By Danica Bennewies
It’s Friday, which means its time for another installment of Friday Finds! This is the series on the CBLB where we share five of the top corporate and securities law news stories that dominated the headlines and our conversations over the past week. So, sit back, relax, and get caught up with us – particularly if you’re one of the lucky students that’s been off on vacation. This week, we’re following up on the Hydro One compensation plan, another gold company hostile takeover, and more.
Last week, one of the big stories we discussed on the blog was the disagreement between Hydro One and the Ontario provincial government over executive compensation. A quick reminder: Hydro One published its new executive compensation plan last week, which had a CEO salary of up to $2.775-million. This was an over 60% reduction in CEO compensation. Energy minister Greg Rickford called this plan “unacceptable” and unfair to Ontario’s ratepayers. This Thursday, Minister Rickford stated that the Management Board of Cabinet is issuing a directive which will require Hydro One to cap its maximum CEO compensation at $1.5-million, as per the authority granted under the Hydro One Accountability Act. In his statement, Rickford said that the Hydro One Board of Directors “has failed to take steps to adequately reduce compensation for both the CEO and themselves as board members.” As such, the government is taking “decisive action” to bring executive compensation to the same level as comparable utilities. In a brief response, Hydro One acknowledged that it received the directive and that it will keep its attention focused on its CEO search.
We’ve covered a number of takeovers in the gold industry here on the CBLB, and it looks like another one is right around the corner. Toronto-based Barrick Gold Corp is apparently considering launching a hostile takeover bid for Newmont Mining Corp. This would be one of the biggest mining deals to date and would secure Barrick’s position as the world’s largest gold producer. The two-part deal under consideration would consist of Barrick acquiring Newmont for US$19-billion in stock and then flipping some of the assets to Australia-based Newcrest Mining. This comes at the same time that Newmont is trying to close its own takeover of Goldcorp Inc, which was announced mid-January. If Barrick is successful in its bid for Newmont, Newmont’s deal with Goldcorp would be terminated and Barrick would be left having to pay a US$650-million break fee to Goldcorp. However, industry experts believe that a Barrick acquisition of Newmont would lead to synergies that could result in huge cost savings.
Moving now to regulator news, the Canadian Securities Administrators (CSA) published a statement on Thursday regarding a proposed national start-up crowdfunding exemption rule. The proposed rule under development by the CSA will have the same key features as a similar rule adopted in British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia in 2015. The existing rule allows start-ups to raise capital through securities crowdfunding by using certain start-up registration and prospectus exemptions. In its statement, the CSA said that the new rule will have “targeted amendments to improve harmonization” and will increase the effectiveness of crowdfunding as a capital raising tool. The CSA does not anticipate that the proposed national rule will come into effect until after the existing rule expires in the relevant provinces in May 2020.
In the US this week, the Securities and Exchange Commission (SEC) announced that it is looking into easing IPO rules. In the press release issued on Tuesday, the SEC proposed expanding its “test-the-waters” rule to allow all issuers, including investment company issuers, to solicit investor interest prior to filing an IPO. The rule currently only applies to emerging growth companies, which are generally companies with less than US$1-billion in annual revenues. The expansion of the rule would allow all prospective issuers to have discussions with certain investors before filing a registration statement. The SEC says that the purpose of this rule is to improve issuers’ ability to conduct successful IPOs and will ultimately increase investors’ opportunities to invest in public markets. Furthermore, the test-the-waters rule will provide issuers with greater flexibility in communicating with institutional investors about potential securities offerings and a more cost-effective method for evaluating market interest.
Lastly, we have some regulatory news from “down under”. This week, the Australian Securities and Investments Commission (ASIC) announced that its enforcement capabilities will soon be enhanced, thanks to a new bill. Once the legislation passes, the ASIC will have the ability to apply civil penalties to a broader range of misconduct with increased limits, as well as the power to pursue criminal cases. The deputy chair of the ASIC called this new bill a “significant step for ASIC’s enforcement regime”, as previously the law did not have sufficient penalties to effectively punish wrongdoers. With the new legislation in place, the ASIC will be better positioned to pursue sanctions against breaches of Australia’s corporate laws. The new bill comes out of an earlier task force review that presented a number of ways in which ASIC’s ability to prevent harm in the financial sector could be enhanced. In addition to this task force, the Royal Commission also released a report earlier in February discussing misconduct in Australia’s financial sector and the extensive reforms needed to ensure the integrity of the financial services industry.
That wraps up this week’s Friday Finds. Be sure to check back next week for more of the latest corporate and securities law new stories!