CROSS BORDER SECURITIES
UPDATE
June 2003
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were never posted and instead a brief two line message
of apology.
"The final application for listing on
the BBX is not available for download.
We regret that we were not able to
meet our expected target date and will provide an update as soon as
possible."
The tragedy, of course, is the amount of time issuers spent in
getting themselves ready for the new BBXchange. |
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The good news is that the OTCBB will continue as
it is in its present form. It is a sigh of relief for the
over 3,000 OTCBB companies who would not have meet the standards
of the BBX and were facing trading in the PinkSheets.
The bad news is companies who were looking forward
to higher quality small cap exchange will need to continue
looking.
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The BBX:
Is Cancelled
NASDAQ announced at its annual general meeting on June 25,
2003, it was pulling the plug on the BBXchange.
It was only a few short weeks ago the BBXchange
announced it would be accepting listing applications from companies on
July 1, 2003.
The first clue something was up was on June 12, 2003.
This was the date the BBX stated it would be posting its listing
applications on-line. The applications
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Companies hired business plan
writers and instructed their lawyers, accountants and other advisors to
get their company in shape to apply to the BBX. Boards of directors
were changed, stock holder meetings were held, private placements were
conducted to increase the number of stockholders, and new committees were
formed all with the view of listing on the new BBX.
What happened?
It is doubtful if we will ever learn the real reason behind the
decision of NASDAQ to not go ahead with the BBX. Bob Greifeld, the
CEO of NASDAQ, announced it was not going ahead with the BBX as one of
four business lines being abandoned.
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Insider
Reports: Filing Changes
In Canada and the United States, insiders of public
companies must begin filing their respective insider reports online in
June 2003.
In Canada, the effective date is June 9, 2003, and
insiders of Canadian public companies must register and file all insider
reports on the
System for Electronic Disclosure by Insiders ("SEDI")
electronic filing system in Canada. Paper filings will no longer be
accepted after this date.
Insiders or their agents must register as a SEDI user and
create an insider profile. Reporting issuers must also register on
SEDI.
continued... |
VENTURE
LAW
CORPORATION
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CROSS BORDER SECURITIES
UPDATE: JUNE 2003
Page 2
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Insider Reports: Filing Changes
(continued)
In Canada, insider activity must be reported within 10
calendar days after a transaction takes place unless
the share change is due to a merger, amalgamation, stock split or
consolidation. In these circumstances the insider activity must be
reported within one business day of the transaction. This is
a new rule.
The information required to be filed on SEDI is identical
to the paper insider trading forms.
As a final note the
SEDI user guide is available online and is 214 pages long. The
Canadian Securities Administrators Staff Notice 55-309, sets out the
SEDI filing requirements and is available on the
CSA website with the other regulations applicable to SEDI.
In the United States insiders of SEC reporting companies
must file their Section 16 insider reports (Form 3, 4 & 5) electronically
on the
EDGAR system effective
June
30, 2003.
In addition, corporations must display
website that contains them.
In the US, insider activity must be reported within 2 calendar
days after a transaction takes place.
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Before an insider or their agent can file on EDGAR the insider must
register by fax to obtain the required codes.
The SEC EDGAR site for insiders is very straight-forward in
comparison to the Canadian SEDI site. Still the
filing manual is a hefty 80 or more pages.
Depending on your patience you may wish to use a
filer service to file your insider
reports via SEDI and or EDGAR.
CNQ: Canadian
Micro-Cap Exchange Live July 25, 2003
The Canadian Trading and Quotation
System Inc. ("CNQ"), is Canada’s newest equity market exchange and it will
be going live July 25, 2003. The CNQ trading system is a fully
automated open book auction market with client and dealer orders exposed
combined with a market making system to add further liquidity.
Quotes are in real time in Canadian or US dollars.
The new exchange is aimed at junior and start-up firms that might find
it too expensive or complicated to list on the TSX Venture Exchange or one
of the recognized US exchanges. |
The listing requirements for the
CNQ are a bit more challenging than that of the BBXchange in the US.
To list on the CNQ companies must have:
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150 public shareholders
holding a board lot; |
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500,000 shares in the public
float worth at least C$ 50,000; |
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a public float which
represents at least 10% of the issued and outstanding share capital
(or 5% if the company has 200 shareholders); |
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confirmation of reporting
issuer status in Ontario; |
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either: |
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a cash generating capacity,
or |
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a recent history as a listed company & a
minimum of $50,000 in working capital, or |
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a minimum of C$ 100,000 in working capital. |
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revenue and likelihood of
profitability in the future if operating at time of application; |
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the ability to generate money
and move its business forward if non-operating at time of application; |
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had previous work conducted on any
applicable mining property and a NI 43-101 Report; and |
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a 12 month business plan; |
The listing fee for the CNQ is C$ 10,000. There is no annual
sustaining fee and instead CNQ companies pay a monthly fee of C$ 300.
continued... |
VENTURE LAW CORPORATION
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CROSS BORDER SECURITIES
UPDATE: JUNE 2003
Page 3
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CNQ: Canadian
Micro-Cap Exchange Live July 25, 2003 (continued)
The CNQ requires companies to file a monthly and quarterly report in a
specified form once listed. Companies are also required to maintain
their reporting issuer status in Ontario in good standing.
There are no transactional reviews, approval, or fees on CNQ other than
an obligation to file a form and lodge certain documents prior to
specified transactions.
The CNQ estimates the review process of a listing application will take
approximately 20 days.
As of October 7, 2003, we have had two clients submit listing
applications to CNQ and have found the staff very helpful and
accommodating.
If you are interested in finding out more about the CNQ please do not
hesitate to call our office or visit the
CNQ web site.
BC
Company Act: Out with the Old and in with the New Business
Corporation Act
This fall the
Business Corporation Act will replace the
Company Act in British Columbia. There are significant differences
between the old and new corporate statutes and how companies are expected
to interact with the Registrar of Companies in BC. |
Overall the changes are positive but they will require the
over 275,000 companies incorporated in BC to transfer over to the new
electronic system within two years.
First a brief review of the statutory changes benefiting BC
incorporated companies. Under the new
Business Corporation Act:
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board of directors of a company can be
composed entirely of directors who reside outside of Canada.
(The old Act required a majority of the directors to be
residents of Canada with at least one director resident in BC.)
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companies may hold stockholders meetings
by telephone (internet) or outside the province. (The old Act required
you obtain permission first from the Registrar of Companies.) |
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companies may indemnify its directors
without court approval (Court approval was required under the old
Act.) |
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companies can amalgamate with a related
company without shareholder or court approval or entering into a
formal amalgamation agreement. (Under the old Act you needed approval
of the Registrar, stockholders and court.) |
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individuals may on behalf of a
corporation to be formed enter into pre-incorporation contracts
without the ignatory becoming personally liable as under old Act. |
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special resolutions only need 66%
approval to pass versus 75% stockholder approval required under the
old Act. |
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companies may chose not to prepare
financial statements each year if all the stockholders
agree. |
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companies may continue out
(re-incorporate or re-domesticate) to another jurisdiction much easier
than under the old Act. |
The new Business Corporation Act will also bring
with it a new
electronic
filing system of the BC Registrar of Companies. Unlike the
current BC Online system which is available to subscribers only, the new
Registrar site will be available to everyone 24/7. It will also
allow a broader range of online filing.
For instance, when incorporating under the new system
companies will file an incorporation application and notice of articles on
a secured site on the internet instead of filing a memorandum and articles
in paper form with the Registrar in Victoria. Companies will also be
able to file their annual reports, notice of change of directors,
alterations etc. online.
Existing corporation will be required to file a
"Transition Application" within two years of the change over to the new
electronic system. The Transition Report is essentially an
electronic profile of the existing company. There is no regulatory
filing fee associated with filing this report online.
There are a number of housekeeping matters companies will
be required to do to their articles before moving over to the new Act.
Companies will need to update their articles to comply with the new
Business Corporation Act and to |
VENTURE LAW CORPORATION
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CROSS BORDER SECURITIES
UPDATE: JUNE 2003
Page 4
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BC Company Act: Out with
the Old and in with the New Business Corporation Act (continued)
incorporate any provisions of the old Company Act
deemed to be part of a company's articles. Most of these changes can
be made by a directors' resolution or an ordinary resolution of the
stockholders.
If you have any questions about the new Business
Corporation Act please do not hesitate to call our office or visit
the
Business Corporations Act Project web site.
Exciting Changes to BC Small Business Venture Capital Act
The
Small Business Venture Capital Act is designed to encourage arm’s
length investors to make equity investments in businesses which enhance
export, replace imports or otherwise diversify the British Columbia
economy.
The BC government provides investors with an incentive equal to 30
percent of
their investment in an eligible small
business. This investment may now be made either directly into the
eligible small business corporation or through a specially formed venture
capital corporation ("VCC"). Tax credits are realized through the issuance
of tax credit certificates.
Changes to this legislation March 28, 2003 has opened-up this program
to a wider group of investors and companies. |
Some of these changes include:
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eliminating the need to invest in an
eligible small business through a VCC and allowing direct investments
by investors in a eligible business corporation. |
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allowing investors to claim a tax credit
made within the calendar year, or 60 days immediately following that
calendar year. |
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allowing investors to invest using funds
held in their self-directed RRSPS. |
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allowing eligible small businesses to
issue common shares, non-voting shares, preferred shares, warrants,
options and debentures to investors. |
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increasing the maximum investment limit
to rolling $5,000,000 every two years. |
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increasing the maximum employees an
eligible small business may have at the time of the initial investment
from from 75 to 100. |
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allowing redemption or retraction of the
shares after five years. |
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allowing VCC's up to 24 months to
complete eligible investments. |
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allowing pro-rated tax recovery if
investment held for at least three years before divesting. |
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allowing the program administrator
discretion to waive a VCC's divestment obligation if an eligible small
business no longer meets investment requirements. |
Since the adoption of the new changes in March 2003 the
Ministry of Competition Science and Enterprise has received a huge
response from BC businesses electing to go the direct investment route. |
Last year tax credit grants
under the program were still available in late December. This year
the
Ministry expects to run-out of available tax credit grants well before
December. The program is not open to all BC businesses. In order
to be deemed an eligible small business a company must be involved in one
of the prescribed business activities outlined in the Small Business
Venture Capital Act. Certain business activities are prohibited
such as resource exploration, financial services, land development,
agriculture, restaurants and retail services etc.
If you are interested in more information on accessing the program
under the Small Business Venture Capital Act please do not hesitate
to call our office or visit the
Ministry's web site for further information.
The information in this newsletter is of a general
nature only about recent developments of interest to our clients.
You are encouraged to contact legal counsel before acting on any
information provided.
 Author
Alixe Cormick has assisted small and micro cap companies through each
stage of their growth from inception to graduation to junior and more
senior trading forums.
VENTURE LAW
CORPORATION
618 - 688 West Hastings Street
Vancouver, British Columbia, V6B 1P1
Phone: 604-659-9188
Fax: 604-659-9178
Web: www.venturelawcorp.com |
