By Danica Bennewies
It’s finally Friday, which not only means that the weekend is right around the corner, but it’s also time for another Friday Finds. This is the weekly series here on the CBLB where we share five of the top corporate and securities law news stories that dominated the headlines, as well as our conversations, over the past week.
First up, airlines have been a hot topic in the news recently. Recently, private equity fund Onex Corp announced its plan to buy WestJet Inc. A few days later, Air Canada announced a possible transaction with Transat A.T. Inc. In a press release issued last week, Air Canada said that it has entered into exclusive discussions with Transat about a possible deal to purchase the Montreal-based airline for $13 per share. At this price, the entire transaction would be worth approximately $520-million. Transat has apparently been fielding several different purchase offers but chose to enter into exclusive transaction discussions with Air Canada for the next 30 days. If these talks are successful, the deal will then go to the airlines’ shareholders for approval and finally will be subject to regulatory approval, which, if unsuccessful will require Air Canada to pay Transat $40-million. Similarly, if Transat ultimately accepts another bid, it will be required to pay Air Canada a $15-million fee. While spokespeople for each airline sound positive, the deal has raised concerns among customers that this would allow Air Canada to further consolidate its market position and drive up ticket prices. These potential competition issues may make regulatory approval more challenging than Air Canada anticipated.
In regulatory news, the Ontario Securities Commission (OSC) is checking another item off its burden reduction to-do list. Last Thursday, the regulator announced that it is imposing a moratorium on the required fees that registrants previously had to pay for disclosing outside business activities (OBAs) past the filing deadline. The fee waiver will start retroactively from the beginning of this year until, at the latest, the end of December in 2021. This change is expected to result in significant cost savings for registrants. Under the current regulatory regime, individual registrants are required to submit an OBA disclosure within 10 business days of a new OBA, with a $100 fee charged for every business day that the filing is late. During the two-year period, the OSC plans to work on clarifying the current regulatory requirements. This is one of the initiatives that came out of the OSC’s second burden reduction roundtable that took place earlier in May. Other proposed changes at the roundtable included removing the requirement for separate Fund Facts for each series of a mutual fund, lengthening the simplified prospectus renewal cycle from 12 to 25 months, and appointing OSC staff as registrant “relationship managers” to improve staff-registrant interactions.
The British Columbia Securities Commission (BCSC) also had a big win this week. On Wednesday, the west coast regulator won the first round of its bid to enforce a disgorgement order against a former Vancouver resident that has since moved to the U.S. According to the BCSC, this is the first time that a U.S. court has recognized BCSC sanctions for someone to repay ill-gotten gains. The case was against Michael Lathigee, a former Vancouverite who defrauded nearly 700 investors back in 2008. Lathigee fraudulently raised $21.7-million from investors to invest in the Freedom Investment Club, a group of companies that he controlled. In 2014, a BCSC hearing panel imposed a $15-million fine on Lathigee and also ordered him to return the $21.7-million, however Lathigee then moved to Las Vegas, Nevada. Though Lathigee is appealing the decision, the ruling of the U.S. court sends a strong message to all Canadians that you can’t avoid the consequences of your wrongdoing by simply leaving the country.
In a recent post we discussed the federal government’s proposed legislative changes that would strengthen shareholders’ voices by requiring a mandatory, non-binding shareholder say-on-pay vote at every annual meeting. However, not everyone is keen on these changes. In contrast to this pending initiative, shareholders of the Power Corporation of Canada voted against a say-on-pay proposal at the company’s annual general meeting last Tuesday. Only 23.3% of shareholders voted in favour of increasing shareholder voice in executive compensation decisions, while 76.7% opposed the proposal. At a press conference following the meeting, Power Corp. chairman Paul Desmarais Jr. raised his concerns with the government’s proposed mandatory say-on-pay legislation. Desmarais questioned what trend it would set and what other decisions shareholders would subsequently be given a say in. While proponents argue that mandatory say-on-pay legislation could improve communication between shareholders and boards, opponents raise the issue of shareholder micromanaging. In the Power Corp. press conference, Desmarais went on to say that boards and independent compensation committees are in the best position to make complex executive pay decisions, and if shareholders are unhappy with how a company is being run there are alternative actions they can take, such as selling their shares.
Speaking of unhappy shareholders, BP is facing pressure from investors regarding its climate change targets. The oil and gas company’s carbon emissions in 2018 were the highest they’ve been in six years, leading a greater number of shareholders to look for confirmation that BP’s operations are in line with the goals of the 2015 Paris climate deal. A resolution has been proposed by 58 shareholders and backed by BP requiring the company to be more transparent about its emissions as well as tie executive compensation to reducing emissions. The motion will be raised at BP’s annual general meeting next week and is expected to pass. However, some investors are looking for BP to do even more to cut its carbon emissions. An activist group has drawn up another resolution that would require BP to reduce emissions from the fuel and products it sells to its customers on top of cutting emissions from its own operations. While this resolution is not expected to pass at next week’s meeting, the message its sending is clear – shareholders want BP to step up its climate change commitments. BP has responded saying that it is welcoming engaging and working with investors on this issue.
Thanks for joining us for another Friday Finds on the CBLB, we hope you enjoyed getting caught up on the week’s major corporate and securities law news. We’ll be back again next Friday with more major headlines.