Court File and Parties

2022 ONSC 4360

COURT FILE NO.: CV-22-00680875-00CL

DATE: 20220518

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

IN THE MATTER OF an application under section 192 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended;

AND IN THE MATTER OF Rule 14.05(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194;

AND IN THE MATTER OF a proposed arrangement of FAX Capital Corp. involving its shareholders, 13998037 Canada Inc., Fax Investments Inc., and Federated Capital Corp.

BEFORE: Kimmel J.

Counsel

Matthew Fleming and Ara Basmadjian, for the Special Committee of the Board of Directors of the Moving Party, Fax Capital Corp.

Andrew Mccomb, for FAX Capital Corp.

Max Munoz, for 13998037 Canada Inc., Fax Investments Inc. and Federated Capital Corp.

HEARD: May 18, 2022

ENDORSEMENT

[1] This motion by the special committee of FAX Capital Corp. (“FAX”) seeks an Interim Order under s. 192 of the Canada Business Corporations Act, R.S.C.1985, c. C-44 (“CBCA”), for advice and directions from this court by way of an interim order (the “Interim Order”) approving the proposed procedure for calling, holding, and conducting a special meeting (the "Meeting") of holders (the "Shareholders") of Subordinate Voting Shares and multiple voting shares ("Multiple Voting Shares") to consider and vote on, amongst other things, a special resolution approving a proposed plan of arrangement (the “Arrangement”). The intended outcome, if the proposed Arrangement is eventually approved, is for the company to cease to be a reporting issuer and to “go private”. This will entail a number of steps to be implemented in the context of the Arrangement.

[2] The Arrangement includes customary protection for the minority shareholders under corporate and securities laws. The proposed Interim Order primarily deals with notice and voting mechanics and is substantially the same as the Commercial List Model Interim Order, with the exception of the identified and now fairly common variation contained in paragraph 22 of the Interim Order requiring dissenting shareholders to exercise their dissent rights two days prior to the scheduled meeting, to allow the purchaser(s) an extra day before the meeting to determine whether the dissent threshold has been exceeded and/or whether it will be waived.

[3] Counsel have advised that the voting thresholds specified in this and other paragraphs of the Interim Order are all consistent with those prescribed under the corporation’s constating documents and/or applicable statutory and regulatory requirements, including providing for special majority and majority of minority approvals where required.

[4] In assessing whether to approve an Interim Order under section 192 of the CBCA, an applicant must demonstrate that it (i) is acting in good faith in putting the proposed plan forward and (ii) satisfies the applicable statutory requirements, namely that:

a. the proposed arrangement constitutes an "arrangement" as defined under subsection 192(a) of the CBCA;

b. it is not "insolvent" within the meaning of subsection 192(2) of the CBCA;

c. it is not practicable for the applicant to effect a fundamental change in the nature of an arrangement under any other provision of the CBCA; and

d. the Applicant gave notice of the application to the Director appointed under section 260 of the CBCA.

See: St. Lawrence & Hudson Railway, Re (1998), 82 A.C.W.S. (3d) 895 (Ont. Gen. Div. [Comm. List]) at para. 12; 8440522 Canada Inc., Re, 2013 ONSC 2509 at paras. 47-49.

[5] Having regard to the record before the court, I am satisfied that the applicant (FAX, acting through the special committee of its board of directors) is acting in good faith and that the statutory requirements are satisfied at this stage. The court has been provided with the letter of non-participation dated May 17, 2022 from the CBCA director for purposes of the Interim Order sought today.

[6] It is not incumbent upon the Judge being asked to grant an interim order to carry out a detailed examination of the Information Circular that is to be distributed to for its sufficiency. The Court does not approve or authorize the Information Circular. Re First Marathon Inc., 1999 CarswellOnt 2295 (Ont. S.C.J. - Comm. List) at paragraphs 9 to 11; Re 45133541 Canada Inc., 2009 QCCS 6440 at paras. 23-24 and 52. The court at this stage is concerned with the approval and authorization of the mechanics for the notice and calling of the meeting for the shareholder vote and for shareholders to express their views known and exercise their voting and dissent rights.

[7] Nor does the court have to undertake a detailed fairness analysis at this stage. It is enough that it be satisfied that there is sufficient indication of fairness to warrant the matter proceeding to a vote and fairness hearing. See Re Canopy Rivers Inc. 2021 ONSC 355 (Ont. S.C.J. - Comm. List).

[8] Having considered both the written and oral submissions of counsel, I am satisfied that it is appropriate for the requested Interim Order to be granted in the form signed by me today, with immediate effect and without the necessity of formal issuance and entry, although a formal order may be taken out by any interested party, if so advised.

Kimmel J.

Date: May 18, 2022