Quebec. The Filer is not in default of securities legislation in any such jurisdiction of Canada.
The Filer is subject to reporting obligations under the United States Securities Exchange Act of 1934, as amended (the 1934 Act).
As part of the Filer’s obligations under the 1934 Act, the Filer was required by the SEC, at the end of every second fiscal quarter, to test whether it continued to qualify as a foreign private issuer as defined in Rule 405 of Regulation C under the United States Securities Act of 1933, as amended (the 1933 Act) and Rule 3b-4 under the 1934 Act.
As of September 30, 2019, the Filer determined that it no longer met the criteria for qualification as a foreign private issuer because (a) more than 50% of the outstanding voting securities of the Filer were held by residents of the United States, and (b) the majority of the Filer’s directors are United States citizens.
Effective as of April 1, 2020, the Filer is now subject to the reporting requirements applicable to U.S. domestic registrants and a “large accelerated filer” as such term is defined in Rule 12b-2 promulgated under the 1934 Act.
In accordance with Section 6120.4 of the SEC’s Division of Corporation Finance Financial Reporting Manual, as of April 1, 2020, the Filer is required, to prepare its Annual Financial Statements in conformity with U.S. GAAP.
Furthermore, as of April 1, 2020, the Filer, is considered an “SEC issuer” within the meaning of NI 51-102, and files its continuous disclosure documents with the SEC in the United States pursuant to the U.S.-Canada multi-jurisdictional disclosure system.
As an “SEC issuer”, the Filer must file Restated Interim Financial Reports prepared in accordance with U.S. GAAP for the interim periods since its most recently completed financial year for which annual financial statements have been filed, on or before the Deadline for the Filer to file its Annual Financial Statements.
Recognizing that market participants may be unable to meet certain obligations under securities law as a result of the coronavirus disease 2019 (COVID-19) outbreak, the Canadian Securities Administrators announced temporary relief orders that provide a 45-day extension from certain regulatory filings required to be made during the period from March 23, 2020 to June 1, 2020.
In Ontario, this relief is provided to corporate finance issuers by Ontario Securities Commission Instrument 51-502 Temporary Exemption from Certain Corporate Finance Requirements (OSC Instrument 51-502) issued March 23, 2020. In particular, OSC Instrument 51-502 provides non-investment fund reporting issuers with an additional 45 days from the deadline otherwise applicable under the Legislation to make certain filings, including but not limited to, annual financial statements required by section 4.2 of NI 51-102 and an interim financial report required by section 4.4 of NI 51-102 and related MD&A.
Since the Filer intends to file its Annual Financial Statements on or before the Deadline, the 45-day extension provided under OSC Instrument 51-502 does not apply to the filing of Restated Interim Financial Reports in accordance with subsection 4.3(4)(d) of NI 51-102.
As a result of the COVID-19 outbreak, employees of the Filer and its advisors have been required to work remotely since mid-March, which has caused unanticipated delays in the Filer’s work plan related to preparing the Restated Interim Financial Reports in accordance with U.S. GAAP.
Due to these new working conditions as well as the emergence of a number of novel and time sensitive matters with respect to the COVID-19 outbreak that have diverted the attention of management, the Filer will not be in a position to finalize and file the Restated Interim Financial Reports and related MD&A by the Deadline.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted, subject to all of the following conditions:
(a) on or before July 16, 2020, the Filer files the Restated Interim Financial Reports prepared in accordance with U.S. GAAP, and related MD&A, for the interim periods since its most recently completed financial year for which annual financial statements have been filed;
(b) the Filer issues and files on SEDAR, as soon as reasonably practicable, and in any event, no later than June 1, 2020, a news release that discloses:
a. it is relying on this exemption;
b. that its management and other insiders are subject to an insider trading black-out policy that reflects the principles in section 9 of National Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions; and
c. the anticipated date by which the required Restated Interim Financial Reports prepared in accordance with U.S. GAAP and related MD&A are expected to be filed; and
(c) the Filer does not file a preliminary prospectus or a final prospectus for an offering of securities until it has filed all documents for which it is relying on this exemption.
Furthermore, the decision of the principal regulator is that the Confidentiality Sought is granted.
“Marie-France Bourret”
Manager, Corporate Finance
Ontario Securities Commission