By Bryan Yau
Happy New Year CBLB readers! We are excited to be back with our first Friday Finds of 2021. This week, we will be highlighting some corporate and securities law stories that captured our attention over the holidays, including an update to the TMAC Resources acquisition, the Ontario government’s changes to liquor regulation, and the TSX Venture’s Capital Pool Company Program.
In an update to our October 23, 2020 issue of Friday Finds, the federal government recently rejected the proposed acquisition of TMAC Resources Inc. (TMAC) by Shandong Gold Mining Co. Ltd, stating that it did not pass the national security review ordered by cabinet. TMAC, a gold mining company with properties in the Canadian Arctic, was subject to a national security review under the Investment Canada Act. Due to the confidentiality provisions of the Act, the government could not provide further comment on the matter. Experts, however, noted that the sensitivity of the Arctic region and the current state of Canada-China relations are factors contributing to the government’s decision. On January 5, 2021, TMAC announced that Agnico Eagle Mines Ltd. would purchase the company at a premium to that which was first offered by Shandong Gold. TMAC said it is planning to seek court approval for the transaction on January 20. According to Tuesday’s press release, shareholders owning 62.3 per cent of TMAC’s outstanding shares – including Shandong and Newmont Corp. – have agreed to cooperate on closing the deal with Agnico and will refrain from seeking any competing bids. Agnico Eagle already has two major mining operations in the Canadian Arctic and is unlikely to require a national security review.
In an update to our November 6 post about the release of Ontario’s 2020 budget, the government has made additional permanent changes to the regulation of alcohol sales in support of the hospitality industry’s post-pandemic recovery. To do so, there have been numerous amendments to the Liquor Licence Act, and the Alcohol, Cannabis and Gaming Regulation and Public Protection Act. Some of these changes include: extending retail liquor sale hours, making liquor takeout and delivery permanent, allowing for mixed drinks to be sold (only “unopened” drinks were previously allowed), reducing minimum prices for spirits, allowing liquor sales on docked commercial boats, giving the Alcohol and Gaming Commission of Ontario (AGCO) more flexibility for approving temporary patio extensions, removing restrictions on alcohol delivery in meal kits, and allowing distillers, wineries, cider makers, and brewers to sell at farmers’ markets. Liquor sales represent a high-margin source of revenue at a time when dine-in options are unavailable. Throughout the year, readers should expect other pandemic-era programs supporting small businesses to be extended or made permanent as they near expiration.
Starting in 2021, the TSX Venture Exchange’s (TSXV) proposed changes to its Capital Pool Company (CPC) Program come into effect. The CPC program provides a popular alternative method for private companies to list on the TSXV. The program allows directors and officers to create companies, or CPCs, with no assets (except cash) and no commercial operations. These companies are listed on the TSX Venture Exchange and their directors and officers raise a pool of capital to invest in a private business. Once this “qualifying transaction” is complete, the CPC’s shares continue trading as a regular listing on the exchange. The TSX writes that the CPC program accounted for almost 50% of new TSXV listings in the past 10 years. A TSXV listing, access to cash, and the presence of a veteran board makes CPCs attractive to private companies who can utilize the CPC program as a lower risk option to go public. The TSXV’s new changes are meant to increase flexibility and reduce regulatory burdens. Some key changes are highlighted below:
1. Increased limits on the amount of funds that can be raised by CPCs through seed and initial public offerings:
Now, up to $1,000,000 can be raised by issuing seed shares below the IPO price, and $10,000,000 can be raised on aggregate gross proceeds. Such change should channel more capital into CPCs.
2. No deadline to complete a qualifying transaction and no seed share cancellation as a consequence of missing the original 24-month deadline:
Under former policy, if a CPC failed to complete a qualifying transaction within a 24-month period, it could be suspended or delisted.
3. Public distribution requirements that are more closely aligned with the Canadian Securities Exchange:
Previously, CPCs were required to have a public float of at least 1,000,000 shares, with at least 200 public shareholders. Now, the TSXV will only require a public float of 500,000 shares, held by a minimum of 150 public shareholders. Collectively, public shareholders must hold at least 20% of the issued and outstanding CPC shares.
4. Relaxed requirements for directors and officers of the company:
Under the former policy, all directors and officers had to be residents of Canada or the US. Now, only most of them must be residents of Canada or the US. The TSXV also allows a single CPC officer to hold the offices of CEO, CFO and corporate secretary at the same time.
5. Changes to CPC structure:
The TSXV will allow CPCs to take on the form of a trust. This was not the case under former policy.
These changes, and more, will make access to public markets easier for private companies going forward.
That wraps up the first of 2021’s Friday Finds! Thanks for reading and come back next week for more business law stories.