April 29, 2025
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
GOODWOOD INC.
(the Filer)
AND
GOODWOOD CAPITAL FUND
(the Fund)
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):
(a) revoking and replacing the Previous Decision (as defined below);
(b) for approval pursuant to paragraph 5.5(1)(d) of National Instrument 81-102 Investment Funds (NI 81-102) to permit the Fund to extend until December 31, 2025 (or such earlier date as the Fund is terminated and liquidated) the suspension of the right of its unitholders to request that the Fund redeem their units of the Fund (the Suspension of Redemptions);
(c) for an exemption from the requirement in paragraph 2.4(2) of NI 81-102 to permit the Fund to hold illiquid assets making up more than 15% of its net asset value until December 31, 2025 (or such earlier date as the Fund is terminated and liquidated) (the Illiquid Asset Restriction); and
(d) for an exemption from the requirement in subparagraph 14.2(3)(a) of National Instrument 81-106 Investment Funds Continuous Disclosure (NI 81-106) for the Fund to calculate its net asset value once a week during the period of suspension (the Suspension of NAV Calculations),
(collectively, the Exemption 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 subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada other than the Jurisdiction (together with the Jurisdiction, the Jurisdictions).
Interpretation
Terms defined in MI 11-102, National Instrument 14-101 Definitions and NI 81-102 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
The Filer is a corporation incorporated under the laws of the Province of Ontario. The Filer’s head office is located in Oakville, Ontario.
The Filer is registered as an investment fund manager in Ontario, Quebec and Newfoundland and Labrador and as an investment dealer in Ontario, Quebec, British Columbia, Alberta and Nova Scotia.
The Filer is not in default of securities legislation in any of the Jurisdictions.
The Filer is the investment fund manager and portfolio adviser of the Fund.
The Fund
The Fund is an open-end mutual fund trust established under the laws of Ontario. The Fund was created pursuant to the provisions of a declaration of trust dated December 23, 1999. This declaration of trust was amended and restated as a trust agreement on January 27, 2006, and was further amended and restated on March 9, 2010 and June 11, 2014 (as amended from time to time, the Trust Agreement). Computershare Trust Company of Canada Inc. acts as trustee to the Fund pursuant to the terms of the Trust Agreement.
The investment objective of the Fund is to achieve capital appreciation by investing primarily in equity securities of North American companies over a broad range of industry sectors.
The Fund is a reporting issuer in each of the Jurisdictions and distributes its units to the public pursuant to disclosure documents prepared and filed in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure.
The Fund calculates its net asset value on a weekly basis in accordance with subparagraph 14.2(3)(a) of NI 81-106 and is redeemable on a weekly and monthly basis.
The Fund is not in default of securities legislation in any of the Jurisdictions.
Termination of the Fund
The Filer obtained a previous decision dated January 30, 2025 (the Previous Decision) to permit the Fund to suspend the redemption of units of the Fund and the calculation of the net asset value of the Fund for a period of 90 days until April 30, 2025.
On April 16, 2025, the Filer convened a special meeting of unitholders of the Fund at which the unitholders voted to approve the termination of the Fund.
The Filer has commenced the liquidation of the assets of the Fund, other than the Illiquid Positions (as defined below), and expects to have this process completed on or before April 29, 2025. The Filer will distribute the proceeds of this liquidation (less a cash reserve for Fund expenses) to the unitholders of the Fund on or before April 30, 2025, which distribution the Filer estimates will represent approximately 83% of the current net asset value of the Fund.
The portfolio of the Fund (the Portfolio) currently includes investments that constitute illiquid assets as such term is defined in NI 81-102 (the Illiquid Positions), equivalent to approximately 11.9% of the net asset value of the Fund as at April 17, 2025. The Fund’s largest Illiquid Position is a convertible promissory note (approximately 10.7% of the Fund’s net asset value, including accrued interest), for which the Filer will seek repayment from the issuer of outstanding principal and accrued but unpaid interest on its maturity date. This maturity date was extended from March 31, 2025 to September 17, 2025 and may be further amended at the discretion of the issuer. The Filer understands that the issuer is awaiting a decision on its receipt of a certain tax benefit that would allow it to repay the note. The Fund also holds common shares of a Canadian private company, which represents approximately 0.8% of the net asset value of the Fund as at April 17, 2025, and common shares of a publicly-listed company, which represents approximately 0.4% of the net asset value of the Fund as at April 17, 2025. With respect to the common shares of the Canadian private company, the Filer is taking steps to monetize its position by way a potential third-party sale prior to the date the Fund is terminated and liquidated. With respect to the common shares of the publicly-listed company, while such common shares are listed on the TSX Venture Exchange and on the U.S. OTCQB Venture Market, there is currently no active market for the security. The Filer will continue to offer such shares for sale in an effort to liquidate at market prior to the date the Fund is terminated and liquidated.
The Filer submits that it is actively working to liquidate or otherwise monetize the Illiquid Positions and will continue to distribute any proceeds from the disposition of the Illiquid Positions and any residual cash to unitholders of the Fund. However, the Filer does not know the precise date on which it will be able to dispose of the Illiquid Positions or the amount that can be realized from the disposition, if any. For tax reasons, the Filer intends to terminate the Fund no later than December 31, 2025.
The suspension period under the Previous Decision will expire on April 30, 2025. On this date, the Portfolio will consist only of Illiquid Positions, and the Fund will not be able to satisfy redemption requests until those Illiquid Positions are liquidated or otherwise monetized. Accordingly, the Filer wishes to revoke and replace the Previous Decision to extend the period for the suspension of redemptions and calculation of the net asset value of the Fund until December 31, 2025 (or such earlier date as the Fund is terminated and liquidated).
Absent the Exemption Sought, the Filer would be required to terminate the Fund on or before April 30, 2025, which would require the Filer to write down the value of the Illiquid Positions to zero in order to terminate the Fund. This means that the Fund would not be able to distribute any proceeds in respect of the Illiquid Positions. The Filer submits that extending the suspension of redemptions and calculation of the net asset value of the Fund is in the best interests of unitholders of the Fund because it will enable the Fund to continue to attempt to realize value on the Illiquid Positions and distribute the maximum amount of assets pro rata to all its unitholders as quickly as possible in an orderly manner.
Exemption Sought
The Trust Agreement requires the consent of the Ontario Securities Commission to suspend the determination of the net asset value of the Fund. The Trust Agreement also provides that if the determination of the net asset value of the Fund is suspended, the right of a redeeming unitholder to have their units redeemed shall be similarly suspended. Accordingly, the Trust Agreement requires that the Exemption Sought be obtained in order to suspend the determination of the net asset value of the Fund and redemptions from the Fund. The Filer intends to continue to determine the net asset value of the Fund for the purpose of processing distributions and otherwise on an as needed basis.
Section 10.6 of NI 81-102 only permits an investment fund subject to that instrument to suspend the right of securityholders to request that the investment fund redeem its securities for the whole or any part of a period during which normal trading is suspended on a stock exchange, options exchange or futures exchange within or outside Canada on which securities are listed and posted for trading, or on which specified derivatives are traded, if those securities or specified derivatives represent more than 50% by value, or underlying market exposure, of the total assets of the investment fund without allowance for liabilities and if those securities or specified derivatives are not traded on any other exchange that represents a reasonably practical alternative for the investment fund. The present facts do not permit the Filer to suspend redemptions on this basis.
Pursuant to paragraph 5.5(1)(d) of NI 81-102, the approval of the securities regulatory authority is required before an investment fund suspends, other than under section 10.6 of NI 81-102, the rights of securityholders to request that the investment fund redeem their securities.
As the Portfolio will only consist of Illiquid Positions from April 30, 2025 onwards, the Fund requires an exemption from the Illiquid Asset Restriction.
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, provided that:
(a) the Suspension of Redemptions may continue until, but not beyond, December 31, 2025;
(b) the proceeds of the sale of all positions in the Portfolio, other than the Illiquid Positions, will be distributed to unitholders of the Fund by April 30, 2025;
(c) if the Illiquid Positions are liquidated or otherwise monetized prior to the termination date of the Fund, the proceeds will be distributed to unitholders of the Fund (net of Fund expenses) as soon as commercially reasonable;
(d) during the Suspension of Redemptions, the Fund will continue to meet its continuous disclosure obligations under NI 81-106 as well as all other applicable securities law obligations (as modified by the Exemption Sought);
(e) during the Suspension of NAV Calculations, the Fund will continue to meet its continuous disclosure obligations under NI 81-106 as well as all other applicable securities law obligations (as modified by the Exemption Sought);
(f) the Manager will not earn and collect management fees from the Fund while the Suspension of Redemptions remains in effect;
(g) the Manager will not earn and collect management fees from the Fund while the Suspension of NAV Calculations remains in effect;
(h) the Fund will not distribute any further securities prior to its termination;
(i) the Filer shall promptly issue a press release announcing the continuation of the Suspension of Redemptions and the reasons therefor;
(j) the Filer will continue to determine the net asset value of the Fund for the purpose of processing distributions and otherwise on an as needed basis; and
(k) the net asset value of the Fund will be provided on the Filer’s designated website on a timely basis.
“Darren McKall”
Darren McKall
Manager, Investment Management Division
Ontario Securities Commission
Application #2025/0265
SEDAR+ Project #6273537