By Bryan Yau
We have made it through another week, which means that it is time for another instalment of Friday Finds! In this weekly series, we share notable business law stories and developments that have dominated recent headlines and discussions. This week, we are covering two stories and flagging three ongoing events:
The Canadian Securities Administrators (CSA) is proposing changes to the Offering Memorandum exemption requirements that set out new disclosure demands for issuers that are involved in real estate, and issuers that are “collective investment vehicles.” These changes, reflected in proposed amendments to National Instrument 45-106 Prospectus Exemptions (NI 45-106) and proposed changes to Companion Policy 45-106CP Prospectus Exemptions, would expand and clarify disclosure required from these types of issuers when relying on the OM exemption. According to the CSA notice, the OM exemption was first intended to help small companies raise relatively small amounts of capital by allowing for investments from a wider range of investors than under other exemptions such as the existing accredited investor, or the family, friends and business associates exemptions. Issuer OMs must disclose certain information about the issuer and include audited financial statements, however, they do not require nearly the same level of disclosure as a prospectus. The CSA finds that, in practice, larger and more complex issuers are increasingly raising money under the OM exemption, with a large proportion of such issuers operating in the real estate and mortgage industries. The CSA says that current rules make it unclear to issuers as to what type of disclosure is required. Their proposed changes are intended to provide issuers with clearer, more tailored disclosure requirements, and investors with more useful information. The CSA is currently seeking comments on the proposals until December 16, 2020.
The Financial Services Regulatory Authority of Ontario (FSRA) will assess the life and health insurance sector to determine if clients are being treated fairly as part of its 2020-2021 assessment. The FSRA aims to review insurer policies, processes and practices in relation to two key areas: (1) the implementation of Fair Treatment of Customers (FTC) principles across distribution channels, in collaboration with the Canadian Council of Insurance Regulators (CCIR) and its member regulators [this was introduced in 2018 under FSRA’s predecessor, FSCO], and (2) the relationship between insurance companies and Managing General Agencies (MGAs). While the FSRA doesn’t regulate MGAs, the regulator said it will review the relationship between insurers and MGAs to understand how they, along with agents, interact with clients during sales. As a regulator, the FSRA is charged with administering legislation related to insurance industry practices, and has specific rule-making authorities and powers to enforce guidance that ensure fair treatment for consumers seeking insurance products.
On Wednesday, the federal government’s throne speech laid out its plan to manage the now rising rates of infection and chart a post-COVID-19 recovery based on a new green and social agenda. Much of the speech addressed three broad themes: (1) the federal government’s response to a recent spike in COVID-19 cases in the immediate term, (2) the continuation and possible creation of new federal income supports for Canadians, and (3) a social and green agenda for Canada’s post-COVID-19 recovery. While the throne speech did not provide plans about how the three objectives will be carried out, those details will come later when Prime Minister Justin Trudeau releases new mandate letters to his ministers. Among the policy goals for the new government are major implications for businesses, including retrofitting homes and business buildings to reduce energy consumption, addressing systemic racism and challenges for women at work, and combatting “corporate tax avoidance” by digital giants. Various industries and interest groups will also be looking for details on potential issues including policies to develop clean energy, regulations to address hate speech for social media companies, employment insurance, legislating Canada’s goal of net-zero emissions by 2050, and pharmacare. The CBLB will keep you updated on details related to major policy items and their impact on Canadian businesses as they become available in the coming weeks.
The takeover bid for Cogeco Inc. and its subsidiary Cogeco Communications Inc. (collectively referred to as “Cogeco”) has grown increasingly hostile, with the parties involved accusing each other of flouting corporate governance rules. On September 16, a lead director for Cogeco Inc., a telecommunications and media company operating in Quebec, Ontario and the US, claimed that Altice USA Inc. and its partner, Rogers Communications Inc., were engaging in “bad faith tactics” as part of their proposed bid for the company. This comes a day after the chief executives of Rogers and Altice sent a letter stating that Cogeco “boards and their independent directors failed to fulfill their most basic duties in representing the shareholders” when they turned down the takeover bid. The letter sent by the chief executives of Rogers and Altice says that Cogeco failed to establish an independent committee to review the offer, nor referred the offer to a relevant committee. Louis Audet, whose family controls Cogeco through a dual class share structure, has previously stated that there is no intention to sell the company. The Quebec government has also expressed concerns about a proposed takeover that would move the company’s Montreal headquarters. The CBLB will keep an eye on this as the takeover bid progresses.
On Tuesday and Wednesday, the Supreme Court of Canada (SCC) heard from more than two dozen interested parties on the constitutionality of the federal government’s Greenhouse Gas Pollution Pricing Act. The Act sets minimum standards for carbon pricing and imposes a federal system on provinces that do not have an equivalent act of their own. The federal government, and provincial governments of Alberta, BC, Manitoba, New Brunswick, Ontario, and Quebec were among the different parties arguing in support and against the Act. Many businesses will be affected by the decision as it impacts governmental climate change policy and operational costs for manufacturing and energy usage throughout the economy. The SCC has reserved judgement on the matter, but the CBLB will cover the decision as soon as it is released.
That wraps up this week’s Friday Finds! Thanks for reading and come back next week for more business law stories.