Changes to the UK Listing Regime
Following a two-year period of consultation, the UK Financial Services Authority introduced its new two-tier listing regime, which has been in effect since April 6, 2010. The new regime allows all companies, UK or overseas, to choose either a "Premium" or a "Standard" Listing.
Developments in the UK Market
A series of brief updates on a variety of recent developments in the UK markets.
Laying the Foundation for a National Securities Regulator
The federal government has pressed ahead with its objective of establishing a national securities regulator under a voluntary regime that enables provinces and territories to opt in by choice. In late May of this year, the proposed Securities Act (Canada) was unveiled by the Finance Minister, and in mid-July, the Canadian Securities Transition Office (CSTO) delivered its key planning document entitled Transition Plan for Canadian Securities Regulatory Authority.
Proposed Regulatory Regime for Credit Rating Organizations
Although credit rating organizations (CROs) are not currently subject to formal securities regulatory oversight in Canada, they nonetheless play an important role in Canadian securities legislation. If appropriately rated by an "approved credit rating organization," short-term debt securities may be distributed to the retail market under an exemption from the prospectus requirement, and are eligible investments for money-market funds, while debt securities of all maturities can be distributed by short-form prospectuses (including shelf prospectuses).
Public Company Disclosure & Corporate Governance
Lessons to be Learned from Recent CSA Continuous Disclosure Review
The Canadian Securities Administrators (CSA) have summarized the results of their annual continuous disclosure (CD) review program of reporting issuers (other than investment funds) for fiscal year 2010 in CSA Staff Notice 51-329 Continuous Disclosure Review Program Activities for the fiscal year ended March 31, 2010. Issuers should review the staff notice and take note of the deficiencies identified by the CSA when preparing their own filings.
Diversity Within Organizations and on Boards of Directors: a CICA Diversity Briefing
Having a diverse board and workplace is beneficial for business. The Risk Oversight and Governance Board (ROGB) of the Canadian Institute of Chartered Accountants (CICA) recently commissioned a study to raise awareness of the importance of diversity and to provide directors with some insights into how to address diversity issues within their organizations.
CSA Staff Conduct IFRS Transition Disclosure Review
The Canadian Securities Administrators (CSA) recently released the results of their review of the extent and quality of International Financial Reporting Standards (IFRS) transition disclosure provided by certain issuers in their 2009 annual management’s discussion and analysis (MD&A). Guidance on IFRS transition disclosure was provided to issuers in May 2008 in CSA Staff Notice 52-320 Disclosure of Expected Changes in Accounting Policies relating to Changeover to International Financial Reporting Standards.
Mergers & Acquisitions
BCSC Says "NO" to Board’s "Just-Say-No" Response to Hostile Takeover Bid
The British Columbia Securities Commission (BCSC) has issued its final majority reasons in the case of Icahn Partners and Lions Gate Entertainment. The BCSC had issued a ruling that cease traded the Lions Gate shareholders' rights plan (SRP) at the conclusion of a hearing in April, 2010. In summary reasons that followed, a majority of the hearing panel expressed reservations that the decisions of the Alberta Securities Commission in Pulse Data Inc. and the Ontario Securities Commission in NEO Materials Technologies may have departed from the Canadian Securities Regulators’ view of the public interest as it relates to SRPs in prior decisions of Canadian Securities Commissions and in National Policy 62-202 on defensive tactics and takeover bids.
How to Handle a "Bear-Hug" Letter
Very often, the first shot fired in a take-over bid battle is when the potential acquiror of a public company calls the target’s CEO or Chair and asks for a meeting to discuss a matter of "mutual interest." One scenario is that the potential buyer will express admiration for the target company, disclose that they are already a significant shareholder (maybe just below 10 per cent, so that no insider or early warning report has been filed), and propose that the two parties enter into formal discussions to explore whether an outright purchase, or maybe a merger, might be in the best interests of both parties. At some point toward the end of that conversation, the potential bidder will table a letter addressed to the target company, the purpose of which is to sweep the target into as firm an embrace as possible — this is the so-called "bear-hug" letter.
Important Considerations for Canadian Companies Dealing with Chinese Investors
In recent years, more and more Chinese enterprises are making investments in Canada. Such investments are taking various forms, including acquisition of the target Canadian corporation or business, acquisition of majority control in the target Canadian corporation or its business, or entering into a joint venture and becoming a major but non-controlling shareholder of the target Canadian corporation or business. The purpose of this article is to set out briefly a "Top 10" list of matters for Canadian companies to consider in dealing with investors from China.
United Kingdom Bribery Act — 2010 Legal Update
On April 8, 2010, the Bribery Bill received Royal Assent and passed into law in the United Kingdom. The Bribery Act 2010 is now expected to come into force in stages between June and October 2010.
Supreme Court of Canada Decision a Wake-Up Call for Tardy Victors in International Arbitration Proceedings
Arbitration as an option for dispute resolution in international commercial transactions presents a unique set of issues that are often not given the attention and due care they deserve. The primary attraction of international arbitration is that an award rendered pursuant to a valid arbitration clause has virtual finality and international currency in terms of enforcement. It will therefore not be subject to appeal as are court judgments. The intention is that the parties will be able to enforce an arbitration award with minimal court intervention.
Canwest Media and Goldman Sachs
The failure and resurrection of Canwest provides a microcosm of the 2008-2009 recession. Bloated with debt from acquisitions in broadcast and publishing, starved for advertising revenues by retrenching customers, and plagued by uneconomical newspapers and local television stations, Canwest fell into default of its financial obligations in early 2009. By then, the vultures were circling and the Asper family was facing the demise of its media empire.
Competition Law Update
Important Considerations for the Acquisition of Cultural Businesses
The Investment Canada Act (
Competition Class Action Update
Competition class actions — especially those involving allegations of price-fixing — are on the upswing in Canada. Two recent decisions from British Columbia and Ontario, in which the courts certified classes of combined direct and indirect purchasers, may encourage a continuation of this trend.
Labelling Non-Food Products — Enforcement Guidelines for "Product of Canada" and "Made in Canada" Claims now in Effect
Manufacturers and processors making "Product of Canada" and "Made in Canada" claims on non-food products will now have to comply with new guidelines from the Competition Bureau — or risk enforcement action. The enforcement guidelines, which recently came into effect, describe the Bureau’s approach to assessing these claims under the false or misleading representations provisions of the Competition Act, the Consumer Packaging and Labelling Act, and the Textile Labelling Act.
Labour & Employment Update
The Dependent Contractor
In the case of McKee v. Reid Heritage Homes, the Court of Appeal has now confirmed the intermediate category of the dependent contractor. As a result, employers must now provide reasonable notice upon termination for both employees and dependent contractors. Employers, in order to be aware of the defining features between an employee, an independent contractor, and the new intermediary category of the dependent contractor, need to take a closer look at the essence of the relationships with workers.
US Supreme Court Limits Extraterritorial Reach of US Securities Law: Morrison v. National Australia Bank
Out of the US Supreme Court comes a positive development for Canadian issuers of securities who have business operations in the United States: the US Supreme Court held, on June 24, 2010, that the principal statutory provisions used by security-holders to bring class actions in the US — s.10(b) of the Securities and Exchange Act of 1934 and SEC Rule 10b-5 (which is promulgated under s. 10(b)) — have no application to trades in securities that are not traded on a US exchange and that do not take place in the US.
Privacy Law Update
Proposed Amendments to PIPEDA to Include Breach Notification Requirement
The Canadian government recently introduced Bill C-29, which proposes to amend Personal Information Protection and Electronic Documents Act (PIPEDA) to add new exceptions to consent requirements, specify what constitutes "valid consent," and — most significantly — impose mandatory breach notification obligations.
Technology Law Update
Modernizing Canadian Copyright Laws — Federal Government Introduces New Copyright Bill
At long last, the Canadian government has introduced its proposed copyright amendments. Bill C-32, the Copyright Modernization Act, aims to address gaps in the current Copyright Act created by the Internet and other digital technologies and to bring the Canadian legislation in line with international standards. The changes include measures to implement the World Intellectual Property Organization (WIPO) treaties, a cap on statutory damages, a new exception for "mash-ups," clarification on the liability of Internet service providers (ISPs) for infringement by their subscribers, and a new cause of action for secondary infringement.
Trade Law Update
Export Controls Alert: Canada’s Response to Liberalization of Controls on Ancillary Encryption
Canadian controls over the export or transfer of goods, software and technology containing or designed to work with encryption continue to present challenges for Canadian companies. Export permits must be applied for and obtained in order to export information security items or transfer any related technology from Canada to destinations other than the United States. Canada’s Export Control List identifies the goods and technology covered by these requirements and imposes a very low threshold of control — encryption with key lengths in excess of 64 bits (in the case of symmetric algorithms). Further, the available exemptions for mass market items and technology and software in the public domain may only be relied upon in very limited circumstances.
Canadian Government Undertaking Industry Consultations on Cryptography Export Permit Process
The Export Controls Division of Foreign Affairs and International Trade Canada (ECD) has launched another consultation with industry regarding the control of encryption goods and technology for export or transfer from Canada. This comes on the heels of earlier consultations on the mass market exemption launched in March of this year and further described at Canadian Government Launches Consultations on Encryption Controls (March 2010).