SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: IN THE MATTER OF A PROPOSED PLAN OF ARRANGEMENT involving Renewable Energy Developers Inc. and Capstone Infrastructure Corporation

BEFORE: D. M. Brown J.

COUNSEL:
R. Cohen, for the Applicant

R. Morris and R. Turner, for Capstone Infrastructure Corporation

HEARD: September 10, 2013

REASONS FOR DECISION

I. Application to approve a plan of arrangement

[1] Renewable Energy Developers Inc. seeks a final order approving a plan of arrangement pursuant to section 192 of the Canada Business Corporations Act. A developer of renewable energy products, Renewable entered into an Arrangement Agreement with Capstone Infrastructure Corporation under which interests in Renewable will be exchanged for interests in Capstone. The principles to be considered by a court in deciding whether to approve a plan of arrangement were set out by the Supreme Court of Canada in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560.

[2] In the present case, the evidence disclosed that the proposal constitutes an “arrangement” within the meaning of the CBCA, the applicant is solvent and it has complied with all the requirements contained in the Interim Order made August 1, 2013. The application has been put forward in good faith and for a proper business purpose: the Arrangement Agreement was the product of a process characterized by the striking of a Strategic Review Committee, arm’s-length negotiations and an independent fairness opinion. The implied value of the consideration represents a 10.8% premium for the exchanged common shares of Renewable. The proposal made allowance for the exercise of dissent rights. At the meeting held on September 4, 2013, a quorum was present. The special resolution was approved by 99.67% of the votes cast by shareholders and 99.55% of the votes cast by the shareholders other than the Interested Shareholders. No shareholder exercised dissent rights. No person filed a notice of appearance in this proceeding or appeared at the hearing to oppose the order sought.

[3] Section 192(3) of the CBCA provides that “where it is not practicable for a corporation…to effect a fundamental change in the nature of an arrangement under any other provision of this Act”, the corporation may apply for approval of an arrangement proposal. While the dictionary definition of “practicable” connotes an element of necessity - such as the definition in the Concise Oxford English Dictionary of “able to be done or put into practice successfully” - section 192(3) has been interpreted in a much different fashion, as is captured by the summary in section 2.06 of Policy Statement 15.1 issued by the Director appointed under the CBCA:

The Director endorses the view that the impracticability requirement means something less than “impossible” and, generally, that the test would be satisfied by demonstrating that it would be convenient or less advantageous to the corporation to proceed under other provisions of the Act. The Director endorses this view subject to a concern that the arrangement provisions of the Act not be utilized to subvert the procedural or substantive safeguards applicable to other sorts of transactions possible under the Act.

As the Supreme Court of Canada observed in the BCE Inc. case, at paragraph 123 of its reasons, the arrangement provisions were placed into the CBCA as recognition that arrangements are a practical and flexible way to effect complicated transactions.

[4] In the present case, the evidence disclosed that the proposed multi-step transaction structure between the parties would generate a degree of complexity which makes the use of a plan of arrangement more convenient in the circumstances. The process approved by the Interim Order ensured that proper safeguards were put in place for those whose legal rights would be affected by the transaction. Accordingly, the applicants have satisfied the “not practicable” component of the test for approval.

[5] Although this applicant, like so many other applicants in the past, also adduced evidence in respect of the practicability issue that proceeding by way of plan of arrangement would permit the company to benefit from a registration exemption available under U.S. federal securities law, as Farley J. stated in Re JDS Fitel Inc., 1999 CarswellOnt 2263:

Once again I note that the exemption for US Securities purposes is not germaine to this proceeding before this court, but it may be regarded as an icing on the cake bonus.

[6] Taken together, all this evidence supports a finding that the Arrangement is fair and reasonable. For these reasons, I approve the Arrangement as described in the Arrangement Agreement and the First Amendment to the Arrangement Agreement.

D. M. Brown J.

Date: September 10, 2013