The Securities Commission has granted a decision under multiple securities regulations to exempt a wholly-owned subsidiary (Subsidiary) of a parent company (Parent) from certain continuous disclosure and insider reporting requirements, following a plan of arrangement where the Subsidiary will become a wholly-owned subsidiary of the Parent. The Subsidiary is a reporting issuer with convertible securities outstanding, which entitle securityholders to acquire common shares of the Parent. However, these securities do not qualify for certain exemptions as they do not provide voting rights in the Parent.
The exemption is based on the following conditions:
1. The Parent must own all voting securities of the Subsidiary.
2. The Parent must be a reporting issuer in good standing and fulfill all filing requirements.
3. The Subsidiary must not issue any new securities to the public post-arrangement, except under specific conditions.
4. The Subsidiary must file notices or copies of the Parent’s disclosure documents.
5. The Parent must send all relevant disclosure materials to the holders of the Subsidiary’s warrants.
6. The Parent must make timely public disclosures of material information.
7. Both entities must issue news releases and file reports for material changes.
The exemption is supported by the following regulations:
– National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), Section 13.1 and 13.3
– National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), Section 8.6
– National Instrument 55-104 Insider Reporting Requirements and Exemptions, Section 10.1
– National Instrument 55-102 System for Electronic Disclosure by Insiders, Section 6.1
The decision concludes that the continuous disclosure and insider reporting requirements for the Subsidiary would not be meaningful or beneficial to warrant holders and would impose unnecessary costs, given that the Subsidiary will be a wholly-owned subsidiary and its financials will be consolidated with the Parent. The outcome allows the Subsidiary to avoid duplicative regulatory burdens while ensuring that material information remains accessible to securityholders through the Parent’s disclosures.