Canadian M&A Lawhttps://www.stikeman.com/en-ca/rss/canadian-ma-law?utm_source=ma-list-en&utm_medium=email&utm_campaign=malawCanadian M&A Lawen-CA{FF47E511-83CE-4BC0-9662-7ABF94429963}https://www.stikeman.com/en-ca/kh/canadian-ma-law/Views-from-the-Market-Midmarket-MandA-and-Private-Equity-PodcastMario Nigrohttps://www.stikeman.com/en-ca/people/n/mario-nigroCanadian M&A LawViews from the Market: Midmarket M&A and Private Equity Podcast<p class="BulletedList" style="margin-left: 0in;"><span>Please join us – at your convenience – for a series of podcasts on private equity and midmarket M&A, with a focus on Canada. In these concise 15-minute segments, a wide range of industry participants discuss the deal market trends that they’ve been seeing. The host and originator of the series is Mario Nigro, M&A partner at Stikeman Elliott in Toronto.</span></p> <p class="BulletedList" style="margin-left: 0in;"><strong><span><br /> </span></strong></p> <table style="width: 1131.7px; height: 25.9954px;"> <tbody> <tr> <td><strong> Episode 107 – Investigative Due Diligence in M&A: The Latest Trends <br /> <br /> </strong> With Michael Karran, Managing Director of the Mintz Group, New York and Toronto </td> <td> Mike Karran of the Mintz Group speaks with Mario Nigro about Mintz’ global due diligence and investigations practice, particularly as it relates to vetting investment targets and their executives. Mike describes what Mintz’ investigations look for and gives examples of how the results can change the risk dynamics of a proposed transaction. As investors become more discerning and data-driven, investigative due diligence is increasingly seen as a standard practice in midmarket deals. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3mWZ6319ULtjmrf4MuUbTM?si=h0v6CdiPRt2r9s7FEtINUg" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-107-investigative-due-diligence-in-m-a/id1475781337?i=1000650731743" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-107-investigative-due-diligence-in-ma-the-latest-trends?si=d4a02d107231417c8a1169f91917c57e&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 106 – From MBA to Search Fund Success: The Emergence of Alpha40 Capital <br /> <br /> </strong> With Ash Buckle and Mohsen Manzari, Partners, Alpha40 Capital </td> <td> Today’s guests are founders of Toronto-based Alpha40 Capital, a self-funded search fund that is emerging as a significant force in the lower midmarket. Mohsen Manzari and Ash Buckle discuss how they became interested in entrepreneurship, honed their skills in business school, and developed a successful search fund during and after the pandemic. Anyone interested in the search fund model will be interested in their “lessons learned” and thoughts about the future. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/2txRXvMSXgmvSUS663qQgc?si=e841b904311f4207" target="_blank">Spotify</a> | <a href="https://podcasts.apple.com/us/podcast/episode-106-from-mba-to-search-fund-success-the/id1475781337?i=1000649194638">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-106-from-mba-to-search-fund-success-the-emergence-of-alpha40-capital?si=8dd6fb3fd3524d1cb57267b1bda8ce3c&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 105 – After the Party: Post-purchase Disputes Take Centre Stage <br /> <br /> </strong>With Vimal Kotecha, Partner, Valuations and Dispute Advisory, Richter LLP </td> <td> Our guest on this episode is Vimal Kotecha, a senior transactional advisor at Richter LLP with special expertise in business valuations and disputes. In the wake of the deal euphoria of 2021-22, many acquired businesses are not tracking projections, leading to a rising tide of post-purchase price disputes. Join Vimal and Mario for a wide-ranging discussion of what’s triggering these disputes, what the solutions are, and how dispute risk can be minimized in future transactions. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1rkG5rfPnVUS5JI1pJoNxd?si=5hIpZpyJQZqPieFdBHWNuQ" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-105-after-the-party-post-purchase-disputes/id1475781337?i=1000647541152" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-105-after-the-party-post-purchase-disputes-take-centre-stage?si=cde359fae6714a4f90e4a642a502c66f&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 104 – Canadian Search Fund Activity: A U.S. Perspective <br /> <br /> </strong> With Andy Love, Founder and Managing Partner, Aspect Investors </td> <td> In this episode, Mario Nigro speaks with Andy Love of Dallas-based Aspect Investors. Andy has been involved in the search space for about 25 years. Aspect, which he founded in 2012, has made over 200 investments, including more than 20 here in Canada. He and Mario discuss trends in the industry – both long-term and recent – and look ahead to what Andy sees as a period of continued growth over the next few years. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1ePbJrdcgcsLW1VJyQQgyJ?si=vyT2OjB5QCSm-0EScgY8sQ" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-104-canadian-search-fund-activity-a-u-s-perspective/id1475781337?i=1000645458646" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-104-canadian-search-fund-activity-a-us-perspective?si=d9f5710eddf048bd9e91408be4c6e09e&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 103 – Staying Power: Alcorn’s Long-term Investment Strategy <br /> <br /> </strong> With Greg Duggan, CEO and Co-Founder, Alcorn Partners </td> <td> Mario’s guest for this podcast is Greg Duggan of Alcorn Partners. Alcorn’s investment strategy is aimed at profitable lower midmarket businesses – often family-owned enterprises – that are ready to take the next step toward professionalized management. Investments are long-term in the truest sense – up to 20 years or more – and portfolio companies can be in any industry in Canada or the U.S. As Greg notes, Alcorn’s long-term commitment is attractive to exiting founder-owners and avoids the common private equity mistake of selling too early, as well as being advantageous from a tax perspective. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0oNxzWjtjZafEpGugSN7ok?si=RmDEsOfVRsG1pTBrJwaCyA" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-103-staying-power-alcorns-long-term-investment/id1475781337?i=1000643820308" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-103-staying-power-alcorns-long-term-investment-strategy?si=b01eff2e51d646db88da4a97cf532b99&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 102 – Finding the Opportunities in the Lower Midmarket: The Quadrivium Model <br /> <br /> </strong> With Lars Hamkens and Jamie Pridham, Quadrivium Capital Partners </td> <td> In this episode, Mario speaks with Lars Hamkens and Jamie Pridham of Toronto-based Quadrivium Capital Partners. Quadrivium, an investment firm that works with executives and serial entrepreneurs in lower midmarket acquisitions, currently has a portfolio of 11 successful companies funded by groups of individual investors and generally held for the long term. The typical Quadrivium deal begins with an introduction to an entrepreneurial business operator for whom an appropriate opportunity is identified, often a situation with an exiting owner-operator. Looking ahead, Jamie and Lars are of the view that the lower midmarket is significantly insulated from macroeconomic forces and should continue to reward those who are willing to take the risks of entrepreneurship. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4LRFWlW0KEAoBAE0bFbpeh?si=NfB0k49rT2eDKI2kVBiMzg" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-102-finding-the-opportunities-in-the/id1475781337?i=1000642106136" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-102-finding-the-opportunities-in-the-lower-midmarket-the-quadrivium-model?si=acdd26b756a74260982e9a5a8ff532d8&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 101 – Entrepreneurship Through Acquisition: Democratizing the Deal Space <br /> <br /> </strong> With Bakari Akil, Founder of Graves Hall Capital </td> <td> In this podcast, Bakari Akil of Graves Hall Capital shares his experiences in Entrepreneurship Through Acquisition (“ETA”), a type of entrepreneurship that begins with the acquisition of an existing business using primarily third-party capital. While it is beginning to make its mark in Canada, ETA is mainly a U.S. phenomenon, thanks to the extraordinary availability of capital south of the border. In Bakari’s view, ETA is democratizing the deal space by providing a path to business ownership that almost anyone can follow. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4qRpL60PyJ1THBCofgDWSk?si=JqekTxmmRySd3sPKvQ498w" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-101-entrepreneurship-through-acquisition-democratizing/id1475781337?i=1000637819969" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-101-entrepreneurship-through-acquisition-democratizing-the-deal-space?si=ba066a8c92514ee1864388b14ba7bd3e&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 100 – Flow Capital: An Attractive Alternative for High Growth Companies <br /> <br /> </strong> With Josh Axler, Principal, Flow Capital Corp. </td> <td> In this edition, Mario Nigro speaks with Josh Axler of Flow Capital, a publicly-traded alternative finance firm that works with high-growth businesses in Canada, the U.S. and the U.K. Josh discusses Flow’s investment criteria, which include 25% year-over-year growth and $2.5 million recurring revenue (or $4 million non-recurring) and how it structures its involvement to be minimally dilutive and non-controlling. In the current environment, with some pullback from banks and VC firms, more high-growth lower midmarket companies are looking seriously at what Flow has to offer. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4tkrRfAdVinx3JzxOxjsfb?si=mdztvlsfRVSyxIPXHbSrAg" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-100-flow-capital-an-attractive-alternative/id1475781337?i=1000635805201" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-100-flow-capital-an-attractive-alternative-for-high-growth-companies?si=26e06a2a452b4802ab7b9ae574e9ae6c&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 99 - Together in the Trenches: Patricia & Enrico's Search Fund Journey <br /> <br /> </strong> With Enrico Magnani and Patricia Riopel, Principals of Magnum Capital Partners </td> <td> In this episode, Patricia Riopel and Enrico Magnani of Montréal-based Magnum Capital Partners share their unique journey through the search fund model, from the challenges of finding a business to acquire to their successful exit from Scribendi, an Ontario company that develops text-editing software. They also discuss their experiences as a married couple navigating this path, Patricia's perspective as the first woman to achieve a search fund exit in Canada, and their future plans to support the search community as investors. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/7tiClymYp0u2devLPdJs8S?si=31hai0HzTse4ukcCUmWRWw" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-99-together-in-the-trenches-patricia-enricos/id1475781337?i=1000634268779" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-99-together-in-the-trenches-patricia-enricos-search-fund-journey?si=b4d50ad9ca974e908b496f151c5a87af&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 98 – Western Canada’s Thriving Midmarket: Energy, Insurance and More <br /> <br /> </strong> With Erica McGuinness, Partner, Sequeira Partners, Vancouver, B.C. </td> <td>Today’s podcast takes us to British Columbia, where Erica McGuinness has built a sell-side advisory practice with one of Western Canada’s leading firms, Sequeira Partners. Mario and Erica discuss Alberta and B.C.’s strong deal market, with emphasis on insurance M&A, where valuations are increasing as PE firms seek out brokerage consolidation possibilities. Other sectors with strong deal flow include engineering, environmental consulting and industrials. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1wW4vBSYw69YkAMLRu4Qrd?si=Vc-NVrlWT3eHt6Pg6meNQA" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-98-western-canadas-thriving-midmarket-energy/id1475781337?i=1000632700614" target="_blank">Apple Podcasts</a> (iTunes) |<a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-98-western-canadas-thriving-midmarket-energy-insurance-and-more?si=04769234d7e844d68f6314bf889f554f&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank"> SoundCloud</a></td> </tr> <tr> <td><strong> Episode 97 – Snowdon Partners: A North American Lower Midmarket Investor with Québec Roots <br /> <br /> </strong> With Liroy Haddad and Dan Chetrit, Partners and Co-Founders, Snowdon Partners </td> <td>Today’s guests, Dan Chetrit and Liroy Haddad, are co-founders of Snowdon Partners. Snowdon invests in lower midmarket businesses, both directly and as a search funder. Liroy and Dan are flexible about the level of ownership Snowdon assumes, but their philosophy is to be active, long-term partners to their portfolio companies. While its investments span Canada and the U.S., Montréal-based Snowdon is particularly noted for its experience and connections in Québec’s lower midmarket. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/2mrs7pFgJUIqdVtawA04lc?si=FT4f5oy1Qk6V28qmK3FGPg" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-97-snowdon-partners-a-north-american-lower/id1475781337?i=1000631097663" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-97-snowdon-partners-a-north-american-lower-midmarket-investor-with-quebec-roots?si=971f81083802454fb573e5e8e0a8631c&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 96 – AI and M&A: Can Generative AI Play a Role in Dealmaking? <br /> <br /> </strong> With Kalle Kilpi, Founder and CEO of DealMap.Ai </td> <td>Mario’s guest is Kalle Kilpi, Founder and CEO of DealMap.Ai, a Boston-based business that tailors large language model (LLM) M&A solutions for active acquirors. LLMs like Chat GPT have potential applications to nearly every aspect of a transaction, from drafting, due diligence and routine correspondence to target discovery and strategic analysis. Please join Mario and Kalle for a fascinating and informative look at what could be the M&A world of tomorrow. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/5tu7LQsUyxf2njfxOgXGx4?si=JjUB0XUbRculoqx15XKpjw" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-96-ai-and-m-a-can-generative-ai-play-a/id1475781337?i=1000629538093" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-96-ai-and-ma-can-generative-ai-play-a-role-in-dealmaking?si=35adc569279449e692b347ff9724bd8e&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 95 – Who’s Finding Buyers and Who Isn’t <br /> <br /> </strong> With Ed Bryant, President and CEO, Sampford Advisors Inc. </td> <td>Mario’s guest, Ed Bryant, is the driving force behind Sampford Advisors Inc., a tech-sector sell-side advisor. He and Mario discuss the post-pandemic market, noting that buyers will still pay a good price for quality businesses but are less interested in those that are cash-flow negative. In contrast with 2020-21, growth is no longer enough: the “Rule of 40” is being more strictly applied. Among the other topics of discussion is AI, which in Ed’s view is not yet a major M&A driver but may become so within a few years. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3xnA9MmXEthdc3GUWDUWXw?si=75Q3G2KoSda88HCMdhRhsA" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-95-whos-finding-buyers-and-who-isnt/id1475781337?i=1000627874066" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-95-whos-finding-buyers-and-who-isnt?si=130728f1ee95408495d54c9000b01456&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 94 – Patience With A Purpose: The Helia Capital Story <br /> <br /> </strong> With Sebastien Koechli, Managing Director, Helia Capital </td> <td>Today’s guest is Sebastien Koechli of Helia Capital, a family office that provides “patient capital” to businesses transitioning out of their entrepreneurial phase. As a purpose-driven investor, Helia looks beyond short-term profit, making minority or majority investments (as appropriate) in businesses with long-term potential and aligned social values. While current market conditions are challenging, Sebastien reports that internally-funded Helia is continuing to find good investment opportunities. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/5JD5VLEdFJHyTGU64kfunO?si=2-eqQFIkRIqsakiVEKmGLw" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-94-patience-with-a-purpose-the-helia-capital-story/id1475781337?i=1000626328542" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-94-patience-with-a-purpose-the-helia-capital-story?si=03df30963c814a348b703ffd9cdbdfe8&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 93 – Search, Sale, C-Suite: A Successful Searcher Sells But Doesn’t Exit <br /> <br /> </strong> With Matthew Hooper, CEO of Hometurf Lawn Care </td> <td>In this podcast, Mario speaks with Matthew Hooper, CEO of Hometurf Lawn Care, about his journey from searcher to owner to seller and now CEO of a mid-sized regional home services business. Matthew talks about the search process, about entering a sector that was new to him (in which a strong relationship with the seller was critical) and about his subsequent decision to sell the business and continue as CEO as it becomes part of a larger home services group. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0JDY5M9OOhFikyuHJijlhB?si=NxdoyYruQNOXFtwOQdOxHw" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-93-search-sale-c-suite-a-successful/id1475781337?i=1000624767165" target="_blank">Apple Podcasts</a> (iTunes) | <a href="https://soundcloud.com/user-685358992/episode-93-search-sale-c-suite-a-successful-searcher-sells-but-doesnt-exit?si=69bd7e4639b24fc29eb46f2813931b06&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 92 – An Insider’s Guide to the Western Canadian Midmarket <br /> <br /> </strong> With Grant Wallace, Partner, Relay Transition Partners, Vancouver, B.C. </td> <td>Mario’s guest today is Grant Wallace of Vancouver-based Relay Transition Partners, an advisory firm serving midmarket businesses in western Canada. Grant shares his insights into the British Columbia and Alberta markets, in which deals tend on average to be slightly smaller than is typical in Ontario and Quebec. Investors that are comfortable in the $5-30 million market niche will find many outstanding prospects in tech, energy, manufacturing and distribution, among other sectors. PE funds tend to focus on the upper end of this range, while the lower end is attracting intense interest from search funds. Deal flow has slowed slightly but remains healthy heading into Q3 of 2023. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3n8hcLDfAJOI3HdwlH0zCg?si=wnlBToqRSo6YPThFsk5fhQ" target="_blank">Spotify </a>|<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-92-an-insiders-guide-to-the-western/id1475781337?i=1000623317489" target="_blank"> Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-92-an-insiders-guide-to-the-western-canadian-midmarket-1?si=7a39ad027d7544b497de8c6c112fb8c1&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 91 – HVAC & Plumbing Maintenance: Still a Hot Sector for Acquirors? <br /> <br /> </strong> With Jody Law and Brent Timmerman, co-CEOs of Pacific West Mechanical, Vancouver, B.C. </td> <td>Mario’s guests, Brent Timmerman and Jody Law, are co-CEOs of Pacific West Mechanical, a British Columbia company that provides HVAC and plumbing maintenance services to high-rise buildings, including condominium towers. Through their investment business, Gazelle Capital, Jody and Brent acquired Pacific West after a year-long partnered search and are now in their second year of operating the business. They discuss the attractive features of this sector – which include significant recession resistance – and their thoughts about generating further consolidation via M&A. In their view, the recent surge in interest in HVAC and plumbing businesses is affecting seller expectations but, at the same time, is not showing any signs of slowing down. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4A56MOfkrkw25yLKD7UMP4?si=F5mKjr7QSuGmMkg9CQp_0Q" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-91-hvac-plumbing-maintenance-still-a-hot/id1475781337?i=1000621763478" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-91-hvac-plumbing-maintenance-still-a-hot-sector-for-acquirors?si=c1d2d197523e48daafad7058b0d750b7&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 90 – NADF: A True Innovator in Indigenous Investment <br /> <br /> </strong> With Brian Davey, CEO of NADF, Thunder Bay, Ontario </td> <td>Joining Mario today is Brian Davey, CEO of NADF (Nishnawbe Aski Development Fund), a lender to Indigenous entrepreneurs across Northern Ontario. With over $50 million successfully disbursed to date, NADF is planning to take the next step: creating an investment fund that will leverage its deep understanding of Indigenous communities and their needs. In Brian’s view, infrastructure – particularly roads, transmission lines and housing – is where many of the region’s best opportunities lie. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3l7Buii4A7XKtLxQlJcRDb?si=DmluZXUkSLu_J6GdPvcwGQ" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-90-nadf-a-true-innovator-in-indigenous-investment/id1475781337?i=1000621022615" target="_blank"> Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-90-nadf-a-true-innovator-in-indigenous-investment?si=f5b94db0184841b79c425c49b8cfeeb0&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 89 – Private Debt: How It Works and Why It’s A Growing Presence in Canada <br /> <br /> </strong> With Brandon Lalonde, Associate, FrontWell Capital Partners </td> <td>Mario’s guest on this edition of the podcast, Brandon Lalonde of FrontWell Capital Partners, discusses FrontWell’s emergence as a key facilitator of private debt. Equally able to participate alone or in a syndicate, FrontWell lends against assets or cash flow in transition situations where a fundamentally strong business is in a capital-intensive growth phase or re-positioning after an adverse event. Current economic uncertainty is bringing this form of lending, which has been uncommon in Canada, to the fore, as interest rate pressure causes Canada’s bank lenders to tighten their lending criteria. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4LEUtUnCahDuX2C7Gcx9Xx?si=grKQbcHiQQ--fIx56ETMBQ" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-89-private-debt-how-it-works-and-why-its/id1475781337?i=1000619557928" target="_blank"> Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-89-private-debt-how-it-works-and-why-its-a-growing-presence-in-canada?si=eadf38af881f473bbf95f9d9983793dc&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 88 – The Midmarket at Mid-Year: How 2023 Is Shaping Up <br /> <br /> </strong> With Jordan Fish, Partner, Blair Franklin Capital Partners </td> <td>Today’s podcast guest is Jordan Fish of Blair Franklin, an M&A advisory practice with 20 years of Canadian midmarket experience. He and Mario discuss the state of the market at the midway mark of 2023, as buyers focus on higher quality assets and take a more cautious approach that is leading to extended due diligence processes. Sectors discussed include financial services, which continues to see significant deal flow, and technology, where disciplined companies with good cash flow are attracting the most attention. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6DsMEXQA6JEeidtjYSRKT8?si=sQd0IFAAQxi6HnAPLvYt3w" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-88-the-midmarket-at-mid-year-how-2023-is-shaping-up/id1475781337?i=1000618757003" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-88-the-midmarket-at-mid-year-how-2023-is-shaping-up?si=19ef96f1847e45bc835f81f41c24027a&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 87 – Aiming “Low”: A Private Equity Firm Finds Value in Smaller Businesses <br /> <br /> </strong> With Matthew Burpee, Managing Director, Kepler Capital Corp. </td> <td>Mario Nigro speaks with Matthew Burpee of Kepler Capital, a Canadian firm focused on the lower end of the North American midmarket (typically under $3 million EBITDA/cash flow). Often overlooked by investors, these businesses offer many opportunities, and Matthew shares Kepler’s strategy of long-term collaboration and investment in outstanding enterprises that are “small” only because their market niche or geographic region is small. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/7ndJaiakO39307c4Z2YSpp?si=8hJhmd_kSHyycWV5TE-2DQ" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-87-aiming-low-a-private-equity-firm-finds/id1475781337?i=1000617977961" target="_blank"> Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-87-aiming-low-a-private-equity-firm-finds-value-in-smaller-businesses?si=c4e6d20db5c748c1932d84af7134e771&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 86 – Employee Ownership Trusts: Will Canada’s Version Succeed? <br /> <br /> </strong> With Michael Decicco, Partner, Stikeman Elliott LLP </td> <td>Mario’s guest on this podcast, Stikeman Elliott M&A partner Michael Decicco, has been closely tracking the development of the Employee Ownership Trust concept in Canada, which is being accelerated by changes to certain federal laws. Under the current proposal, business owners who sell to EOTs would enjoy some modest capital gains tax advantages. However, as Mike and Mario discuss, it is an open question whether these will be sufficient to make EOTs a popular exit alternative. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0Ilhl7rkQx2AAKzOIlTGyG?si=erR5D5hQRAmyN05VaIB_vw" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-86-employee-ownership-trusts-will-canadas-version/id1475781337?i=1000617149763" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-86-employee-ownership-trusts-will-canadas-version-succeed?si=7b21c01aa1fb4909ad575762fcfba833&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 85 – Canada’s Midmarket: Will Resilience Become Resurgence? <br /> <br /> </strong> With Colin Walker and Stephen Ng, Managing Directors, Crosbie & Co. </td> <td>Today’s podcast guests are Colin Walker and Stephen Ng of Crosbie & Co., a midmarket M&A leader since the 1980s. While current market conditions can be challenging, Stephen and Colin continue to see significant deal flow driven by baby-boomer retirements and opportunistic acquisition strategies focused on high-quality businesses. As the “new normal” of higher interest rates, tighter diligence and lender caution sinks in, they are optimistic that the market will strengthen in the second half of 2023. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0foXgapWAqdw1IY3348HGb?si=OrZ8mn5pRMK52kp3pLkn0g" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-85-canadas-midmarket-will-resilience-become/id1475781337?i=1000616149655" target="_blank"> Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-85-canadas-midmarket-will-resilience-become-resurgence?si=09889ddbe3b54844b951de0cd8695c25&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 84 – The “Human Side” of M&A: Employment Issues in Transactional Contexts <br /> <br /> </strong> With Khalfan Khalfan, Partner in the Employment & Labour Group at Stikeman Elliott LLP </td> <td>Mario’s guest today is Stikeman Elliott’s Khalfan Khalfan, an expert in employment-related transactional issues. Topics discussed include, among others, new statutory curbs on the enforceability of employment non-competes, Canadian approaches to post-closing retention of vendor management, independent contractor mischaracterization issues and Competition Act prohibitions on no-poach agreements and wage-fixing between unrelated entities. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/7bxp779d3bTDNGUljMR1tc?si=_lP3CWO3QbyfLDCfnYT-2A" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-84-the-human-side-of-m-a-employment/id1475781337?i=1000615296073" target="_blank"> Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-84-the-human-side-of-ma-employment-issues-in-transactional-contexts?si=651c6488be8e4110b062f89014505ecd&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 83 – M&A in 2023: What’s Behind the Midmarket’s Resilience? <br /> <br /> </strong>With Eric Castonguay, National Leader, PwC Corporate Finance Group </td> <td>Mario’s guest this week, Eric Castonguay of PwC’s Corporate Finance Group, discusses the resilience of midmarket M&A in Canada, which continues to be driven by the aging of the baby boomers, Covid burnout and a sense among corporate leaders that long-term survival requires transformative change. Private equity’s need to deploy capital is also a factor. Even so, 2023 is in many respects a buyer’s market, with today’s typical deal being more structured, more strongly diligenced and slower to close than was the case in the frenzy of 2021. </td> <td><a href="https://open.spotify.com/episode/5DCG0vl1FvTLZpdfrAwTaO?si=CA29C799QxOIlxodxKiMQA">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/ca/podcast/episode-83-m-a-in-2023-whats-behind-the/id1475781337?i=1000614520631" target="_blank">Apple Podcasts </a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-83-ma-in-2023-whats-behind-the-midmarkets-resilience?si=2ce99ef02668459bb7bac2cf9a56c430&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 82 – M&A in Challenging Times: What Restructuring Options Bring to the Table <br /> <br /> </strong> With Elizabeth Pillon, Partner and Head of the Toronto Restructuring & Insolvency Group, Stikeman Elliott LLP </td> <td>In this podcast, Mario speaks with Liz Pillon, leader of the restructuring practice in Stikeman Elliott’s Toronto office, about the role that restructuring professionals are playing in today’s M&A market. In 2023, Liz has noted a considerable increase in formal insolvency proceedings after a period in which lenders had been hesitant to initiate them. If involved early enough, restructuring lawyers can often help businesses find out-of-court alternatives, including by connecting them with investors who specialize in distressed assets. Liz and her team are currently seeing extensive “distressed M&A” interest in sectors such as real estate, distribution/manufacturing and pharma, among others. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3Sn2NDWT1ixt36HxcLWNUK?si=xVEGf5qfTbW_MbRIDQ0Q-A" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-82-m-a-in-challenging-times-what/id1475781337?i=1000613528061" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-82-ma-in-challenging-times-what-restructuring-options-bring-to-the-table?si=cfc1b3ab4f2e42929c917e68abc6a8d9&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 81 – State of the Midmarket: Spring 2023 <br /> <br /> </strong> With John Caggianiello, Managing Director, Corporate Finance Group, MNP </td> <td>Today’s guest, midmarket transactional diligence specialist John Caggianiello, shares his “in the trenches” view of the current state of Canada’s M&A market. After a noticeable slow-down in Q1 2023 that particularly affected tech deals and clinical (e.g. dental) roll-ups, activity seems to have increased in March and April. However, the deals that are getting done are proceeding more slowly as buyers, concerned about a possible recession, insist on up-to-the-minute numbers and greater clarity with respect to soft adjustments. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/5uyrzjCxBukd9W9lC5a6pK?si=rwJlLCFmT1yDiaQJQPXuDA" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-81-state-of-the-midmarket-spring-2023/id1475781337?i=1000612637037" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-81-state-of-the-midmarket-spring-2023?si=ae9111c029c140eeb5e42edb4d422f98&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 80 – Entrepreneurship as a Relationship Business: Carma’s Growth Story <br /> <br /> </strong> With Michael Platt, CEO of Carma Corp. </td> <td>Mario’s guest this week is Michael Platt, CEO of Carma Corp. Based in Lindsay, Ont., Carma provides sub-metering services, generating data on utility usage in residential buildings and commercial enterprises. Michael attributes his success in breaking into this competitive industry to his efforts, as a self-funded searcher, to build trust with the company’s owner. He has applied the same relationship-building philosophy to the additional acquisitions Carma has made as it has expanded both geographically and in terms of its service offerings. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0Sca5anKI9w6vsDl6Ll8Ua?si=IG6vFv_fQwCbuhxSyntUog" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-80-entrepreneurship-as-a-relationship/id1475781337?i=1000611740732" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-80-entrepreneurship-as-a-relationship-business-carmas-growth-story?si=b1e264a9d409414892530766650414a2&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 79 – When It’s Finally Time: Helping Owner-Operators Sell <br /> <br /> </strong> With Raymond Gingras, President and Founder of Coldwater Corporate Finance Inc. </td> <td>Joining Mario for this podcast is Ray Gingras of Coldwater Corporate Finance, who shares some of his experiences supporting owner-operators through the arduous and usually unfamiliar process of selling their businesses. While the economy may generally be slowing, Ray and his firm continue to be very busy as strategic buyers prioritize locking up the long-term value that Coldwater’s midmarket clients are able to provide. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/7KAC2PVC1mFfRRR6xloslm?si=kljKB1WzQVinJ7di3X4YGQ" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-79-when-its-finally-time-helping-owner-operators/id1475781337?i=1000610881924" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-79-when-its-finally-time-helping-owner-operators-sell?si=a7e4596f2fb1495aa78fb934bd89cfde&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 78 – Searching for Searchers: Perspectives of a Leading Search Fund Partner <br /> <br /> </strong>With Lawrence J. Dunn III, Partner, Endurance Search Partners</td> <td>Joining Mario Nigro is Larry Dunn of Endurance Search Partners, which has supported over 250 searchers across the U.S. and Canada since 2009. Larry and Mario discuss the current state of the market in the U.S. and Canada as well as the characteristics that Endurance looks for in successful searchers. In Larry’s view, the search sector is positioned for continued growth, even in challenging economic times. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6DOTPnRJ7oaM9R1rzI8C1k?si=5SIdGu-TQu6blujvvg8DCA" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-78-searching-for-searchers-perspectives-of/id1475781337?i=1000609931639" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-78-searching-for-searchers-perspectives-of-a-leading-search-fund-partner?si=9d353c1a6b8249b0b9d69de3e2be0815&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong>Episode 77 – Time to Sell: A Lifelong Entrepreneur Reflects on Her M&A Experience <br /> <br /> </strong>With Sabine Veit, Founder and Former CEO, Bäckerhaus Veit Ltd.</td> <td>In this podcast, Mario speaks with Sabine Veit about selling the frozen bread business she had built from scratch over three decades. The success of the business, which required infusions of capital as it grew, led to the realization that it was time to sell, and Sabine notes the critical importance of specialized advisors in what was to her the very unfamiliar world of M&A. By selling well before retirement age, Sabine has been able to move on to a new venture that has rekindled her entrepreneurial spirit. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0pJxKFz1zEpNY7sSDkoeAk?si=f3XFXT2LQZGyoiKXY64lig" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-77-time-to-sell-a-lifelong-entrepreneur/id1475781337?i=1000607714011" target="_blank">Apple Podcasts </a>(iTunes) |<a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-77-time-to-sell-a-lifelong-entrepreneur-reflects-on-her-ma-experience?si=22751ee706af4a3483d4b0d5899b22e1&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank"> SoundCloud</a></td> </tr> <tr> <td><strong>Episode 76 – Canadian Companies in the World: The View from Ottawa <br /> <br /> </strong>With Hon. Mary Ng, Minister of International Trade, Export Promotion, Small Business and Economic Development in the Government of Canada</td> <td>This week’s podcast looks at the potential of Canada’s corporate midmarket from the perspective of government. Mario’s guest, the Hon. Mary Ng, is Canada’s Minister of International Trade, Export Promotion, Small Business and Economic Development. Minister Ng and Mario speak about federal programs to help businesses expand internationally, initiatives that promote women entrepreneurs, opportunities surrounding the transition to the green economy and our trading relationships with the U.S., Europe and Asia-Pacific. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1hglO3m88Ll2RI5A6KpobN?si=588h1IlCStGyNwGmooZYOQ" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-76-canadian-companies-in-the-world-the-view/id1475781337?i=1000606600546" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-76-canadian-companies-in-the-world-the-view-from-ottawa?si=2bb37b2993e147f3b067a37e75bce4eb&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong>Episode 75: Insights of a Global Search Fund Veteran</strong> <br /> <br /> With Jan Simon, Managing Partner, Vonzeo Capital</td> <td>This edition of the podcast features Vancouver-based Jan Simon, co-founder and managing partner of Vonzeo Capital, an international search fund investor. With a background as an investment banker and academic, Jan was involved in some of the earliest searches outside the U.S. and has been a key player in the industry’s rapid growth. Among other insights, he notes the importance of board guidance as successful searchers transition to CEO roles and discusses some of the challenges specific to self-funded searches. Looking ahead, he suggests that search funds may have advantages in challenging economic times and forecasts continued growth for the search fund model.</td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4qPWMAbCuOzMIlP11Bqa57?si=ul7InsqOQC2gjTsPbzkvWg" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-75-insights-of-a-global-search-fund-veteran/id1475781337?i=1000605569812" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-75-insights-of-a-global-search-fund-veteran?si=66e5af3c8b8a44d1b45a8e78b90e5ab2&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong>Episode 74 – Current Market Challenges: Thoughts from a Restructuring Expert</strong> <br /> <br /> With Michelle Pickett, Partner in the Deals Practice of PwC</td> <td>Today’s guest, Michelle Pickett, is a PwC partner in Toronto with a restructuring focus. She and Mario discuss the challenges facing companies in the current market environment, from overbought inventory to rapidly rising debt service costs. Avoiding a full-scale restructuring often depends on a company’s commitment to addressing issues of this type as soon as they appear, before major liquidity problems emerge. Finally, while Michelle is already noticing a rise in distressed M&A, investors do not appear to be losing interest in good midmarket opportunities.</td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1WHHU83Ab8uItHgyF5kAMS?si=ZVdaDDDATPe_jRLFBDPlQA" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-74-current-market-challenges-thoughts-from/id1475781337?i=1000604515883" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-74-current-market-challenges-thoughts-from-a-restructuring-expert?si=05b3bee5d526410f86337f3d4123b41a&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> </tr> <tr> <td><strong>Episode 73 – Growth Equity: What U.S. Capital Sees in Canada</strong> <br /> <br /> With Leon Chen, Managing Partner, and Robert Shilton, Managing Director, Kayne Anderson Capital Advisors, L.P.</td> <td>Mario is joined today by Leon Chen and Rob Shilton, members of Kayne’s Los Angeles office. Rob and Leon, whose special focus is on growth equity for tech and tech-enabled businesses, describe the efficiency and resilience that are characteristic of the Canadian companies that make up a large part of their portfolio. They and Mario also discuss the market’s recent shift away from “grow at all costs” to a profitability focus and the opportunities that are emerging as we move into 2023.</td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1eJWD1TatrOVhoVtD3GENH?si=144522fdaff642af" target="_blank">Spotify |</a><a rel="noopener noreferrer" href="https://podcasts.apple.com/ca/podcast/episode-73-growth-equity-what-u-s-capital-sees-in-canada/id1475781337?i=1000603342839" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-73-growth-equity-what-us-capital-sees-in-canada?si=7aa21c42d34d460d8aa7e5781b1aaef7&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><strong> Episode 72 – Patience: One of the Keys to Search Fund Success</strong> <br /> <br /> With Yaseen Ali, CEO, Ontario Home Health</td> <td>Today’s podcast guest is Yas Ali, CEO of Ontario Home Health, a provider of medical devices that allow those with chronic illnesses to live comfortably at home. After deciding that he wanted to own his own business, Yas entered into a self-funded search process, casting his net wide and looking at hundreds of possibilities before discovering Ontario Home Health. He and host Mario Nigro discuss his diligent and patient search and how search funds are creating a bright future for midmarket M&A in Canada.</td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/7Asv0NveGUfX2fDOg9RBg8?si=8S0oScDFScekXjOAAsECFA" target="_blank">Spotify |</a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-72-patience-one-of-the-keys-to-search-fund-success/id1475781337?i=1000602556227" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-72-patience-one-of-the-keys-to-search-fund-success?si=491b5784268944c299d2bccd026833cb&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> </tr> <tr> <td><strong> Episode 71 – Selling to Private Equity: Once the Exception, Now the Rule</strong> <br /> <br /> With Brian Faughnan, Partner, Osprey Capital</td> <td>Mario’s guest in this podcast is Brian Faughnan of Osprey Capital, a leading sell-side advisor in the Canadian midmarket. The focus of their discussion is the growing presence and acceptance of private equity buyers in Canada over the past 10-15 years. In Brian’s experience, private equity firms, which in the midmarket still tend to be U.S.-based, now often comprise 80-90% of the buyer pool. As many of the firms strongly prefer ongoing co-ownership, sellers are now able to look at private equity investment as a growth strategy as much as an exit strategy. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6hWLVI1ivBio2fFeJ8vzTY?si=x3sCDkLlReSoXUKN9LlHPQ" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-71-selling-to-private-equity-once-the/id1475781337?i=1000601280957" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-71-selling-to-private-equity-once-the-exception-now-the-rule?si=213c49c568204f448a76efb83ba15f6e&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 70 – Cardata: A Search Fund Success Story </strong> <br /> <br /> With Michael Levine and Sheret Ross, co-CEOs of Cardata</td> <td>Sheret Ross and Michael Levine of Cardata join Mario to discuss their journey from MBA students to searchers to successful entrepreneurs. A diligent and proactive search process led Sheret and Michael to Cardata, a business with an efficient solution for companies that reimburse employees for personal vehicle use. They discuss how they built upon Cardata’s existing strengths by expanding its market and focusing its messaging and look ahead to the challenges of a changing economic environment. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/575AncY7QWaXWVgTVyAvMW?si=bHZlJ3gGRK-Ud6Dyb9XLyg" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-70-cardata-a-search-fund-success-story/id1475781337?i=1000600000805" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-70-sheret-ross-michael-levine?si=cfb87091182d4df986df115b339be312&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 69 – The Resilience of Midmarket M&A: A Banker’s Perspective </strong> <br /> <br /> With Michael Denham, Vice-Chairman, Commercial and Financial Markets, National Bank of Canada</td> <td>Michael Denham of National Bank joins Mario in this edition of the podcast to discuss the current state of M&A activity in Canada. The midmarket continues to be busy in 2023, as companies look for productivity-enhancing acquisitions that will enable them to thrive in the post-pandemic world. At the same time, labour shortages continue to pose challenges and may play a part in driving up interest rates later this year, although Michael is hopeful that rate stability and stronger growth will return in 2024. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0vFUkaejlhoLJpgWjiJa0c?si=9kNki5XPTWOjtB238RZFGg" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-69-the-resilience-of-midmarket-m/id1475781337?i=1000598902758" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-69-the-resilience-of-midmarket-ma-a-bankers-perspective?si=ed10df075a0a4956ace69e3944740b81&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 68 - More Than Food and Fashion: Canadian-Italian Trade Offers Opportunities in Many Sectors </strong> <br /> <br /> With Corrado Paina, Executive Director of the Italian Chamber of Commerce of Ontario</td> <td>Mario’s special guest on this podcast, Corrado Paina, has promoted Canadian-Italian trade for many years as Executive Director of the Italian Chamber of Commerce of Ontario. He and Mario look at how free trade has enhanced the ability of small and mid-sized Canadian and Italian companies, from a wide variety of sectors, to access each other’s markets. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3kxN8NCLJmHaqfAidbLfk8?si=fgvYZC--QF2CYlXBUVfXOg" target="_blank">Spotify </a>|<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-68-more-than-food-and-fashion-canadian/id1475781337?i=1000597730682" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-68-more-than-food-and-fashion-canadian-italian-trade-offers-opportunities-in-many-sectors?si=f0f5c4faafe24cbda2981459159490d3&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 67: Filling the Growth Equity Gap for Late-stage Companies </strong> <br /> <br /> With Sanjiv Samant, Managing Partner, Round13 Capital</td> <td>Mario’s guest is Sanjiv Samant, manager of the Round13 Growth Fund at Toronto-based Round13 Capital. Sanjiv’s fund provides growth equity, typically in the range of $15-25 million, to companies that are approaching a liquidity event. Sanjiv and Round13 established this fund to provide the specific supports that companies need at this important stage – filling a gap in the Canadian market. Sanjiv and Mario also discuss the state of the deal market heading into 2023. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1HzDwsduDncsiHLU5rEQYU?si=cJNZCQU_QMmnJbuKp-ICPA" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-67-filling-the-growth-equity-gap-for-late/id1475781337?i=1000596761817" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-67-filling-the-growth-equity-gap-for-late-stage-companies?si=0004688043f440d296b61259fbe11f78&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 66 – Between Friends: New Directions in German-Canadian M&A </strong> <br /> <br /> With Eric Bremermann, Partner, Stikeman Elliott LLP</td> <td>In this podcast, Mario Nigro speaks with Stikeman Elliott’s Eric Bremermann, a specialist in acquisitions involving Canadian and European businesses – particularly those from German-speaking countries. In the past year, Eric has observed a surge in interest in Canadian critical mineral sector as European firms look to low-risk, “friendly” sources of key supply chain components, including lithium. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0w4Ntuzjvn3gUuER1xrAp7?si=RjznpBkDT2-p_7sqLrqyrg" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-66-between-friends-new-directions-in-german/id1475781337?i=1000595481034" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-66-between-friends-new-directions-in-german-canadian-ma?si=f3da2ae7dc03455b995ce5f81119c525&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 65 – How does the Canadian private equity market compare to the U.S. market and what's coming? </strong> <br /> <br /> With Shez Bandukwala, Managing Director in KPMG’s Corporate Finance Group in Toronto</td> <td>Joining Mario is Shez Bandukwala, Managing Director of KPMG’s Corporate Finance Group in Toronto. Shez recently brought his 30-years of investment banking experience to the Canadian private equity market. He notes the differences in the Canadian vs the U.S. market with the Canadian private equity market being, as yet much smaller, somewhat less efficient, more conservative in overall leverage and, generally, a less specialized market. He discusses strategic versus private equity buyers and cultural fit. He foresees that, despite a looming recession, the middle market will continue to find new opportunities in which to invest the substantial capital available. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/7r4jPdyog94j3RpNx5ZLCq?si=JYbIY82CTIaJBSqmaYdrVg" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/ep-65-how-does-the-canadian-private-equity-market/id1475781337?i=1000594042079" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/ep-65-how-does-the-canadian-private-equity-market-compare-to-the-us-market-and-whats-coming?si=2a2b43473c88442b85a8a5580ce25ded&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 64 – Mixed Signals: A Midmarket Leader Looks Ahead to 2023 </strong> <br /> <br /> With Bruno Suppa, CEO of BDO Canada</td> <td>In this podcast, Mario is joined by Bruno Suppa, CEO of BDO Canada, an organization with a strong midmarket focus. While not downplaying the possibility of recession in 2023, Bruno foresees considerable resilience in Canadian midmarket M&A, thanks in part to factors such as the favourable U.S. exchange rate and private equity’s continuing capacity, in all economic conditions, to unlock value in small and medium businesses. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/5G6NgvxFRRCedrBl7UPU7E?si=PiFEo-lDTYu_a25F6iMSmg" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-64-mixed-signals-a-midmarket-leader-looks/id1475781337?i=1000592707804" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-64-mixed-signals-a-midmarket-leader-looks-ahead-to-2023?si=c16ad2a937de421db8bc5e0fc2a922dd&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 63 – The Art of the Midmarket Deal: For Sellers, It’s About More Than Money </strong> <br /> <br /> With Michele Middlemore, Managing Director of MC2 Business Advisors Inc.</td> <td>In this podcast, Mario Nigro speaks with Michele Middlemore, Managing Director of MC2 Business Advisors Inc., about the importance of understanding what truly matters to the midmarket seller. Preservation of corporate philosophy, retention of long-term employees and other non-monetary considerations are often top of mind for long-term operators entering the mysterious world of M&A for the first time. Michele’s experience has been that getting to know selling entrepreneurs as people can often be the difference between transactional success and failure. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3fS7owiatRYJwqsjF9cS22?si=pvydEhk4Sgi3fKrCNdznaA" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-63-the-art-of-the-midmarket-deal-for/id1475781337?i=1000590323919" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-63-the-art-of-the-midmarket-deal-for-sellers-its-about-more-than-money?si=d608b09148f34df3ab3729150c000ec6&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 62 – Success After Success: Searching for a Second Career Challenge </strong> <br /> <br /> With Anne Ristic, Co-owner and CEO of Agency Employment Services</td> <td>Joining Mario is Anne Ristic, CEO of Agency Employment Services (AES). Anne, a longtime partner of Stikeman Elliott, recounts her decision to embark on a new career as of 2022, and how the search fund model allowed her to find a perfect fit in the form of AES, a growing HR back office business. She and Mario also discuss some of the challenges faced by a first-time CEO as well as the current state of the human resources marketplace. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1VStU8dXeLWvkKh7h7LRcN?si=oIwDFruBRiOzxETWeNflLg" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-62-success-after-success-searching-for-a/id1475781337?i=1000589434601" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-62-success-after-success-searching-for-a-second-career-challenge?si=dae34985bdbf4674aae76218ffd5ba83&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 61 – The Right People in the Right Places: Trends in the Search for Talent </strong> <br /> <br /> With Ian Brenner, Partner in the Interim Management and Executive Search Practice at Farber Group</td> <td>Human capital is the subject of today’s podcast, as Mario Nigro is joined by Ian Brenner of Farber Group in Toronto. The human side of business has taken centre stage in the past few years as companies struggle to retain talent at every level. The pandemic focused corporate attention on employee satisfaction and corporate culture, while, in a new development, the possibility of recession is putting a premium on executive-level talent with experience in past downturns. Join us for Ian’s insights into what may lie ahead. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1nwSgB3bSGcPZyVpRyEzek?si=qqjupXvhQMOv4pmprR2I5g" target="_blank">Spotify </a>|<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-61-the-right-people-in-the-right-places-trends/id1475781337?i=1000588360864" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-61-the-right-people-in-the-right-places-trends-in-the-search-for-talent?si=d4916360fe624b68b5837d3b20a64096&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 60 – Proceeding With Caution: What’s Next for Midmarket M&A in Canada </strong> <br /> <br /> With Ryan Farkas, Managing Director, M&A and Capital Markets, BDO Canada</td> <td>In this episode, Mario Nigro speaks with Ryan Farkas of BDO Canada. Ryan focuses on deals in the $10m-150m range across all industries, giving him a broad perspective on the state of the market at a time of rising interest rates, inflation and instability. While deal flow remains relatively robust, transactions are more challenging to complete as buyers take more time to understand the market they are buying into. Nevertheless, Ryan’s view is that the demographic drivers of midmarket M&A are not going away, even if multiples will inevitably come down from their pandemic-era peaks. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/54xl6p2wqccaCVEvrDGfHD?si=A-TFGedeRsK1sg91_xLD-A" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-60-proceeding-with-caution-whats-next-for/id1475781337?i=1000585783496" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-60-proceeding-with-caution-whats-next-for-midmarket-ma-in-canada?si=339eaa16f83c4c7cb1f68eae7fda3243&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong> Episode 59 – A True Middle Market Guy: From KPMG, Nomura And BMO To National Bank </strong> <br /> <br /> With Alex Parker, Managing Director and Head of PE, Forum Asset Management</td> <td>Mario Nigro welcomes Alex Parker, co-head managing director of the National Client M&A Group at National Bank of Canada. Alex shares how National Bank’s integrated team grows its business outside of Québec while maintaining its focus on family and entrepreneur led businesses. Alex and Mario look to how different sectors are responding to recent market dynamics and Alex gives his thoughts on the “Covid fatigue” factor. Although Alex continues to see a “very robust market”, he foresees a slowdown coming. </td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1zxl9efsb2Ihb7AUJTFmIQ?si=GjaFaZTER7qmvXVSdMNdVw" target="_blank">Spotify </a>|<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-59-a-true-middle-market-guy-from-kpmg/id1475781337?i=1000584947623" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-59-a-true-middle-market-guy-from-kpmg-nomura-and-bmo-to-national-bank?si=163264f1f29c4ae39471df991ea26ce4&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong>Episode 58: How One Firm's Unique Investment Strategy Creates Value and Growth for Small Businesses</strong> <br /> <br /> With Trish Higgins, Co-Founder and Partner, Chenmark</td> <td>Mario Nigro’s guest in this episode is Trish Higgins, Co-Founder and Partner of Chenmark. Chenmark is a Maine investment firm with a goal of acquiring, growing and holding on to small-to-medium sized businesses. Mario and Trish discuss Chenmark’s long-term investment perspective as it looks for steady businesses with a durable demand for their goods or services and a history of profitability that generates cash flows. Despite current uncertainty in the market linked to inflation and the possibility of reduced demand, Trish still sees lots of opportunity out there from a deal perspective.</td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/7o8yAAOIZX7X616CFjCdw7?si=Qf0Mn7ooTdObk4uNpsm4Sw" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-58-how-one-firms-unique-investment-strategy/id1475781337?i=1000583302902" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-58-how-one-firms-unique-investment-strategy-creates-value-and-growth-for-small-businesses?si=dd09a016ca9c4da6bdca72b317681130&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong>Episode 57: Private Equity Investments in Midmarket Infrastructure Businesses </strong> <br /> <br /> With Duncan Ramage, Partner and Head of PE, Forum Asset Management</td> <td>Mario’s guest in this episode is Duncan Ramage, Head of Private Equity at Toronto-based Forum Asset Management. Duncan oversees a Forum team that invests in smaller and midmarket businesses in the infrastructure space, broadly construed to include everything from HVAC to broadband providers to outdoor billboards. Duncan discusses how Forum assesses and structures investments and how the market is shaping up as inflation and interest rates rise.</td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/16O0BfDYf8WKp04V0Lj2h7?si=SYdzTtqiShG7fhj86Sqzdw" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-57-private-equity-investments-in-midmarket/id1475781337?i=1000582533055" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-57-private-equity-investments-in-midmarket-infrastructure-businesses?si=5ec5e4e38b5949c592fc387df83ab46b&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong>Episode 56 – Novacap: A Canadian Private Equity Leader Since 1981</strong> <br /> <br /> With Marc Paiement, Senior Partner, Novacap</td> <td>Marc Paiement joins Mario Nigro to discuss recent developments at Novacap, one of Canada’s largest and oldest PE firms. Working from the firm’s Toronto office, Marc leverages his own extensive experience as an entrepreneur in developing growth strategies for Novacap’s businesses, which come from a wide range of sectors. Looking ahead, Marc is seeing steady deal flow even as the pandemic-era exuberance dies down.</td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/28xlvKiIYeJ1607orkcNkK?si=-VoCz6KCTEO2bwMSdY5QxQ" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-56-novacap-a-canadian-private-equity-leader/id1475781337?i=1000581804357" target="_blank">Apple Podcasts </a><a href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) |<a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-56-novacap-a-canadian-private-equity-leader-since-1981?si=a494d3c78fc64cf6a0ec513907c1c795&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank"> SoundCloud</a> </td> </tr> <tr> <td><strong>Episode 55: - Taking Successful Businesses to the Next Level: A Private Equity Approach that Partners with Committed Entrepreneurs</strong> <br /> <br /> With Justin Catalano, Managing Director and Group Head of Private Equity, Fengate Asset Management</td> <td>In this podcast, Mario Nigro speaks with Justin Catalano, head of the PE group at Fengate Asset Management. Toronto-based Fengate partners with entrepreneurs, bringing capital and strategic expertise to help them grow their established businesses. Justin and Mario discuss Fengate’s recent work, the effect that economic uncertainty is having on deal flow, and how the market might look in the coming year.</td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6oeLS0f3ICQLVI2U6P699H?si=Q3Lje_I4Q76mYAZ5eMK2Mw" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-55-taking-businesses-to-the-next-level-a/id1475781337?i=1000580340766" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-55-taking-businesses-to-the-next-level-a-pe-approach-that-partners-with-entrepreneurs?si=d3c3ad096e4a4deda7d4ac5802b0ed99&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a> </td> </tr> <tr> <td><strong>Episode 54 – Successful Succession: Taking an HVAC Distribution Business Forward</strong> <br /> <br /> With Cameron Roblin and Philip Desrochers of Stratos Growth Partners</td> <td>Joining Mario in this podcast are Philip Desrochers and Cameron Roblin of Stratos Growth Partners, a search fund focused on small and mid-sized Canadian businesses looking for a tailored succession strategy. In addition to the Stratos story, Cameron and Philip discuss their acquisition of GLP Canada Inc., a distributor of HVAC products, and the renewed interest in HVAC that has resulted from the pandemic.</td> <td><a href="https://open.spotify.com/episode/5AWLGIYyVZ3fkIgnGy9gGW" title="Episode 54 - Successful Succession: Taking an HVAC Distribution Business Forward">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-54-successful-succession-taking-an-hvac/id1475781337?i=1000579596374" title="Episode 54 - Successful Succession: Taking an HVAC Distribution Business Forward">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-54-successful-succession-taking-an-hvac-distribution-business-forward" title="Episode 54 - Successful Succession: Taking an HVAC Distribution Business Forward">SoundCloud</a> </td> </tr> <tr> <td><span><strong>Episode 53 – Life Sciences and Healthcare: Making M&A Work in a Highly Regulated Environment <br /> </strong><br /> With Sara Zborovski, Partner at Stikeman Elliott LLP </span></td> <td><span>Mario’s guest for this podcast is Sara Zborovski, a partner at Stikeman Elliott and leader of the firm’s life sciences and healthcare regulatory practice. As Sara and Mario discuss, the recent surge in health sector M&A has shown the importance of expert regulatory guidance relating to everything from telemedicine and medical AI technology to the compliance aspects of roll-up acquisitions of professional practices. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3hqoIjv9uxluSNeKstXGeL?si=IARRSPALRTWwX_FE-pdwjQ" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-53-life-sciences-and-healthcare-making-m-a/id1475781337?i=1000578048458" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-53-life-sciences-and-healthcare-making-ma-work-in-a-highly-regulated-environment?si=f1816e03a91d4ef8b6d97330e8953937&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 52: What’s New in Midmarket M&A Tax Planning? <br /> </strong><br /> With Stephen Rupnarain, Partner and M&A Tax Services Leader, RSM Canada </span></td> <td><span>Mario’s guest in this episode is Stephen Rupnarain, leader of RSM Canada’s M&A Tax Services practice. Recent changes to Canadian tax laws have focused buyer and seller attention on transactional tax issues, notably depreciation. Despite the elimination of some traditional tax planning mechanisms, Stephen finds that it is still possible to achieve results that work for both sides – especially where sellers think through their tax issues well before the LOI. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6y3w7vLOR0a6aCgDQShecK?si=dOdlfzjkQP-wec1AcKOoLQ" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-52-whats-new-in-midmarket-m-a-tax-planning/id1475781337?i=1000577355476">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-52-whats-new-in-midmarket-ma-tax-planning?si=5730ab6e803e4e68bb649d9f52fa1c86&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 51 – Canada’s Midmarket and U.S. Private Equity: A Growing Partnership <br /> </strong><br /> With Stephanie Mooney, Director of Business Development for Canada and the US Pacific Northwest, Trivest Partners </span></td> <td><span>In this episode, Mario Nigro is joined by Stephanie Mooney of Trivest Partners, a Florida-based PE firm that focuses on family and founder-owned businesses. Trivest, which has been active in the Canadian midmarket for many years, has recently added funds that focus on smaller businesses and minority growth equity. Despite indications of an economic slowdown, Stephanie is continuing to see strong interest in M&A across the country. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/7A3ZKvD5mUUGM7q6kEHvKE?si=6NUH63OzR0SYc2oGKa7agw" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-51-canadas-midmarket-and-u-s-private-equity/id1475781337?i=1000576489535" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-51-canadas-midmarket-and-us-private-equity-a-growing-partnership?si=3c962c7fa07f45a3ba50d3ae5c870db6&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 50: A Different Path: How Search Funds Helped A Canadian Newcomer Find The Right Business Fit <br /> </strong><br /> With Piyush Kunnapallil, CEO of Ti Foods </span></td> <td><span>Mario Nigro is joined by Piyush Kunnapallil, CEO of Ti Foods, a GTA-based importer and distributor of Asian food brands. After developing his management skills at a multinational electronics firm, Piyush relocated to Canada where he found search funds were ready to help him achieve his goal of leading a midmarket business. He and Mario discuss the process that led to the transaction with Ti Foods, as well as Piyush’s plans for the business going forward. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1mXbXhiDk56czjKWpwyaUB?si=Enims_NHRWGVizqQ2eM9TA" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/ep-50-a-different-path-how-search-funds-helped/id1475781337?i=1000575040344" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-50-a-different-path-how-search-funds-helped-a-canadian-newcomer-find-the-right-business-fit?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 49 – After COVID: What’s Next for Industrial and Manufacturing Midmarket M&A? <br /> </strong><br /> With Sylvia Rasic, Partner and Senior Managing Director, M&A Group, Deloitte Canada </span></td> <td><span>Joining Mario Nigro for this podcast is Sylvia Rasic, Partner in Deloitte’s M&A Group in Toronto. Sylvia is a CPA with a broad transactional practice that often focuses on private companies in the manufacturing and industrial sectors. Expectations and valuations in areas such as logistics, packaging and building products have been strongly affected by COVID-19 and, as the economy slows, uncertainty about post-pandemic pricing is creating interesting challenges for successful deal completion. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/2Y0UDGwaw5hscU7PKzaTUZ?si=upu2ZGX3QZu7Wm44YlnRaw" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-49-after-covid-whats-next-for-industrial-and/id1475781337?i=1000571458323" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-49-after-covid-whats-next-for-industrial-and-manufacturing-midmarket-ma?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 48 – Selling the Business You’ve Built: A SAAS Entrepreneur Shares His Experiences <br /> </strong><br /> With Peyman Aleagha, Founder & CEO of WebsiteBox </span></td> <td><span> Today’s guest on the podcast is Peyman Aleagha, Founder & CEO of WebsiteBox. WebsiteBox developed and sold a popular and affordable website builder and CRM platform for real estate professionals. Mario and Peyman discuss the company’s history, from idea to success, and the key ingredients of a successful sale process: confidence, careful preparation, a clear vision and a trusted team of advisors. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/2FYa9aYHIhvCeBuJjS7NUm?si=4_gt6N3qQrSVvls61x33Ug" target="_blank">Spotify </a>|<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-48-selling-the-business-youve-built-a/id1475781337?i=1000570704494" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-48-selling-the-business-youve-built-a-saas-entrepreneur-shares-his-experiences?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 47 - Midmarket Private Debt as a Supplement to Bank Financing <br /> </strong><br /> With Jason Sellakumar, Director, First West Capital </span></td> <td><span>Joining Mario Nigro for this podcast is Jason Sellakumar of First West Capital, a junior capital provider with 20 portfolio companies at present. Mario and Jason discuss First West’s experiences as a cash lender to businesses in need of capital beyond what is available from bank lenders and look at how market uncertainty could generate new demand for this type of financing. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6yFrHrFKMD8jnyF8HdMUuv?si=tpdZ3MU2Rf6xWnRVtoIemg" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-47-midmarket-private-debt-as-a-supplement/id1475781337?i=1000569911567" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-47-midmarket-private-debt-as-a-supplement-to-bank-financing?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 46 – The Current Landscape in Midmarket Corporate Finance: From Banks to Alternative Lenders <br /> </strong><br /> With Shilpa Mishra, Managing Director and Leader of the Capital Advisory team at BDO Canada </span></td> <td><span>Shilpa Mishra, Managing Director and Leader of the Capital Advisory team at BDO Canada, joins Mario Nigro to discuss recent financing trends in the Canadian midmarket. During the pandemic period, banks and alternative lenders, particularly U.S.-based PE funds, have shown an increasing willingness to look at midmarket deals. Mario and Shilpa discuss whether, in anticipation of further rate increases, now may be the best time for midmarket businesses to take advantage of available opportunities. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6JhGc8s3sZBsEt6LMVNxui?si=O9zz9mPHQk6SHCKdQs3o6Q" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-46-the-current-landscape-in-midmarket/id1475781337?i=1000569159399" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-46-the-current-landscape-in-midmarket-corporate-finance-from-banks-to-alternative-lenders?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 45 – Searching For Success: A Decade of Growth for Search Funds <br /> </strong><br /> With Trevor Lwin and Bruce Moszcelt, Operating Partners at Blue Frame Capital Partners </span></td> <td><span>Mario Nigro’s guests in this podcast are Trevor Lwin and Bruce Moszcelt, Operating Partners of Blue Frame Capital Partners. In 2011, Trevor and Bruce were among the first in Canada to enter the search space, acquiring a business that they successfully operated for 5 years. Recently, they joined with two traditional investors to create Blue Frame, which provides financing and advice to searchers across the North American market. As they discuss, the flexibility of the search model makes it a particularly strong solution for midmarket businesses in succession scenarios. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/42iHq4KvxKhIMFOJq3eOvR?si=3jXTDltMSRaJC30m0EnP8w" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-45-searching-for-success-a-decade-of/id1475781337?i=1000566638761" target="_blank">Apple Podcasts </a><a href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-45-searching-for-success-a-decade-of-growth-for-search-funds?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 44: Transaction Diligence in an Era of Uncertainty <br /> </strong><br /> With Michelle Alphonso, Partner in the National Transaction Advisory Services Group and Private Equity Leader at Grant Thornton LLP </span></td> <td><span>In this episode, Mario Nigro speaks with Michelle Alphonso of Grant Thornton LLP about her recent experiences conducting financial diligence in midmarket M&A transactions. While opining on “sustainable EBITDA” can be a challenge in these uncertain times, Michelle and her team are able to identify and evaluate the variables that make up a company’s risk profile. Data analytics are playing an increasing role in this work – a development that has been accelerated during the pandemic. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6j9c1nKruJYWqIasg4zWuY?si=wCRkr9iCSYiFJp_NRlaNfg" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-44-transaction-diligence-in-an-era-of-uncertainty/id1475781337?i=1000565788330" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-44-transaction-diligence-in-an-era-of-uncertainty?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 43 – Economic Sanctions Laws: A Growing Issue for Canadian Businesses<br /> </strong><br /> With Shawn Neylan, Partner in the Corporate Group of Stikeman Elliott LLP </span></td> <td><span>Mario’s guest on this edition of the podcast is Shawn Neylan, a partner at Stikeman Elliott and a specialist in foreign investment issues of all types. In recent years, and particularly since the Russian invasion of Ukraine in February 2022, compliance with economic sanctions legislation has been a growing regulatory issue for many Canadian businesses. Today, even small and medium-sized businesses are developing internal policies and education programs and, as Shawn notes, such efforts often require attention to not only Canadian sanctions regulations but U.S. and other foreign requirements as well. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6v21SUknbhuD1z3mtmUXKT?si=y9IeyerCSs20V0L12n3sag" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-43-economic-sanctions-laws-a-growing-issue/id1475781337?i=1000564978730" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-43-economic-sanctions-laws-a-growing-issue-for-canadian-businesses?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 42: Finding Financing for Canadian Midmarket Companies<br /> </strong><br /> With Leon Raubenheimer, Managing Partner and Founder, Zed Financial Partners </span></td> <td><span>Mario Nigro’s guest on this podcast is Leon Raubenheimer, founder of Toronto-based Zed Financial Partners, which for 20 years has specialized in connecting Canadian businesses with debt and equity financing. Leon provides insight into the factors that make a financing deal work, which include targeting the right financiers and presenting the deal clearly. While an economic recession is possible, he expects that the deal market will continue to benefit from a strong supply of uncommitted capital. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4SpcrKyFN3t7g7RUl5uWID?si=oZdBzw7tTQ6tRePsOAHGTg" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-42-finding-financing-for-canadian-midmarket/id1475781337?i=1000564004540" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-42-finding-financing-for-canadian-midmarket-companies?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 41 – The Tech Sector Deal Space: Where To From Here?<br /> </strong><br /> With Daniel Lee, Managing Director, Investment Banking – Technology & Innovation Sectors, CIBC Capital Markets </span></td> <td><span>Daniel Lee of CIBC Capital Markets joins Mario to discuss the state of the midmarket tech sector after two years of pandemic-driven growth. Despite some softening in valuations, Daniel detects positive signs: investment capital “dry powder” is at historically high levels and the economy’s structural shift toward digital transformation will likely sustain a healthy investment climate. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/5jOR4Hpqa3cAOK8eHQpWV7?si=9Bxz2aQtQTmaKjxw472YtQ" target="_blank">Spotify </a>|<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-41-the-tech-sector-deal-space-where-to-from-here/id1475781337?i=1000562626881" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-41-the-tech-sector-deal-space-where-to-from-here?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 40: Bringing Innovation to Consumer Legal Services<br /> </strong><br /> With Lena Koke, CEO and Co-Founder, Axess Law </span></td> <td><span>Mario’s guest in this podcast is Lena Koke, the driving force behind Axess Law, a provider of consumer-friendly legal services focused on residential real estate, as well as will drafting and probate. Lena’s understanding of the retail sector has helped shape Axess as it continues to push the boundaries of virtual service provision in a historically conservative industry – a process accelerated by the growing acceptance of “legal tech” during the pandemic. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4EEPqqCBA5oqObHTZAexMA?si=K2bN4Z8_TTWRdwFeDnz59A" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-40-bringing-innovation-to-consumer-legal-services/id1475781337?i=1000560774147" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-40-bringing-innovation-to-consumer-legal-services?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 39: ESG’s Growing Presence in Smaller Private Companies<br /> </strong><br /> With Ramandeep K. Grewal, Partner, Stikeman Elliott LLP </span></td> <td><span>In this episode, Mario welcomes Ramandeep Grewal, Partner and Member of the Corporate Group at Stikeman Elliott in Toronto. Well-known for her securities law expertise, Raman is a leading advisor in the growing field of ESG. As she and Mario discuss in this podcast, it is partly because of the increasing recognition of the link between strong ESG performance and sound overall management that ESG practices are beginning to take hold in smaller non-public companies, a trend that she believes will continue.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/5wsE9FBbOwmMzeGfw8OHhI?si=yvy3xmzDQhmnT1cfnji-XA" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-39-esgs-growing-presence-in-smaller-private/id1475781337?i=1000559733231" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-39-esgs-growing-presence-in-smaller-private-companies?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 38 – Food System Sustainability: An Innovative Investment Focus<br /> </strong><br /> With Ben Gibbons, Founder and Managing Partner, Waterpoint Lane </span></td> <td><span>Mario Nigro is joined by Ben Gibbons, founder of Waterpoint Lane, an investment firm that contributes growth capital to a diverse group of businesses that each promote food system sustainability. Ben and his firm partner with investors who want their investments to achieve solid economic returns and positive social impacts. Ben and Mario discuss the promising future of this sector in an environmentally and health conscious age.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/45uVIR0ZKLafF6ieFDX8Vz?si=a7v3slC5T163_XH_HATOsw" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a href="https://podcasts.apple.com/us/podcast/episode-38-food-system-sustainability-an-innovative/id1475781337?i=1000558289422" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-38-food-system-sustainability-an-innovative-investment-focus?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 37 – Trends in Representation and Warranty Insurance: A Canadian Perspective<br /> </strong><br /> With Daniel Howard, Managing Director, M&A and Transaction Solutions, Aon </span></td> <td><span>In this installment, Mario Nigro is joined by Daniel Howard of Aon in Toronto. Daniel leads Aon’s transaction solutions team, with a focus on representation and warranty insurance. RWI has become a fixture of the Canadian deal market and is now becoming commonplace even for deals in the $20-$50 million range. As Daniel notes, in many transactions RWI is entirely taking the place of seller indemnities other than for fraud. Canada is quickly catching up to the U.S., where the use of RWI is nearly universal.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0tsZKZepUwOpVqjks7AW9S?si=TpywFaMsR-aDk8KJLor6AQ" target="_blank">Spotify</a> |<a href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank"></a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-37-trends-in-representation-and-warranty/id1475781337?i=1000557607117" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-37-trends-in-representation-and-warranty-insurance-a-canadian-perspective?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 36 – Brainpower Enrichment: Connecting a Passion for Education with a Passion for Entrepreneurship<br /> </strong><br /> With Vanessa Iarocci, CEO of Brainpower Enrichment Programs Ltd. </span></td> <td><span>In this edition of the podcast, Mario Nigro speaks with Vanessa Iarocci about her transition from the M&A group of a large bank to an entrepreneurial career as CEO and business owner. Vanessa discusses how her passion for education led her, through a search fund process, to Brainpower Enrichment Programs, a growing company that provides supplementary educational experiences for high-achieving students. Among many other things, the conversation touches on some of the obstacles and opportunities for women entrepreneurs in Canada.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1oCc0q4tiM9yOZkm082hN6?si=FN8T7qIlSU27ZOUfjiqtPA" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-36-brainpower-enrichment-connecting-entrepreneurship/id1475781337?i=1000555846959" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-36-brainpower-enrichment-connecting-entrepreneurship-with-a-passion-for-education?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 35: From Idea to Success Story in the Food Sector<br /> </strong><br /> With Asim Qureshi and Karim Kanji, Co-Founders of OneWorld Foods Inc. </span></td> <td><span>Mario’s guests today are Asim Qureshi and Karim Kanji. Their company, OneWorld Foods Inc., has risen in just a few short years from an idea to a supermarket success story by meeting growing market demand for high-quality prepared South Asian and halal foods (under the “Tandoori Oven” and “One World” brands). In the podcast, Karim and Asim discuss the challenges they have overcome, the decision to seek outside financing, and their plans for the post-pandemic future.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/02L4cgAOxd1CIL1xgCuOkf?si=bdQEOXeKSii23tDfv9ZI3w" target="_blank">Spotify </a>| <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-35-from-idea-to-success-story-in-the-food-sector/id1475781337?i=1000555138216" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-35-from-idea-to-success-story-in-the-food-sector?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 34: The Association for Corporate Growth<br /> </strong><br /> With Mike Fenton, President and CEO of ACG Toronto </span></td> <td><span>In this episode, Mario Nigro is joined by Mike Fenton, President and CEO of the Toronto chapter of the Association for Corporate Growth. Celebrating its 50th anniversary in 2022, ACG Toronto, along with the organization’s other Canadian chapters, plays both a thought leadership role and a practical role as a preeminent forum for midmarket deal networking in this country. Mike speaks with Mario about the ACG’s history, its evolution during the pandemic and its plans for the future.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/18bAuE9MbORHzz5NeCLP2h?si=seAJZKCmQba3NXz1Jr2xLA" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-34-the-association-for-corporate-growth/id1475781337?i=1000554373385" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-34-the-association-for-corporate-growth?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 33: A Midsize Creative Agency Grows Through Global M&A<br /> </strong><br /> With Derek Rider, CEO and Corey Peck, COO of Media One Group </span></td> <td><span>In this podcast, Mario Nigro speaks to the co-founders of Media One Group, Corey Peck and Derek Rider. While still a relatively young creative agency, Media One boasts an impressive roster of major corporate clients. Over the past few years, Corey and Derek have built on their success by turning to acquisitions, including cross-border M&A, to expand Media One’s capabilities and global reach. This bold strategy is playing a critical role in the transformation of their Toronto-based business into a worldwide brand.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1quatX5fEJjwmsBXDhTEaO?si=4GexxJl3SjKp51Z_yhiLeQ" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-33-a-midsize-creative-agency-grows-through/id1475781337?i=1000553579414" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-33-a-midsize-creative-agency-grows-through-global-ma?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 32: The Value of Valuation Services to Business Owners<br /> </strong><br /> With Federica Nazzani, Managing Partner, Capital Assist (Valuation) Inc. </span></td> <td><span>Mario’s guest in this episode is Federica Nazzani, Managing Partner of Capital Assist (Valuation) Inc. Federica, who is both a CPA and a chartered business valuator, advises businesses on valuation issues arising in potential sale and acquisition scenarios as well as at other points in the business cycle. She and Mario discuss the importance of professional advisors as sounding boards for business owners, particularly in times of uncertainty.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/5QI45iqDeJkGSOFyfZEZ1C?si=vdCS4K9LQw-A6RkTXlSnfA" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-32-the-value-of-valuation-services-to/id1475781337?i=1000552842837" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-32-the-value-of-valuation-services-to-business-owners/s-2AY4yMA3cl9?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 31: A U.S. Private Equity Fund’s Canadian Story<br /> </strong><br /> With Michael Teplitsky, Partner at Wynnchurch Capital </span></td> <td><span>Michael Teplitsky of Chicago-based Wynnchurch Capital joins Mario Nigro to discuss the private equity firm’s long history of investments in Canada, which extends into its current (fifth) fund. According to Michael, Wynnchurch focuses mainly on industrial and consumer products sectors and has the ability to make both smaller and more substantial investments. He is optimistic that the strong M&A market will continue in 2022 on both sides of the border.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/36vDHEaWaVAyc6LJzqjxwo?si=Bmrc9FWTScGo8uAHUgsH7w" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-31-a-u-s-private-equity-funds-canadian-story/id1475781337?i=1000551405488" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-31-a-us-private-equity-funds-canadian-story?utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 30: Finding Growth Opportunities in Smaller Traditional Businesses<br /> </strong><br /> With Jean-Lou Paquet, Partner at BDG & Partners, Montréal, QC </span></td> <td><span>Joining Mario Nigro for this episode of the podcast is Jean-Lou Paquet, Partner at private equity firm BDG & Partners. Founded in 2015, BDG invests mainly in the lower midmarket. While it is “sector agnostic”, BDG tends to focus on well-established traditional industrial businesses that may not recently have focused on growth opportunities.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0ymOfjZGQ9mZSBS1LvmuRy?si=QA07ba0DQNWEo8Cshzh48w" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-30-finding-growth-opportunities-in-smaller/id1475781337?i=1000550802407" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-30-finding-growth-opportunities-in-smaller-traditional-businesses?si=f0514126a022458683feb291b0fe430b&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 29: The “Old Economy” is New Again<br /> </strong><br /> With Jennifer Chasson, President of Springbank Capital </span></td> <td><span>Jennifer Chasson, President of Springbank Capital, joins Mario Nigro to discuss her M&A experiences in the lower midmarket space over the past two years. Jennifer’s clients, mainly “old economy” businesses, have attracted unprecedented attention during the pandemic, often selling at high multiples as a wider range of investors see the value in stable businesses with tangible assets.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/2wkYbwiVBK3zAUQoxpEvKx?si=5jFmjelhTte_HXQgtQuB6g" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-29-the-old-economy-is-new-again/id1475781337?i=1000549970575" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-29-the-old-economy-is-new-again?si=f35d92c38d6a4ba8964f920fab1e3788&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 28 – Search Funds: Secrets of a New Fund’s Success<br /> </strong><br /> With Elling Dahlen and Garrett Clyne, Partners and Co-Founders of Cassiar Partners </span></td> <td><span>In this podcast, Mario is joined by Garrett Clyne and Elling Dahlen, who founded private equity firm Cassiar Partners in 2020. Cassiar focuses on developing new growth strategies for small and medium-sized Canadian companies in traditional industries. Leveraging the experience of Cassiar’s diverse investor base has been one key to its early success.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3lz7DtSMO7QTvkq6ZNdEVK?si=cj80fDHZR56PM0GXgqtYcA" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-28-search-funds-secrets-of-a-new-funds-success/id1475781337?i=1000549175439" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-28-search-funds-secrets-of-a-new-funds-success?si=786c2ca47cfe42b1b8bb31d2c2c99618&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 27 – Search Funds: The Next Frontier<br /> </strong><br /> With Rob LeBlanc, Co-Founder and Managing Partner, Ambit Partners </span></td> <td><span>Joining Mario Nigro for this podcast is Rob LeBlanc, Managing Partner of Ambit Partners, a search fund investor with a worldwide focus that most notably includes emerging markets in Latin America, Africa and Asia. Rob notes that the pandemic has accelerated “baby boomer” business exits, creating many opportunities for searchers in almost every corner of the world.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1JfndFs1tlxHlAP2Mj3iGq?si=kiKC281ZT9WJqHmEzsqtuw" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-27-search-funds-the-next-frontier/id1475781337?i=1000547706689" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-27-search-funds-the-next-frontier?si=6955b9d5b3514767b8f8b42a7d963dc4&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 26: Healthcare M&A During and After the Pandemic<br /> </strong><br /> With Cathy Steiner, Principal at Origin Merchant Partners, Toronto, Ont. </span></td> <td><span>To help us understand the business impacts of COVID-19 on the healthcare industry, Mario Nigro spoke to Cathy Steiner, Principal at Origin Merchant Partners and leader of their healthcare practice. Interest in healthcare businesses has soared during the pandemic as investors search out innovators in areas like virtual and telemedicine. As Cathy notes, the technological innovation that COVID-19 has necessitated is likely to change the sector for the long term. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0rNVJsOnjLyVVwF72li5Ng?si=FHSBu-toRb2uLgnjiQLLvg" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-26-healthcare-m-a-during-and-after-the-pandemic/id1475781337?i=1000545060318" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-26-healthcare-ma-during-and-after-the-pandemic?si=2eb599eb27f04e38b3ce4c41c5de6962&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 25: Buying In Rather Than Buying Out: A Partnership Model of Private Equity<br /> </strong><br /> With Charlie Gifford, Senior Partner at New Heritage Capital, Boston, Mass. </span></td> <td><span>Joining Mario Nigro for this podcast is Charlie Gifford, Senior Partner at New Heritage Capital, which he co-founded in 2006. New Heritage focuses on founder-owned midmarket enterprises, including Canadian companies, partnering with them on a non-control basis. This “leveraged buy-in” approach focuses on growth-minded businesses looking for well-resourced and experienced support to reach their potential.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/62IiUCErSPEZ7pZLKCD6c2?si=M94GqpMXTzShcwpkeYPnRA" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-25-buying-in-rather-than-buying-out-a/id1475781337?i=1000544453458" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-25-buying-in-rather-than-buying-out-a-partnership-model-of-private-equity?si=ac86a1b2690c4c508249b8e56bf64b7d&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 24 – Pandemic M&A: Where We’ve Been and What 2022 May Bring<br /> </strong><br /> With Chris Hutchinson, Partner at EY specializing in private client transaction advisory services </span></td> <td><span>Our guest for this episode is Chris Hutchinson, Partner in EY’s M&A advisory practice. During the pandemic, high valuations and owner fatigue have created the busiest transactional climate in many years. The strong consumer products sector that Chris is seeing is driven by major changes in online buying behaviour that are likely to endure. Even so, supply chain and interest rate issues could affect the market in 2022.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0wI25cVFhYZhrBQkgzpxiO?si=sAqAzwauQ02uy7cUAS6qlw" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-24-pandemic-m-a-where-weve-been-and-what/id1475781337?i=1000543646744" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-24-pandemic-ma-where-weve-been-and-what-2022-may-bring?si=5d4ac49afdea45e2ba499e01afee27a8" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 23: M&A Trends in the Food & Beverage Sector<br /> </strong><br /> With Paul Hamam, Partner and Senior Managing Director, Corporate Finance, Deloitte Canada </span></td> <td><span>Joining us for this podcast is Paul Hamam, a partner at Deloitte Canada and leader of its consumer industry corporate finance practice. Food and beverage businesses, heavily affected by the pandemic, have been a focus of recent M&A activity. As Paul notes, valuation uncertainty in the food sector, where the “new normal” for post-COVID consumer dining habits is still unclear, creates interesting transactional challenges for deal teams. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1Qe3QuZmaEk1cfuOxmB6aW?si=7Qc3NrNyTsm6J0786qEJqQ" target="_blank">Spotify </a>| <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-23-m-a-trends-in-the-food-beverage-sector/id1475781337?i=1000542969891" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-23-ma-trends-in-the-food-beverage-sector?si=9522b3034a4741bf8cd890e7aa9ab5c8" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 22 - From Small Business to National Brand: A CEO’s Reflections<br /> </strong><br /> With Robin Kovitz, President and CEO of Baskits Inc.</span></td> <td><span>Robin Kovitz joins Mario Nigro to discuss her experience as CEO of Baskits Inc., the Canadian gift-basket business that she acquired in 2014. With a background in private equity, Robin has guided Baskits Inc. from its origins as a small catalogue-based retailer to a multichannel business with a growing emphasis on digital. This success, as she notes, has been predicated on focusing on people – employees and customers alike – and trusting that growth and profit will follow.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0UIeuhxSJ6v3H8YA8Z17Yp?si=Vn3Eoc0WSz6_kfPa31NfMQ" target="_blank">Spotify </a>| <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-22-from-small-business-to-national-brand-a/id1475781337?i=1000542254543" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-22-from-small-business-to-national-brand-a-ceos-reflections?si=7247eec9323140fa89112a97ec907e3f" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 21: What is Driving Today’s High Valuations and Can It Continue?<br /> </strong><br /> With Dr. Howard Johnson, Canadian Market Leader at Duff & Phelps</span></td> <td><span>Mario’s guest is Howard Johnson, Canadian Market Leader at Duff & Phelps and managing director in its M&A Advisory practice. A veteran of the Canadian midmarket and a valuation expert, Howard believes that today’s high valuations and (often) double-digit multiples are likely to persist since many public companies and PE firms are cash-rich and eager to invest. Tax reform and the uncertainty of pandemic-era earnings analysis may emerge as complicating factors, however.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6m6NtyK2jGrL1MCKQPoyvk?si=BgkUz3A9R3ugQnamcGLGWg" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-21-what-is-driving-todays-high-valuations-and/id1475781337?i=1000539904546" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-21-what-is-driving-todays-high-valuations-and-can-it-continue?si=d17fdde0531c4d54ac2f086b9dc8e9c5" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 20: What Does A Tech-focused U.S. Private Equity Firm See In Canada?<br /> </strong><br /> With Doyl Burkett, Managing Partner, Integrity Growth Partners</span></td> <td><span>Doyl Burkett, Managing Partner of Los Angeles-based Integrity Growth Partners, joins Mario Nigro to discuss PE investments in the software and tech-enabled business services space. Integrity typically invests $10-40m in founder-owned-and-operated businesses, often taking non-controlling positions. Doyl’s strategic focus on “underserved geographies” has generated many opportunities across Canada.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/43WNY6lCynPbNtq81sIIkE?si=PBp5FzJFRY2nN_jv4aiUIA" target="_blank">Spotify </a>| <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-20-what-does-a-tech-focused-u-s-private/id1475781337?i=1000539209243" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-20-what-does-a-tech-focused-us-private-equity-firm-see-in-canada?si=890a793bb3454cc78bea54e221233678" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 19: Scaling Canada’s Smaller Successful Companies: A New Solution to an Old Challenge<br /> </strong><br /> With George Rossolatos, CEO of Canadian Business Growth Fund</span></td> <td><span>Joining Mario Nigro is George Rossolatos, CEO of Toronto-based Canadian Business Growth Fund (CBGF), a private equity investor that takes minority stakes in Canadian companies, typically those in the $10-25m revenue range, working with them to promote long-term growth. CBGF was created in 2018, with George as Founding CEO, in response to concerns that Canada needs to get better at growing its successful startups into strong midmarket players. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/6PqC7hG1TDCkIGW6NFLThK?si=wKy1qlMgRR6lsBU6GVY9mg&dl_branch=1" target="_blank">Spotify </a>| <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-19-scaling-canadas-smaller-successful-companies/id1475781337?i=1000538483468" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-19-scaling-canadas-smaller-successful-companies-a-new-solution-to-an-old-challenge?si=1ca6078fe093422d9dd8ebc8554b2e35" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 18: Exiting Ownership But Not Leadership: Staying On As CEO Post-Sale<br /> </strong><br /> With Jeffrey D. Carubba, CEO of Arzon Limited, Burlington, Ontario</span></td> <td><span>This episode features Jeffrey Carubba, CEO and former co-owner of Arzon, a light manufacturing business. In 2019, after many successful years, Jeff and his partner decided to enter a sale process. After pandemic-related delays, a deal was done with Jeff remaining as CEO of the reinvigorated business. </span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/0lfzQZQ1QBVXqV89zNmcTa?si=MFj6lUiORh-P7D38xGMZ_g&dl_branch=1" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-18-exiting-ownership-but-not-leadership-staying/id1475781337?i=1000537753086" target="_blank">Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-18-exiting-ownership-but-not-leadership-staying-on-as-ceo-post-sale?si=4cbc31ef44ee4764a8c688e981219db6" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 17 – The Life of a CEO in a Small to Medium Sized Business: A View From the Trenches<br /> </strong><br /> With Steve Divitkos, Entrepreneur and Former CEO of Microdea Inc.</span></td> <td><span>Mario Nigro’s guest Steve Divitkos is a CEO who successfully transformed and sold a midmarket IT business. Steve’s current project is his “In The Trenches” blog and podcast, which focuses on real-life challenges facing leaders of small and medium-sized businesses. He shares some of his ideas on CEO success along with his views about the current state of the market.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/2xevIlXivQATXM1D5kop3W?si=ZYRQGmZGQyOzn6EoU6L7_w&dl_branch=1" target="_blank">Spotify</a> |<a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-17-the-life-of-a-ceo-in-a-small/id1475781337?i=1000536297243" target="_blank"> Apple Podcasts </a><a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-17-the-life-of-a-ceo-in-a-small-to-medium-sized-business-a-view-from-the-trenches" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 16 – The Factors Shaping Midmarket M&A in Canada: A Banker’s Perspective<br /> </strong><br /> With Robert Hickey, Managing Director and Head of Mid Market M&A at RBC</span></td> <td><span>In this edition of the podcast, Robert Hickey of RBC discusses the dynamics of pandemic-era midmarket M&A. While Canada’s long-term private equity growth has continued, producing an abundance of available capital and attractive valuations, some midmarket deals are running up against capacity issues among buyer due diligence teams and professional services providers. Another development that Robert and the RBC team are seeing is that border controls are shifting the buyer pool significantly toward Canadian entities. Generally, however, the market is strong and promises to remain so for the immediate future.</span></td> <td><a href="https://open.spotify.com/episode/4Cc35FxIHrAnlt37GrcAGi?si=a81cLdI2QQWvSawtCDCx8g&dl_branch=1">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-16-the-factors-shaping-midmarket-m-a-in/id1475781337?i=1000535540497" target="_blank">Apple Podcasts</a> <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a href="https://soundcloud.com/user-685358992/episode-16-the-factors-shaping-midmarket-ma-in-canada-a-bankers-perspective" target="_blank">SoundCloud</a></td> </tr> <tr> <td><span><strong>Episode 15 – In for the Duration: Today’s Midmarket from the Perspective of a Long-term PE Investor.<br /> </strong><br /> With Andrea Nickel, Managing Director, Celina Capital Corp., Toronto</span></td> <td><span>Andrea Nickel of Celina Capital joins Mario Nigro to discuss Celina’s experiences during the pandemic. Founded in 2017, Celina is a long-term midmarket value investor that partners with management teams, generating results in the form of cash flow rather than quick exits. Business in the first half of 2021 has been brisk, as the pandemic continues to spur seller activity across all sectors. While interest rates are a wild card, Andrea believes that the market is likely to remain robust for the foreseeable future.</span></td> <td><a rel="noopener noreferrer" href="https://open.spotify.com/episode/5jnEsOEJ9hBjL2XUV6526d" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-15-in-for-the-duration-todays-midmarket-from/id1475781337?i=1000534711391" target="_blank">Apple Podcasts</a> <a href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank"></a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-15-in-for-the-duration-todays-midmarket-from-the-perspective-of-a-long-term-pe-investor" target="_blank">SoundCloud</a></td> </tr> <tr> <td> <p><strong>Episode 14 - Canada’s Midmarket: Accelerating Growth as Available Capital Increases</strong></p> <p>With Stephen Jakob, Founder and Managing Partner, Osprey Capital Partners, Toronto</p> </td> <td>This podcast features Stephen Jakob, co-founder of Osprey Capital Partners, advisors to families and shareholders selling mid-sized businesses. Over the past 20 years, growing private equity activity has substantially increased available capital in Canada’s midmarket. According to Stephen, the pandemic has only exacerbated this trend, as numerous search funds, unfunded sponsors and U.S. funds join the hunt for Canadian acquisitions, with bidding wars now commonplace for even relatively small businesses.</td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/15hdrq5NEDuCIwp8ccXeBe?si=J23Lw8oySTSDF-EJp-JU8A&dl_branch=1" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-14-canadas-midmarket-accelerating-growth-as/id1475781337?i=1000534006579" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-14-canadas-midmarket-accelerating-growth-as-available-capital-increases" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 13 - Financial Diligence: A View from the Front Lines</strong></p> <p>With Damiano Peluso, Partner, Transaction Services, KPMG, Toronto</p> </td> <td>Damiano Peluso of KPMG joins Mario Nigro to discuss how financial due diligence has been affected by the pandemic. Some of the changes are practical, such as fewer face-to-face meetings and an inability to work on-site. Others are more substantive, as advisors develop new approaches to disentangle COVID-related issues from those that reflect longer-term strengths and weaknesses in the seller’s business. Looking forward, Damiano sees continuing strength in the M&A market over the next 12 months.</td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/5LElEGRmx4bpjTDNHcAhJ0?si=TV2gBIY-QjiEK-mTG4g3Bw&dl_branch=1" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-13-financial-diligence-a-view-from-the-front-lines/id1475781337?i=1000533112965" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-13-financial-diligence-a-view-from-the-front-lines" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 12 - Private Equity and the North American Distribution Sector</strong></p> <p>With Jay Greyson, Co-Founder and Partner, Supply Chain Equity Partners, Tampa, FL</p> </td> <td>Our guest on this podcast is Jay Greyson of Tampa-based Supply Chain Equity Partners (SCEP), the only North American PE firm that invests exclusively in the supply chain/distribution sector. Jay discusses how pandemic-related disruptions, baby-boomer retirements and impending capital gains tax changes in the U.S. are bringing many companies to market. Canada is a significant part of SCEP’s portfolio and the firm continues to pursue opportunities north of the border.</td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1HDJzKIyJ1DOOxpdkOkFV1?si=D0iQ6wXQTs62GyAqfH4EhA&dl_branch=1" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-12-private-equity-and-the-north/id1475781337?i=1000532491335" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-12-private-equity-and-the-north-american-distribution-sector" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 11 - Canada’s Growing Midmarket Tech Sector: Insights and Outlook</strong></p> <p>With Shivalika Handa, Managing Director, PwC Corporate Finance</p> </td> <td>Shivalika Handa, a corporate finance advisor and leader of PwC Canada’s technology transactions group, joins Mario Nigro in this podcast. From a technology M&A perspective, the pandemic sharply accelerated a longer-term trend of international investor interest in Canada’s tech sector, including the country’s fintech, healthcare and AI clusters. Shivalika notes that this improved access to foreign capital has lessened pressures to relocate to the U.S., with the result that Canadian tech companies are growing in place, producing more midmarket players and new M&A opportunities.</td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/2LWgt5rArCJO1bf7Auos1L?si=6RrGkRz_T7aKRkF_IDExEg&dl_branch=1" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-11-canadas-growing-midmarket-tech-sector-insights/id1475781337?i=1000531715047" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-11-canadas-growing-midmarket-tech-sector-insights-and-outlook" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 10 - Pandemic Selling: An Investment Banker’s Perspective on Canadian Midmarket M&A</strong></p> <p>With Christian Davis, Managing Director, Midmarket Investment Banking Group, CIBC</p> </td> <td>In this episode, Mario Nigro speaks with CIBC’s Christian Davis about the trends he’s seeing in Canadian midmarket M&A. The remarkable sell-side strength of the pandemic era appears to be based on a combination of long-term and pandemic-specific factors. In Christian’s view, activity is likely to remain robust over the medium term, with rising inflation being one “red flag” that he and his team are watching closely.</td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3xQiH0YPeigojqNiNJv1GB?si=JJGjzFguR5iTBunCVPrwSQ&dl_branch=1" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/ca/podcast/episode-10-pandemic-selling-investment-bankers-perspective/id1475781337?i=1000530420884" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-10-pandemic-selling-an-investment-bankers-perspective-on-canadian-midmarket-ma" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 9: PE Investing in Residential Real Estate Development</strong></p> <p>With Sasha Cucuz, CEO of Greybrook Securities, Toronto</p> </td> <td>Sasha Cucuz joins us to discuss private equity in the real estate context. His company, Toronto-based Greybrook Securities, makes private equity investments in residential real estate development projects in Southern Ontario and across North America. Greybrook is actively involved in managing the projects in collaboration with developers. Sasha provides his insight into the direction of the residential real estate market and discusses new opportunities, notably in the area of healthy building interiors, that have emerged during the pandemic.</td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/3cKx59NzFfOvtk3KAhn3Sy?si=yo6p0pFUS6qwmeV1Igoskw&dl_branch=1" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-9-pe-investing-in-residential-real-estate-development/id1475781337?i=1000529714432" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-9-pe-investing-in-residential-real-estate-development" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 8: Bridging the Small Business “Tech Gap”: A Unique Investment Approach</strong></p> <p>With Dr. Afsheen Afshar, Founder and Managing Member of Pilot Wave Holdings </p> </td> <td>Our guest in this podcast is Dr. Afsheen Afshar, founder of New York-based Pilot Wave Holdings. Focusing on smaller midmarket companies, Pilot Wave invests not only capital but also AI and other advanced technology expertise into its portfolio businesses. As an MD/PhD from Stanford University, Afsheen spent a number of years leading the data science divisions of top U.S. financial firms before moving into his current role. His recent experience includes Pilot Wave’s first deal in Canada, which he and Mario Nigro discuss before turning to the overall state and direction of the deal market.</td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4UumpsULi6sz6YoiSEk5Bf?si=sqA5bmODQ0K6DcyIV63BsA&dl_branch=1" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-8-bridging-small-business-tech-gap-unique-investment/id1475781337?i=1000528856339" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-8-bridging-the-small-business-tech-gap-a-unique-investment-approach" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 7: Turning a Regional Canadian Business into a Continent-wide Innovator</strong></p> <p>With Rob Cherun, CEO of Stealth Monitoring</p> </td> <td>In this podcast, Mario Nigro is joined by Rob Cherun, an Ottawa native and CEO of Stealth Monitoring, a success story of Canadian entrepreneurship. They discuss the company’s expansion from regional business to significant player in the U.S. and Canadian commercial video surveillance markets, as well as its future possibilities.</td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4UJ0xXqIfOvrkrwK7r7S6y?si=bt168uk8STarWwpTlha7yQ&dl_branch=1" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-7-turning-regional-canadian-business-into-continent/id1475781337?i=1000528135189" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-7-rob-cherun" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 6 <strong>–</strong> Private Equity Without a Permanent Fund: The Argyle Capital Approach</strong></p> <p>With Mark MacPherson, Co-Founder and Partner, Argyle Capital Partners Inc., Toronto</p> </td> <td>Mark MacPherson is co-founder and partner of Argyle Capital Partners Inc., a Toronto-based midmarket firm. In this podcast, he and Mario Nigro discuss Argyle’s approach of raising capital for each specific deal rather than creating a pool of committed capital and finding ways to deploy it, as well as the company’s response to the pandemic.</td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4jTEEc4FR4m1RkaHWU2KcI?si=ByRmTtiURiO7iK7qhAqkPQ&dl_branch=1" target="_blank">Spotify </a>| <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-6-private-equity-without-permanent-fund-argyle/id1475781337?i=1000526614143" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-6-private-equity-without-a-permanent-fund-the-argyle-capital-approach" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 5: Opportunities at the Lower End of the Midmarket</strong></p> <p>With Glen Silvestri, Sage Capital Partners, Toronto</p> </td> <td>Glen Silvestri, co-founder and managing partner of Toronto-based Sage Capital Partners, joins us to discuss his company’s experiences as an investor in businesses at the lower end of the Canadian midmarket. While there are challenges to working in this neglected market niche, there are also many rewards. </td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/1WQkn6iRX2cC2B3oONLcin?si=q05espoXRSGLnYEFNwPEhQ&dl_branch=1" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/views-from-the-market/id1475781337?i=1000525873486" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-5-opportunities-at-the-lower-end-of-the-midmarket" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 4: Investing in Canada during the Pandemic: A U.S. Private Equity Perspective</strong></p> <p>With Chip Chaikin, Partner, Blue Point Capital Partners, Cleveland, Ohio</p> </td> <td>Chip Chaikin, whose Ohio-based firm is about 20% invested in Canada, discusses the challenge of looking for deals and managing relations with portfolio companies across a closed border and refers to some of the differences in the pandemic response in Canada and the United States. </td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/2wgLhp0ZuWJLRx8zvQx6Xa" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/ca/podcast/episode-4-investing-in-canada-during-pandemic-u-s-private/id1475781337?i=1000524775870" target="_blank">Apple Podcasts</a> (iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-4-investing-in-canada-during-the-pandemic-a-us-private-equity-perspective" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 3: Midmarket/Entrepreneurial M&A Advisory in the Pandemic</strong></p> <p>With Alan Chettiar, Partner, M&A Advisory, FirePower Capital</p> </td> <td>Alan Chettiar discusses the resilience he has seen, as an advisor to midmarket entrepreneurs, over the past year. The software sector has been strong throughout the period and most other sectors are now back on track, as buyers begin to price deals on a post-Covid basis. </td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/7tdqC4oDveiNnz4O6lGlaF?si=_xoPOXBCS-ecc07TJev87Q" target="_blank">Spotify </a>| <a rel="noopener noreferrer" href="https://podcasts.apple.com/us/podcast/episode-3-midmarket-entrepreneurial-m-advisory-in-pandemic/id1475781337?i=1000523943761" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-3-midmarketentrepreneurial-ma-advisory-in-the-pandemic" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 2: <span>Midmarket Lending: A Banker’s Perspective</span></strong></p> <p><span>With Ross Thomas, District VP, TD Commercial Banking, Mississauga, Ont.</span></p> </td> <td><span>Ross Thomas is involved in midmarket lending and discusses what he has been seeing in the Mississauga-Etobicoke (Toronto-area) market, which is home to many industrial and logistics companies, during the pandemic. Transition management and succession planning have continued to be busy.</span></td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/4BfeGhBJLmqP70z6aOzgSX?si=YfLHnPVyQtq6IfYhsXkY1A" target="_blank">Spotify</a> | <a rel="noopener noreferrer" href="https://podcasts.apple.com/ca/podcast/episode-2-midmarket-lending-a-bankers-perspective/id1475781337?i=1000522256049" target="_blank">Apple Podcasts </a>(iTunes) | <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-2-midmarket-lending-a-bankers-perspective" target="_blank">SoundCloud</a></p> </td> </tr> <tr> <td> <p><strong>Episode 1: Evolution of Representation and Warranty Insurance</strong></p> <p>With <span>Sean Flinn, VP and Co-head, M&A Practice, BFL Canada</span></p> </td> <td>  <p>Sean Flinn joins us to discuss how RWI is used in transactions involving PE firms and how Canada is following the lead of other countries in using it in a wider range of situations.</p> </td> <td> <p> </p> <p> </p> <p><a rel="noopener noreferrer" href="https://open.spotify.com/episode/2kvNVhOrmAcq3DTsQAlEst?si=1yo31Hw2SO2M6S1qDuv6vw" target="_blank">Spotify </a>| <a rel="noopener noreferrer" href="https://podcasts.apple.com/ca/podcast/episode-1-evolution-representation-warranty-insurance/id1475781337?i=1000522256198" target="_blank">Apple Podcasts</a> (iTunes)| <a rel="noopener noreferrer" href="https://soundcloud.com/user-685358992/episode-1-evolution-of-representation-and-warranty-insurance" target="_blank">SoundCloud</a></p> </td> </tr> </tbody> </table> <br />28-Mar-2024 01:58:00{5055E3A5-3F0C-4864-A563-36CB16DF95B4}https://www.stikeman.com/en-ca/kh/canadian-ma-law/public-safety-canada-updates-guidance-on-forced-and-child-labour-reportingKeith R. Chatwinhttps://www.stikeman.com/en-ca/people/c/keith-r-chatwinAndrew S. Cunninghamhttps://www.stikeman.com/en-ca/people/c/andrew-s-cunninghamBrendan Kennedyhttps://www.stikeman.com/en-ca/people/k/brendan-kennedyIan Trimblehttps://www.stikeman.com/en-ca/people/t/ian-trimbleCanadian M&A LawCanadian Securities LawCorporations & Commercial Law UpdateCanadian Mining LawCanadian Employment, Labour & Pension LawPublic Safety Canada Updates Guidance on Forced and Child Labour Reporting<p><strong>On March 5, 2024, Public Safety Canada made changes to the </strong><a rel="noopener noreferrer" target="_blank" href="https://www.publicsafety.gc.ca/cnt/cntrng-crm/frcd-lbr-cndn-spply-chns/index-en.aspx"><strong>guidance on reporting requirements</strong></a><strong> (“Guidance”) under the </strong><a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/LegisInfo/en/bill/44-1/S-211?view=progress"><strong><em>Fighting Against Forced Labour and Child Labour in Supply Chains Act</em></strong></a><strong>, S.C. 2023, c. 9 (“the Act”) revising its original December 2023 guidance (discussed in our </strong><a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/government-of-canada-issues-key-guidance-on-forced-and-child-labour-reporting"><strong>previous post</strong></a><strong>)</strong><strong>. </strong></p> <h2>Key Changes to the Guidance</h2> <p>The changes to the Guidance include:</p> <ul> <li><strong>Changes to the guidance on which entities must report: </strong>the updated guidance states that “Reporting requirements are for entities producing goods in Canada or elsewhere or importing goods produced outside Canada. Reporting requirements are also for entities controlling other entities engaged in these activities.” Notably, there is no longer a reference to “selling” or “distributing” goods. Although presumably intended to clarify which entities must report, the Guidance now stands in contrast with the underlying statutory obligation, which remains unchanged and requires entities “selling” or “distributing” goods in Canada or elsewhere to report.</li> <li><strong>Clarification on the reporting obligations of subsidiaries: </strong>the Guidance states that subsidiaries must determine their reporting obligations independently of their parent companies and that subsidiaries should use their own financial statements (i.e., they should not include the financials of the parent company) in determining if they meet the definition of “entity” under the Act.</li> <li><strong>Clarification of the length requirement: </strong>the 10-page limit set out in the original Guidance has been changed to a recommendation rather than a requirement. The 100MB maximum size and requirement to submit as a pdf is unchanged.</li> <li><strong>Guidance on use of the questionnaire in preparing the report: </strong>previously, the Guidance had stated that the “exact same information and structure provided through the questionnaire” could be used to prepare the report. This has been removed from the updated Guidance, and it is now only recommended that the questionnaire be used as a resource when preparing the report.</li> <li><strong>Clarification on uploading bilingual reports: </strong>if an entity chooses to file in both official languages, it should upload two separate pdfs.</li> <li><strong>Clarification on timing of posting on website: </strong>the May 31 deadline applies only to submission to Public Safety Canada and entities should publish their reports on their websites “at their earliest convenience following submission”.</li> <li><strong>Clarification on applicability to Crown Corporations: </strong>the updated Guidance clarifies that provincial and municipal institutions are not considered government entities, but that some non-federal Crown Corporations may meet the definition of “entity” and may therefore have corresponding reporting obligations.</li> </ul> <h2>What Should Entities Be Doing?</h2> <p>Corporations, trusts, partnerships and other unincorporated organizations should be determining whether or not they are required to file under the Act. This includes non-Canadian entities that have certain connections with Canada. Entities that have filing obligations should be working to prepare and file their reports prior to the May 31, 2024 filing deadline or potentially sooner in the case of <em>Canada Business Corporations Act </em>entities with pending annual financial statement delivery obligations.</p> <p>Our team has developed several resources to assist clients in complying with the Act. Please contact the authors if you have any questions or if you need any assistance in determining your filing obligations and/or preparing and filing your report.</p>21-Mar-2024 08:46:00{3003CC03-6044-4E3D-B627-DC1B84347C98}https://www.stikeman.com/en-ca/kh/canadian-ma-law/exploring-the-legal-landscape-of-canadian-mergers--acquisitions-in-2024John R. Laffinhttps://www.stikeman.com/en-ca/people/l/john-r-laffinJohn Leehttps://www.stikeman.com/en-ca/people/l/john-leeMeghan Joneshttps://www.stikeman.com/en-ca/people/j/meghan-jonesCanadian M&A LawExploring the Legal Landscape of Canadian Mergers & Acquisitions in 2024<p>Members of our Toronto Mergers and Acquisitions Group have authored <a href="/-/media/files/kh-general/iclg-ma-2024.ashx">the “Canada” chapter</a> of  <em>Mergers & Acquisitions 2024</em>, a publication by <em>International Comparative Legal Guides</em>. This chapter provides an in-depth exploration of Canada's regulatory framework concerning mergers and acquisitions, offering meticulous analysis and detailed insights. The following topics are thoroughly examined:</p> <ul> <li>Relevant Authorities and Legislation</li> <li>Mechanics of Acquisitions</li> <li>Friendly or Hostile</li> <li>Information</li> <li>Stakebuilding</li> <li>Deal Protection</li> <li>Bidder Protection</li> <li>Target Defences</li> <li>Other Useful Facts</li> <li>Updates</li> </ul>04-Mar-2024 07:50:00{B6170587-FB88-4100-A28A-352F449B6D67}https://www.stikeman.com/en-ca/kh/canadian-ma-law/Search-Funds-Perspectives-From-Our-Vancouver-Search-EventJared Bachynskihttps://www.stikeman.com/en-ca/people/b/jared-bachynskiMario Nigrohttps://www.stikeman.com/en-ca/people/n/mario-nigroCanadian M&A LawSearch Funds: Perspectives From Our Vancouver Search Event<p><strong> Interest in the search fund model is growing across North America, including all regions of Canada. Recently, Stikeman Elliott hosted a seminar for the Vancouver and western Canadian search fund community. We have prepared two podcasts based on this event, featuring the comments of the invited panellists – investors and searchers with experience in the western Canadian market and beyond. No matter where your search fund activity is focused, we think you’ll find their reflections interesting. </strong></p> <p><strong>1. Pre-acquisition: How the Process (Really) Works</strong></p> <p>Hosted by Mario Nigro, partner in our Toronto office, the first panel discussion looks at many aspects of the experiences of funders and searchers, including:</p> <ul> <li>How a search starts;</li> <li>How far afield to search (including internationally);</li> <li>What investors are looking for;</li> <li>Challenges of raising capital in Canada; and </li> <li>Pluses and minuses of the traditional model vs. the self-funded model. </li> </ul> <p>As the discussion shows, from a searcher perspective, finding the right deal is often the most challenging part of the process – while funding sources may not be as plentiful in Canada as they are in the U.S., good searchers and good opportunities will still attract capital.</p> <p>Listen and subscribe on <a href="https://soundcloud.com/se-perspectives/search-funds-in-vancouver-part-1-pre-acquisition-how-the-process-really-works/s-iMixgm4yILZ">SoundCloud</a>, <a href="https://open.spotify.com/episode/1RAgh6nKmt9bjuSm2imItr?si=cEK8yc6hT1afVa8DfSNl4w">Spotify</a>, or <a href="https://podcasts.apple.com/ca/podcast/search-funds-in-vancouver-part-1-pre-acquisition-how/id1671877812?i=1000646416574">Apple Podcasts</a>.</p> <iframe width="100%" height="166" scrolling="no" frameborder="no" allow="autoplay" src=" https://w.soundcloud.com/player/?url=https%3A//api.soundcloud.com/tracks/1754937201%3Fsecret_token%3Ds-iMixgm4yILZ&color=%23a50034&auto_play=false&hide_related=true&show_comments=false&show_user=false&show_reposts=false&show_teaser=false "></iframe> <div style="font-size: 10px; color: #cccccc;line-break: anywhere;word-break: normal;overflow: hidden;white-space: nowrap;text-overflow: ellipsis; font-family: Interstate,Lucida Grande,Lucida Sans Unicode,Lucida Sans,Garuda,Verdana,Tahoma,sans-serif;font-weight: 100;"><a rel="noopener noreferrer" href=" https://soundcloud.com/se-perspectives " title="Stikeman Elliott Perspectives" target="_blank" style="color: #cccccc; text-decoration: none;">Stikeman Elliott Perspectives</a> · <a rel="noopener noreferrer" href=" https://soundcloud.com/se-perspectives/search-funds-in-vancouver-part-1-pre-acquisition-how-the-process-really-works/s-iMixgm4yILZ " title="Search Funds in Vancouver, Part. 1 - Pre-acquisition: How the Process (Really) Works" target="_blank" style="color: #cccccc; text-decoration: none;">Search Funds in Vancouver, Part. 1 - Pre-acquisition: How the Process (Really) Works</a></div> <br /> <p><strong>2. Post-acquisition: Quick Pivot to Business Owner</strong></p> <p>The second panel discussion, led by Vancouver partner Jared Bachynski, considers how search-based acquisitions are typically completed, with close attention to the issues that arise once a deal has been identified and after the transaction has closed. A sampling of these include:</p> <ul> <li>In a self-funded process, when to approach investors;</li> <li>Potential roles for investors (e.g. as board members vs. non-director mentors);</li> <li>The critical importance of finding qualified and experienced board members; and</li> <li>Communicating your vision to your new managers and employees.</li> </ul> <p>Looking ahead, the recent growth of the search model can be expected to continue. How the current collaborative and supportive search fund ecosystem can successfully “scale”, as more searchers and funders are attracted to it, is a key issue for the future.</p> <p>Listen and subscribe on <a href="https://soundcloud.com/se-perspectives/search-funds-in-vancouver-part-2-post-acquisition-quick-pivot-to-business-owner/s-ThOM5h9spGw">SoundCloud</a>, <a href="https://open.spotify.com/episode/6ntydLaO7hcC1NOI03FqKO?si=cfCL_-D7R4GbRHO-SVWDGw">Spotify</a>, or <a href="https://podcasts.apple.com/ca/podcast/search-funds-in-vancouver-part-2-post-acquisition-quick/id1671877812?i=1000646416731">Apple Podcasts</a>.</p> <iframe width="100%" height="166" scrolling="no" frameborder="no" allow="autoplay" src=" https://w.soundcloud.com/player/?url=https%3A//api.soundcloud.com/tracks/1754952255%3Fsecret_token%3Ds-ThOM5h9spGw&color=%23a50034&auto_play=false&hide_related=true&show_comments=false&show_user=false&show_reposts=false&show_teaser=false "></iframe> <div style="font-size: 10px; color: #cccccc;line-break: anywhere;word-break: normal;overflow: hidden;white-space: nowrap;text-overflow: ellipsis; font-family: Interstate,Lucida Grande,Lucida Sans Unicode,Lucida Sans,Garuda,Verdana,Tahoma,sans-serif;font-weight: 100;"><a rel="noopener noreferrer" href=" https://soundcloud.com/se-perspectives " title="Stikeman Elliott Perspectives" target="_blank" style="color: #cccccc; text-decoration: none;">Stikeman Elliott Perspectives</a> · <a rel="noopener noreferrer" href=" https://soundcloud.com/se-perspectives/search-funds-in-vancouver-part-2-post-acquisition-quick-pivot-to-business-owner/s-ThOM5h9spGw " title="Search Funds in Vancouver, Part. 2 - Post-acquisition: Quick Pivot to Business Owner" target="_blank" style="color: #cccccc; text-decoration: none;">Search Funds in Vancouver, Part. 2 - Post-acquisition: Quick Pivot to Business Owner</a></div> <br /> <p><a href="https://www.stikeman.com/en-ca/kh/guides/videos-podcasts">> See all Stikeman Elliott multimedia content</a></p>22-Feb-2024 07:19:00{72DD421B-7A83-485D-AE38-AED27FD16436}https://www.stikeman.com/en-ca/kh/canadian-ma-law/private-equity-in-canada-a-comprehensive-guide-for-2023Bradley Ashkinhttps://www.stikeman.com/en-ca/people/a/bradley-ashkinAlethea Auhttps://www.stikeman.com/en-ca/people/a/alethea-auDaniel Borlackhttps://www.stikeman.com/en-ca/people/b/daniel-borlackKevin Anthony Custodiohttps://www.stikeman.com/en-ca/people/c/kevin-anthony-custodioAdam M. Dlinhttps://www.stikeman.com/en-ca/people/d/adam-dlinMeghan Stewarthttps://www.stikeman.com/en-ca/people/s/meghan-stewartCanadian M&A LawPrivate Equity in Canada: A Comprehensive Guide for 2023<p>Several members of our <a href="/en-ca/expertise/private-equity">Private Equity Group</a> have co-authored <a href="/-/media/files/kh-general/stikeman-elliott---lexology-gtdt--private-equity-2023--canada.ashx">the “Canada” </a>chapter in Lexology’s Getting the Deal Through publication, Private Equity (Transactions) 2023. This chapter provides an overview of the Canadian private equity landscape and covers topics including:</p> <ul> <li>Transaction formalities, rules, and practical considerations</li> <li>Debt financing</li> <li>Shareholders’ agreements</li> <li>Acquisition and exit</li> <li>Special issues</li> <li>Updates and trends.</li> </ul> <p>We are pleased to make this <a href="/-/media/files/kh-general/stikeman-elliott---lexology-gtdt--private-equity-2023--canada.ashx">25-page publication</a> available for download.</p>03-Jan-2024 05:29:00{451F79A1-ECCB-40FC-802A-86E72FB453C4}https://www.stikeman.com/en-ca/kh/canadian-ma-law/cbca-corporations-to-begin-submitting-transparency-registers-to-the-governmentJanene Charleshttps://www.stikeman.com/en-ca/people/c/janene-charlesAndrew S. Cunninghamhttps://www.stikeman.com/en-ca/people/c/andrew-s-cunninghamDenise Duifhuishttps://www.stikeman.com/en-ca/people/d/denise-duifhuisTrevor Rowleshttps://www.stikeman.com/en-ca/people/r/trevor-rowlesCanadian M&A LawCorporations & Commercial Law UpdateCBCA Corporations to Begin Submitting Transparency Registers to the Government: Public Access to Follow<p><strong>Canada’s federal beneficial ownership transparency requirements are changing again. </strong><strong>Beginning January 22, 2024, federal corporations will be required to provide certain information from their registers of individuals with significant control (“ISC Registers”) to the federal government, which will then enter that information into what is to become a publicly accessible database. In this post, we discuss this development and a number of other recent changes to the CBCA ISC Register requirements. </strong></p> <h2>ISC Information: The New Public Access Model</h2> <p>As discussed in our <a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/cbca-beneficial-ownership-register-2-0-public-access-stronger-investigatory-powers">previous post</a>, most CBCA corporations have been required since 2019 to maintain an ISC Register (also known as a beneficial ownership register or a transparency register), to be retained internally by the corporation. These registers record the names of a CBCA corporation’s “individuals with significant control” (“<strong>ISCs</strong>”), as defined in the legislation, along with certain personal information and a description of the ISC’s relationship to the corporation. The purpose is to record information relating to the beneficial ownership and control of CBCA corporations for enforcement purposes as well as for the use of shareholders and creditors in certain circumstances.</p> <p>Initially, access to the registers was limited to the Government of Canada, various law enforcement and investigative bodies, and to the corporation’s shareholders and creditors. The Government’s intention, however, has always been to make information from the ISC Registers public. Under Bill C-42, which received <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/LegisInfo/en/bill/44-1/C-42">Royal Assent on November 2, 2023</a>, <strong>most private CBCA corporations will be required, from January 22, 2024 onward, to submit their ISC Register information to the Government of Canada when they file their annual returns and whenever changes in ISC Register information trigger ad hoc updating filings. </strong></p> <p>Additionally, under the Bill C-42 amendments, <strong>the Government of Canada will make some of the submitted information publicly available</strong>, including the following in respect of each ISC of the corporation:</p> <ul> <li>Full legal name;</li> <li>Address for service (or residential address, if no address for service is provided);</li> <li>The date on which the individual became / ceased to be an ISC;</li> <li>The rights, interests and/or influence that make the individual an ISC of the corporation; and</li> <li>Any other prescribed information.</li> </ul> <p>Other required ISC Register information, including an ISC’s date of birth, country or countries of citizenship and tax jurisdiction, will not be publicly disclosed, unless prescribed by regulation in the future. The Government has also stated that it will make the public register system available to the provinces with the goal of integrating provincially and federally incorporated corporations in a single register system. Québec already has a public registry system and British Columbia has announced that it intends to launch its own register in 2025.</p> <p>While the submitted ISC information that is publicly accessible will be limited, note that Corporations Canada, tax authorities, law enforcement and other prescribed investigative bodies will have access to all ISC information submitted to the Government of Canada.</p> <p>While it is not clear whether the infrastructure allowing public access to ISC information will be up and running by January 22, 2024, the obligation to start submitting the required ISC Register information to Corporations Canada will apply as of that date.</p> <p>As of January 22, 2024, ISC Register information filings are required at the following times:</p> <ul> <li><strong><em>Annually</em></strong>, together with the corporation’s annual return filing;</li> <li><strong><em>Within 15 days of </em></strong><em><strong>any change</strong></em> in a corporation’s ISC Register information;</li> <li><em>Upon<strong> incorporation</strong></em> under the CBCA; and</li> <li>Within 30 days of the date of the certificate of <strong><em>amalgamation</em></strong><em> or <strong>continuance</strong></em>, as applicable, under the CBCA.</li> </ul> <p>Note that the annual ISC disclosure will comprise part of an updated federal annual return which can only be filed after the anniversary of the corporation’s incorporation date. Accordingly, <strong>for many existing CBCA corporations, their first ISC information submission to Corporations Canada will be as part of their next (2024) annual return filing </strong>(subject to a change in their existing ISC Register that occurs after January 22, 2024 but before their annual return filing window opens, which would trigger an earlier filing obligation).</p> <h2>Other Changes</h2> <p>The shift to public access is just one of a number of changes announced in 2023 impacting the CBCA corporate transparency regime. As described in detail in <a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/cbca-beneficial-ownership-register-2-0-public-access-stronger-investigatory-powers">our earlier blog post</a>, Bill C-42 mandates:</p> <ul> <li>New disclosure requirements with respect to an ISC’s citizenship and residential address information in the CBCA ISC Register;</li> <li>Enhanced investigatory powers for law enforcement and tax authorities, including amendments to the <em>Income Tax Act</em> to permit access to tax records of corporations and their significant (at least 10%) shareholders for the purpose of verifying register data; and</li> <li>Whistleblower protections.</li> </ul> <p>Three further changes were effected through an <a rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/webdiff/diff.do?lang=en&path=%2Fen%2Fca%2Flaws%2Fregu%2Fsor-2001-512%2Flatest%2Fsor-2001-512.html&path=%2Fen%2Fca%2Flaws%2Fregu%2Fsor-2001-512%2F200778%2Fsor-2001-512.html#h=4097.625">amendment to the <em>Canada Business Corporations Act Regulations, 2001</em></a>:</p> <ul> <li>An exemption for wholly-owned subsidiaries of most public companies from the requirement to maintain an ISC Register (this also applies to wholly-owned subsidiaries of Crown corporations);</li> <li>A more precise description of the “reasonable steps” that must be taken to identify a corporation’s ISCs, including sending a request for information at least once a year to existing ISCs, all shareholders, and any other person that the corporation has reasonable grounds to believe may have relevant knowledge with respect to an ISC; and</li> <li>More precise guidance about situations in which a corporation has determined that it has no ISCs or no ISCs can be identified.</li> </ul> <h3>An additional change: increased penalties</h3> <p>At a late stage of Parliament’s consideration of Bill C-42, the maximum fine for a corporation in contravention of the requirements relating to the submission of information to the Director was increased from $5,000 to $100,000. Individual liability also increased under Bill C-42: penalties for directors, officers and shareholders were increased from the previous 6 months’ imprisonment and/or fines up to $200,000, to now up to 5 years’ imprisonment and/or fines as high as $1 million.</p> <h3>Other consequences of a failure to make required disclosures</h3> <p>Due to the manner in which the ISC information must be submitted to Corporations Canada once the requirement is in force, <strong>a corporation will not be able to file its annual returns</strong> without completing the required ISC disclosure portions of the filing. In addition, failure to comply with these new filing requirements may mean that a CBCA corporation cannot obtain a certificate of compliance or certificate of status. Further, and as mentioned in our previous blog post, the <strong>Director may dissolve a corporation</strong> in default for more than one year, or where a corporation fails to submit the required ISC information within 30 days of an amalgamation or continuance under the CBCA.</p> <h3>Corporations Canada guidance</h3> <p>Corporations Canada has launched <a rel="noopener noreferrer" target="_blank" href="https://ised-isde.canada.ca/site/corporations-canada/en/individuals-significant-control/control-fact-guidance">a web page</a> that provides information to help CBCA corporations understand their ISC Register obligations. This includes a <a rel="noopener noreferrer" target="_blank" href="https://ised-isde.canada.ca/site/corporations-canada/en/individuals-significant-control">sample template ISC Register</a> and guidance with respect to the <a rel="noopener noreferrer" target="_blank" href="https://ised-isde.canada.ca/site/corporations-canada/en/individuals-significant-control/control-fact-guidance">“control in fact”</a> concept.</p> <h2>Selected Issues</h2> <p><a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/cbca-beneficial-ownership-register-2-0-public-access-stronger-investigatory-powers">Our previous blog post</a> reviews the amendments in detail. In this post, we highlight several issues of interest to those who may be working on their ISC Register analysis and disclosure.</p> <h3>Control in fact</h3> <p>As noted above, Corporations Canada has issued <a rel="noopener noreferrer" target="_blank" href="https://ised-isde.canada.ca/site/corporations-canada/en/individuals-significant-control/control-fact-guidance">Control in Fact Guidance</a> which indicates the factors that would need to be considered to determine if an individual is an ISC on the basis of exercising control over the CBCA corporation, including:</p> <ul> <li>how much control the individual has to direct the activities of the corporation;</li> <li>provisions within the articles of incorporation, rights attached to the individual's shares or securities, shareholders agreement or other agreement that give the individual the right to exercise significant influence or control in the corporation;</li> <li>whether the individual has the right to veto decisions related to the corporation's business management (for example: adopting/amending the business plan, securing additional loans from lenders, appointing the majority of directors);</li> <li>whether the individual has sufficient influence to control a family member who is a shareholder, officer, creditor or supplier of the corporation;</li> <li>whether the individual's relationships with the corporation and its management give the individual the capacity to have significant influence or control; and</li> <li>whether the corporation is economically dependent on the individual because they are its main or sole supplier/customer.</li> </ul> <p>Note that the Bill C-42 amendments insert a provision into the legislation (s. 261(1)(a.2)) granting the Governor in Council the regulatory authority to define “control in fact”, “direct influence” and “indirect influence” as those terms relate to the transparency register requirements. Whether “control in fact” will be defined by regulation, and whether that definition will be based on the Corporations Canada Guidance, remains to be seen.</p> <h3>Keeping ISC residential addresses out of the public register</h3> <p>Those responsible for ISC information filings should be aware that the residential addresses of ISCs must now be provided to the Director. In order to ensure that those addresses do not eventually appear on the public register, an alternative “address for service” will need to be provided. There is no requirement that this be an address in Canada. <strong>If an address for service is not provided, then the ISC’s residential address will appear on the public register by default.</strong></p> <h3>ISCs who are citizens of more than one country</h3> <p>The amendments add “citizenship” to the information that must be collected about each ISC. While the legislation does not address dual citizenship, Corporations Canada appears to be taking the position that all citizenships must be disclosed (see their <a rel="noopener noreferrer" target="_blank" href="https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fised-isde.canada.ca%2Fsite%2Fcorporations-canada%2Fsites%2Fdefault%2Ffiles%2Fattachments%2F2023%2Fisc-register-template-en.xlsx&wdOrigin=BROWSELINK">template ISC Register</a>).</p> <h3>Disclosure when no ISCs are found</h3> <p>In certain situations, a corporation may fail to identify any ISCs. This is typically either because no individual meets the applicable tests or because of the corporation’s inability to obtain information needed to identify its ISCs. In either case, the corporation must still maintain an ISC Register which must include a statement that no ISCs have been found, along with a summary of the steps taken by the corporation to identify its ISCs.</p> <h3>Disclosure requirement for exempt corporations</h3> <p>In cases where a corporation is exempt from the requirement to maintain an ISC Register (e.g. as a public company or a wholly-owned subsidiary thereof), corporations are not required to maintain an ISC Register with their corporate records, but are required to disclose this fact in the applicable Government filings. This information will likely appear in the public registry.</p> <h3>Exceptions and exemptions from the public register</h3> <p>The CBCA, as amended by Bill C-42, will allow for limited exceptions and exemptions to the requirement that ISCs be included in the public register of their corporation. It is important to remember that <strong>these exceptions and exemptions do not negate the requirement to include an ISC – including an ISC who is a minor – in the corporation’s ISC Register or to submit that individual’s information to Corporations Canada</strong>.</p> <p>Non-discretionary exceptions apply to certain classes of person, with no need for an application:</p> <ul> <li>Minors – individuals who are less than 18 years of age; and</li> <li>Individuals to whom prescribed circumstances apply (none prescribed as at the date of this post).</li> </ul> <p>Corporations Canada has not yet commented on what the process will be for ensuring the omission of minors (and others to whom prescribed circumstances may apply in future) from the ISC information publicly available online. In the case of a minor, however, we expect that submission of the ISC’s date of birth will determine (presumably automatically) whether the ISC will appear in the public database.</p> <p>In contrast to exceptions, exemptions are granted to specific pieces of information about specific ISCs, on application, where the Director:</p> <ul> <li>Reasonably believes that publicizing the information “presents or would present a serious threat to the safety of the individual”;</li> <li>Is satisfied that the ISC is incapable (i.e., is found, under the laws of a province, to be unable, other than by reason of minority, to manage their property or is declared to be incapable by any court in a jurisdiction outside Canada);</li> <li>Is satisfied that the <em>Conflict of Interest Act</em> (or equivalent provincial legislation) requires that the information remain confidential; or</li> <li>Is satisfied that prescribed circumstances apply to the individual.</li> </ul> <p>The Director’s discretion to grant (or refuse) exemptions on any of the above grounds does not appear to be limited to the consideration of a specific set of factors or objectives. On December 18, 2023, the Government of Canada <a rel="noopener noreferrer" target="_blank" href="https://ised-isde.canada.ca/site/corporations-canada/en/individuals-significant-control/not-publishing-information-about-corporations-individual-significant-control">released Guidance on applying for discretionary exemptions</a>, including regarding the recommended timing for exemption applications, the review process and necessary summary, arguments and supporting documents for the application. The Guidance states, for example, that an application for an exemption on grounds of personal safety should contain a description of the serious threat, documentation supporting its existence (e.g. a police report) and arguments demonstrating that making the ISC Register information public would seriously threaten the ISC’s personal safety. Note that Corporations Canada has indicated that it is unable to review and process exemption applications until Bill C‑42 comes into force on January 22, 2024.</p> <h3>Shareholder and creditor access</h3> <p>Bill C-42 will repeal the right of shareholders and creditors to request access the ISC Register maintained by the corporation as of January 22, 2024. Like all members of the public, however, shareholders and creditors will have access to the ISC information included in the public database.</p> <h3>Going Forward</h3> <p>While CBCA corporations are only required to submit this new ISC disclosure in respect of incorporations, amalgamations and continuances federally on and after January 22, 2024 and in respect of 2024 annual return filings submitted on or after that same date, they should take the opportunity to review their ISC Registers to ensure that they are up to date. ISCs should ensure that an address for service is provided if they would prefer their residential address to remain private.</p>22-Dec-2023 04:40:00{28818F49-54ED-422D-B1A1-D53E70C7A616}https://www.stikeman.com/en-ca/kh/canadian-ma-law/government-of-canada-issues-key-guidance-on-forced-and-child-labour-reportingKeith R. Chatwinhttps://www.stikeman.com/en-ca/people/c/keith-r-chatwinAndrew S. Cunninghamhttps://www.stikeman.com/en-ca/people/c/andrew-s-cunninghamBrendan Kennedyhttps://www.stikeman.com/en-ca/people/k/brendan-kennedyIan Trimblehttps://www.stikeman.com/en-ca/people/t/ian-trimbleCanadian M&A LawCanadian Securities LawCorporations & Commercial Law UpdateCanadian Mining LawGovernment of Canada Issues Key Guidance on Forced and Child Labour Reporting<p><strong>On December 20, 2023, the Government of Canada issued long-awaited </strong><a rel="noopener noreferrer" target="_blank" href="https://www.publicsafety.gc.ca/cnt/cntrng-crm/frcd-lbr-cndn-spply-chns/index-en.aspx"><strong>guidance on reporting requirements</strong></a><strong> (“Guidance”) under the </strong><a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/LegisInfo/en/bill/44-1/S-211?view=progress"><strong><em>Fighting Against Forced Labour and Child Labour in Supply Chains Act</em></strong></a><strong>, S.C. 2023, c. 9 (“the Act”). The Guidance addresses some of the interpretation questions discussed in our </strong><strong><a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/canadian-legislation-on-forced-and-child-labour-in-global-supply-chains-takes-effect">previous posts</a></strong><strong> and also fleshes out the submission process – notably by unveiling an online questionnaire that all entities that are required to report will have to complete. </strong></p> <p>In this post we look at some of the more significant aspects of the Guidance and how they may guide businesses in preparing their reports. While some questions remain, the Guidance has significantly clarified a number of key issues, as discussed below.</p> <h2>Application of the Act</h2> <h3>Guidance relating to the determination of entity status</h3> <p>In assessing whether an organization has a “place of business in Canada”, “does business in Canada” or “has assets in Canada”, issuers should make reference to the ordinary sense of these terms and to the criteria applied by the Canada Revenue Agency. Importantly, doing business in Canada does not require a physical presence in Canada.</p> <p>With respect to the monetary and numeric thresholds (“Size Thresholds”) for assets, revenue and employees, the Guidance suggests that the Government is expecting each entity to report on a consolidated basis (i.e. including entities that it controls and excluding any entity that controls it).</p> <p>The Guidance confirms that the Size Thresholds apply to the organization’s worldwide assets, revenue and employees and specifies that assets are “gross” rather than “net”, while noting that employees exclude independent contractors.</p> <h3>Guidance on whether an entity is a reporting entity</h3> <p>Under section 9 of the Act, an entity is a reporting entity if it:</p> <ul> <li>Produces, sells or distributes goods in Canada;</li> <li>Imports into Canada goods produced outside Canada; or</li> <li>Controls an entity engaged in any of the above.</li> </ul> <p>With respect to the application of the Act to services businesses, the Guidance states that the terms “selling, distributing and importing … are not intended to capture services that solely support the production, sale, distribution or importation of goods.” Examples of such services are marketing, administrative services, financial services and software services.</p> <p>“Goods” is to be given its ordinary meaning within the subject of trade and commerce and “importing goods” does not include those who buy from a third party who is considered the importer for the purposes of the <em>Customs Act</em>.</p> <p>The Guidance also acknowledges that there is no prescribed minimum value of goods that an entity must produce, sell, distribute or import, however it states that these terms should be understood as excluding very minor dealings.</p> <p>The Guidance states that “control” is to be interpreted broadly and is not limited to the understanding of the term under IFRS or GAAP.</p> <h2>Form of the Report</h2> <p>The Guidance sets out detailed rules for the attestation of the report, including recommended text. It also discourages the use of joint reports unless all included entities have similar risk profiles and similar policies and recommends that reports be filed in both English and French.</p> <p>The report should be in PDF format, limited to a maximum of 100 MB and no longer than 10 pages in length (20 pages if provided in both French and English). The report is to be accompanied by a completed questionnaire and, while it is not required, the Guidance states that entities can use the exact same information and structure provided in the questionnaire to prepare their report; however, entities may include additional information and supplementary content in their report, including charts and graphs.</p> <h2>Contents of the Report</h2> <p>The Guidance recommends that entities include in their reports the names of all foreign legislation under which they have made similar reports (this information is also requested in the Questionnaire). Among other things, the Guidance:</p> <ul> <li>Reaffirms that no prescribed level of detail is required in the report, provided that detail is appropriate to the size and risk profile of the entity and that each of the content requirements of the Act is addressed.</li> <li>States that commercially sensitive information may be excluded and that no specific instances of forced and/or child labour need be referenced.</li> <li>Provides examples of the nature of information that may be included in respect of each of the component elements of the report.</li> <li>Requires that entities that control other entities describe the policies, activities, diligence, risk assessment, remediation, training and assessment undertaken in respect of such controlled entities as well.</li> <li>Welcomes the inclusion of existing action plans and information about planned future steps, but not to the point of turning the report into a mission statement.</li> <li>Recommends that straightforward language appropriate to a public-facing document be used.</li> </ul> <h2>The Questionnaire</h2> <p>The report must be accompanied by a completed <a rel="noopener noreferrer" target="_blank" href="https://www.publicsafety.gc.ca/cnt/cntrng-crm/frcd-lbr-cndn-spply-chns/sbmt-rprt-en.aspx">questionnaire</a>. Essentially, the questionnaire is an online form designed to elicit answers to specific questions that can easily be compared between entities. There is both a set of basic, mandatory questions that typically involve choosing from among a number of predetermined responses and an opportunity to expand on those responses, if the entity chooses, with freeform answers up to a 1500 character limit.</p> <h2>Going Forward</h2> <p>In light of the looming initial report filing deadline of May 31, 2024 (and potentially earlier in respect of <em>Canada Business Corporations Act</em> issuers required to provide the report along with their financial statements), entities that have not done so already should be proceeding in earnest to mobilize internal resources to the task of assessing the applicability of the Act and preparing their reports. With the benefit of the newly issued Guidance, they are now much better positioned to do so with confidence.</p>22-Dec-2023 03:37:00{8CA75AD9-BB60-47D6-BD94-091E561AD58D}https://www.stikeman.com/en-ca/kh/canadian-ma-law/decoding-merger-control-a-deep-dive-into-canadas-regulatory-landscapeMichael Laskeyhttps://www.stikeman.com/en-ca/people/l/michael-laskeyPeter Flynnhttps://www.stikeman.com/en-ca/people/f/peter-flynnLaura Rowehttps://www.stikeman.com/en-ca/people/r/laura-roweCanadian M&A LawThe CompetitorDecoding Merger Control: A Deep Dive into Canada's Regulatory Landscape<p>Three members of our <a href="/en-ca/expertise/competition-foreign-investment">Competition and Foreign Investment Group</a> recently co-authored <a href="/-/media/files/kh-general/iclg-merger-control-2024---canada---stikeman-elliott.ashx" target="_blank">the Canada</a> chapter on Merger Control, part of the <em>International Comparative Legal Guides</em> series published by the<em> Global Legal Group</em>. This publication provides an insightful and comprehensive exploration of the pivotal regulatory considerations shaping the landscape of Mergers and Acquisitions (M&A) in Canada, with the discussion including:</p> <ul> <li>Relevant Authorities and Legislation</li> <li>Transactions Caught by Merger Control Legislation</li> <li>Notification and its Impact on the Transaction Timetable</li> <li>Substantive Assessment of the Merger and Outcome of the Process</li> <li>The End of the Process: Remedies, Appeals and Enforcement</li> <li>Miscellaneous</li> <li>Is Merger Control Fit for Digital Services & Products?</li> </ul> <p>We are pleased to be able to make this <a href="/-/media/files/kh-general/iclg-merger-control-2024---canada---stikeman-elliott.ashx" target="_blank">17-page publication</a> available for downloading</p>14-Dec-2023 07:14:00{538A85FD-F816-4B3D-BCA1-A50BBE28E7A4}https://www.stikeman.com/en-ca/kh/competitor/governments-generational-changes-to-competition-law-in-canada-increase-risks-for-canadian-businessesStikeman ElliottThe CompetitorCanadian Class Actions LawCanadian M&A LawGovernment’s “Generational Changes to Competition Law in Canada” Increase Risks for Canadian Businesses<p><strong>On November 28, 2023, the Canadian government unveiled another round of amendments to the <em>Competition Act</em> that had been previewed in its Fall Economic Statement the previous week. These changes, together with several amendments already introduced in September 2023, represent the most significant changes to Canadian competition law since the Competition Act was introduced in 1986. </strong></p> <p>In short, the amendments expand the scope and incentives for private litigation in Canada, and materially loosen the requirements for a finding of anti-competitive behaviour in several key areas. The principal winner here appears to be the plaintiff-side bar, something we expect that Parliamentarians passing these laws in haste are unlikely to appreciate. The losers are likely to be businesses in Canada who will now have to assess a broader array of their business practices through the lens of whether a competitor, strategic litigant or “public interest” group may sue them. The role of the Competition Tribunal in Canadian competition law may also increase significantly as it will likely be asked to decide more cases, under new legal tests.</p> <p>By way of context, these proposed changes follow a years-long lobbying campaign by the Commissioner of Competition and a coterie of Canadian academics who have taken the position that the <em>Competition Act</em> is not fit for purpose. This argument that competition laws must be amended has ebbed and flowed over the years, typically swelling in response to litigation losses, which in turn lead to a call for amendments rather than a careful examination of the circumstances of the litigated cases. The last major amendments to the <em>Competition Act</em>, then characterized as “massive”, were in 2009 at which time the then Commissioner declared enthusiastically: “The result is an updated <em>Competition Act</em> that facilitates more effective enforcement, aligns us with our international counterparts, and ensures that both businesses and consumers benefit from a competitive marketplace. It is our job to ensure we take that opportunity and make the most of it.” So much for that.</p> <p>More recently, the Canadian government last amended the <em>Competition Act</em> in <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/legisinfo/en/bill/44-1/c-19">2022</a>, introducing severe criminal sanctions for wage-fixing and related practices, together with a number of relatively non-contentious changes to the law. Following those amendments, the government <a href="https://www.stikeman.com/en-ca/kh/competitor/the-future-is-here-government-of-canada-launches-consultations-on-the-future-of-competition">launched consultations</a> on the future of Canada’s competition policy, seeking feedback on a <a rel="noopener noreferrer" target="_blank" href="https://ised-isde.canada.ca/site/strategic-policy-sector/en/marketplace-framework-policy/competition-policy/future-competition-policy-canada">discussion paper</a> that canvassed a broad array of themes. These consultations <a rel="noopener noreferrer" target="_blank" href="https://ised-isde.canada.ca/site/strategic-policy-sector/en/marketplace-framework-policy/competition-policy/consultation-future-competition-policy-canada/future-canadas-competition-policy-consultation-what-we-heard-report">generated</a> over 130 submissions from stakeholders, and more than 400 responses from members of the general public.</p> <p>The government then introduced one set of <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/DocumentViewer/en/44-1/bill/C-56/first-reading">amendments</a> on September 21, 2023, which appear to be on the verge of becoming law, with the government showing great determination to push them through as quickly as possible. On November 21, 2023 the government previewed additional amendments as part of its <a rel="noopener noreferrer" target="_blank" href="https://www.budget.canada.ca/fes-eea/2023/report-rapport/toc-tdm-en.html">Fall Economic Statement</a>, noting that these changes, together with several amendments announced earlier this year, amounted to generational changes to Canada’s competition laws. The text of the second set of amendments was released in the <a rel="noopener noreferrer" target="_blank" href="https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-1123-eng.html">bill</a> implementing the Fall Economic Statement on November 28, 2023.</p> <p>Unlike the last <a href="https://www.stikeman.com/en-ca/kh/competitor/primer-on-amendments-to-canada-competition-act-and-investment-canada-act">major round</a> of amendments to the <em>Competition Act</em> in 2009, which were somewhat balanced in loosening some enforcement standards and tightening others, the November amendments are expressly designed to “strengthen the tools and powers available to the Competition Bureau.” The potential cost of non-compliance has increased in a number of areas, and with increased scope for private actions, companies may be subject to more opportunistic or strategic litigation.</p> <p>We will have more to say about the amendments in future posts, but the key highlights and their potential impact on businesses in Canada are outlined below.</p> <ul> <li><strong>Private damages for “reviewable conduct” such as resale price maintenance and exclusive dealing</strong>: Currently, a party found to have engaged in a reviewable trade practice, such as refusal to deal, price maintenance, exclusive dealing, market restriction, or tied selling, can only face a prohibition order of the Competition Tribunal requiring them to stop engaging in the conduct or to take some other action designed to remedy the effect of the conduct. The <a rel="noopener noreferrer" target="_blank" href="https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-1123-eng.html">proposed amendments</a> will empower the Tribunal, where a private action has succeeded, to order payment by the respondent of an amount, not to exceed the value of the benefit derived from the conduct that is the subject of the order, to the applicant and any other person affected by the conduct. No methodology for the calculation of the amount, or the mechanics of distributing the funds, is provided.</li> <li><strong>Private damages for “abuse of dominance”</strong>: The <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/legisinfo/en/bill/44-1/c-19">2022 amendments</a> introduced the ability to commence private actions in respect of an alleged abuse of dominance. However, a successful litigant was not entitled to receive any payment from the respondent; any monetary penalty was payable to the government. The <a rel="noopener noreferrer" target="_blank" href="https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-1123-eng.html">current amendments</a> permit the Competition Tribunal, as described above, to order payment be made to a successful applicant and any other person similarly affected by the conduct. In addition, the <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/DocumentViewer/en/44-1/bill/C-56/first-reading">September amendments</a> will loosen the test for finding that an abuse of dominance has occurred.</li> <li><strong>Increased scope for private actions</strong>: Private actions are currently available only for the reviewable trade practices outlined above and for abuse of dominance. The <a rel="noopener noreferrer" target="_blank" href="https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-1123-eng.html">current amendments</a> propose expanding the ability for individuals, groups and businesses to commence their own private actions before the Competition Tribunal to include claims related to deceptive marketing and agreements that lessen or prevent competition substantially. Successfully challenging an agreement that substantially lessens or prevents competition may result in a payment to the applicant and any other person similarly affected.</li> <li><strong>Broader definition of “anti-competitive agreements” and private damages</strong>: The <em>Competition Act</em> includes a <a rel="noopener noreferrer" target="_blank" href="https://laws.justice.gc.ca/eng/acts/C-34/section-90.1.html">civil provision</a> for agreements that are likely to lessen or prevent competition substantially. This provision is different from the <a rel="noopener noreferrer" target="_blank" href="https://laws.justice.gc.ca/eng/acts/C-34/section-45.html">criminal restrictions</a> on cartels (<em>g.</em>, price-fixing and market allocation agreements), and is intended to apply to a broader universe of agreements that may have anti-competitive effects, but are not as transparently problematic as a cartel. When this provision was first introduced in 2009, it applied to agreements between or among competitors, which included potential competitors. The <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/DocumentViewer/en/44-1/bill/C-56/first-reading">September amendments</a> would broaden the provision such that it would apply to agreements between parties who are not competitors if a significant purpose of the agreement is to prevent or lessen competition. The <a rel="noopener noreferrer" target="_blank" href="https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-1123-eng.html">current amendments</a>, in addition to introducing a private right of action in respect of such agreements, will also introduce significant administrative monetary penalties, payments to successful applicants and others similarly affected, and an ability to order parties to take certain actions (without their consent) to eliminate the anti-competitive effects of their agreement. These changes will significantly broaden the reach of this provision and significantly increase the costs of non-compliance.</li> <li><strong>Protections against reprisals</strong>: A <a rel="noopener noreferrer" target="_blank" href="https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-1123-eng.html">new provision</a> to punish “reprisals” against those who communicate or cooperate with the Competition Bureau will be added. Where the Competition Tribunal is satisfied this provision has been breached, the Tribunal may make an order prohibiting the conduct and also impose an administrative monetary penalty of up to $10 million against a corporation (and up to $15 million for subsequent breaches).</li> <li><strong>Various merger amendments lower the bar for the Commissioner</strong>: The <a rel="noopener noreferrer" target="_blank" href="https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-1123-eng.html">current amendments</a> include an automatic prohibition against closing of a transaction if the Commissioner files an application for an injunction, until the injunction application has been decided. Non-notified mergers will be subject to potential “call-in” review for up to three years after they are substantially completed, up from the current one-year limit. The <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/DocumentViewer/en/44-1/bill/C-56/first-reading">September amendments</a> also would eliminate the efficiencies defence, meaning that an M&A transaction that enhances overall economic efficiency can no longer be saved by the Competition Tribunal. In addition, currently the Tribunal is barred from making an order against a merger on the basis of market share alone. The <a rel="noopener noreferrer" target="_blank" href="https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-1123-eng.html">proposed amendments</a> would repeal this, leaving the door open for the Tribunal to adopt US-style structural presumptions if it chooses to do so. Two new factors have been proposed for the Tribunal’s consideration of whether a merger is anti-competitive: the effect of changes in concentration or market share; and the likelihood that the merger will result in express or tacit coordination between competitors in a market. Neither of those factors is new, but the amendments will codify them in the <em>Competition Act</em>. </li> <li><strong>No litigation costs against the Commissioner</strong>: Clearly still stinging from having to pay costs to Rogers and Shaw of approximately $13 million following the Competition Tribunal’s determination that the Commissioner behaved intransigently in his unsuccessful challenge to the acquisition of Shaw by Rogers, the government has included an <a rel="noopener noreferrer" target="_blank" href="https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-1123-eng.html">amendment</a> that will bar the Tribunal from awarding costs against the government unless the failure to do so would imperil confidence in the administration of justice or have a substantial adverse effect on the other party’s ability to carry on business – a very high bar.</li> <li><strong>Agreements to protect the environment</strong>: The package of <a rel="noopener noreferrer" target="_blank" href="https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-1123-eng.html">current amendments</a> contains many swords; the one shield may be in respect of agreements to collaborate “to protect the environment.” Where parties request, and the Commissioner is satisfied that the agreement will not substantially lessen or prevent competition, the agreement will be shielded from allegations under the conspiracy, bid rigging, agreements between financial institutions, and civil anti-competitive agreements provisions. The certificate can last for up to 10 years and may be renewed for up to a further ten years. Also on the environmental front, an explicit prohibition on “green-washing” has been added to the deceptive marketing provisions.</li> </ul> <h2>Next Steps</h2> <p>The amendments were introduced as part of the implementing legislation for the government’s Fall Economic Statement. Unfortunately, this follows a familiar path for recent significant amendments to the Competition Act. Omnibus budget legislation was used to pass the last major amendments in 2009 as well as the amendments in 2022. Using omnibus budget legislation tends to limit the opportunity for meaningful debate on the merits of the proposals. We will continue to monitor these amendments as they make their way through the legislative process and provide updates as they arise.</p> <p>Do not hesitate to reach out to any member of Stikeman Elliott LLP’s <strong><a href="https://www.stikeman.com/en-ca/expertise/competition-foreign-investment">Competition & Foreign Investment Group</a></strong> for more information.</p>30-Nov-2023 06:14:00{8D79F228-AC33-42C7-9DA4-EF43D5DBB83B}https://www.stikeman.com/en-ca/kh/canadian-ma-law/employee-ownership-trusts-full-steam-ahead-after-governments-fall-economic-statementMichael Deciccohttps://www.stikeman.com/en-ca/people/d/michael-deciccoSimon A. Romanohttps://www.stikeman.com/en-ca/people/r/simon-a-romanoJill Wintonhttps://www.stikeman.com/en-ca/people/w/jill-wintonCanadian M&A LawCorporations & Commercial Law UpdateEmployee Ownership Trusts: Full Steam Ahead After Government’s Fall Economic Statement<p><strong>On November 21, 2023, the Government of Canada released its Fall Economic Statement. Among the measures included in the statement are improved tax incentives for Employee Ownership Trusts (“EOTs”). As discussed in </strong><a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/employee-ownership-trusts-a-potential-new-option-for-sellers-of-canadian-businesses"><strong>our post from March 2023</strong></a><strong>, EOTs are a mechanism that allows exiting business owners to sell their businesses to employees in a tax-efficient manner. While the Government had previously taken some steps to bring the EOT concept to Canada, these additional measures appear likely to make EOTs a genuinely practical option for many more Canadian businesses.</strong></p> <p>Specifically, in the Fall Economic Statement, the Department of Finance has proposed to exempt business owners from paying tax on the first $10 million in capital gains realized upon selling a business to an Employee Ownership Trust (subject to certain conditions). Like the previously announced EOT measures, this exemption is proposed to come into force as of January 1, 2024, but is initially planned to apply to only the 2024, 2025 and 2026 taxation years as the Government pilots the incentives.</p> <p>Stikeman Elliott LLP is monitoring developments in Canada pertaining to EOTs and will be ready to assist our clients in understanding the latest developments in the space. We invite you to contact us with any questions regarding EOTs.</p> <p><em>For information on other aspects of Canada’s 2023 Fall Economic Statement, please see the <a rel="noopener noreferrer" href="https://www.stikeman.com/en-ca/kh/tax-law/canadas-2023-fall-economic-statement" target="_blank">Stikeman Elliott Tax Group’s commentary</a>. </em></p>22-Nov-2023 09:27:00{0F18B1ED-1F70-415F-9A81-F1C9991061AB}https://www.stikeman.com/en-ca/kh/canadian-ma-law/choose-your-words-carefully-three-recent-earnout-cases-under-delaware-lawSamantha Hornhttps://www.stikeman.com/en-ca/people/h/samantha-hornAndrew S. Cunninghamhttps://www.stikeman.com/en-ca/people/c/andrew-s-cunninghamCanadian M&A LawChoose Your Words Carefully: Three Recent Earnout Cases Under Delaware Law<p><strong>When the prospects of an acquired business are uncertain, an earnout can bridge the valuation gap between buyer and seller and help get the deal done. Taking this route is not without risk, however, particularly where circumstances arise that aren’t clearly covered by the earnout language (and the longer the earnout period, the more likely circumstances are to change). In the first two cases discussed below, courts enforced the literal meaning of clearly-worded earnout provisions. In the third, however, an ambiguous earnout provision created uncertainty that the court could resolve only after an extensive review of the circumstances of the negotiations. </strong></p> <p>All three cases were decided under Delaware law by courts in the U.S., but given the relative lack of case law on these issues in Canadian courts and the reliance our courts place on U.S. law in those circumstances, the issues raised will be of interest to anyone involved in the negotiation and drafting of earnouts.</p> <h2>Summary</h2> <ol> <li>In <em>Retail Pipeline v. Blue Yonder</em>, the court rejected the seller’s attempt to invoke Delaware’s implied covenant of good faith and fair dealing against a purchaser that had made a business decision to conduct its affairs in a way that failed to maximize the seller’s earnout.</li> <li>In <em>Shareholder Representative Services v. HPI Holdings</em>, the seller argued that it deserved earnout payments that the agreement had made contingent on the buyer’s signing a “new agreement” with a prior customer of the seller. The court, noting that the purported “new agreement” was just the old agreement with a few riders attached, held that an agreement is not “new” if it is contingent on an existing agreement.</li> <li>In <em>Fortis Partners v. Dematic</em>, the earnout amount was tied to sales of the seller’s “company products”. This term was only vaguely defined in the agreement and the court found that it was ambiguous. After considering the surrounding circumstances, the court accepted the seller’s view that “company products” included software developed after the merger that made use of the seller’s purchased source code.</li> </ol> <h2>1. Limits of the Good Faith and Fair Dealing Doctrine</h2> <h3><a rel="noopener noreferrer" target="_blank" href="https://casetext.com/case/retail-pipeline-llc-v-blue-yonder-inc">Retail Pipeline, LLC v. Blue Yonder, Inc., 21-2401-CV (2d Cir., 14 December 2022)</a></h3> <p>Delaware’s implied covenant of good faith and fair dealing (which is similar to the doctrine of good faith performance under Canadian law) cannot generally be invoked against an acquiror that conducted its post-acquisition business in a manner that failed to maximize the seller’s earnout. In affirming a lower court ruling, the U.S. Court of Appeals for the Second Circuit stressed that the obligations of parties with respect to earnout agreements will generally be limited to what has been set down in writing.</p> <h3>The transaction</h3> <p><em>Retail Pipeline, LLC v. Blue Yonder, Inc.</em>, arose from the 2014 sale of the appellant company’s (“Seller”) principal asset – the IP rights in supply chain software that it had developed – to the respondent company (“Purchaser”). Under the terms of the Purchase Agreement, Seller transferred its interest in the IP to Purchaser in return for an up-front payment of $3 million plus an earnout of up to $7 million.</p> <h3>The earnout</h3> <p>The earnout was calculated in reference to amounts (above specified thresholds) generated by three revenue streams. One of the streams was described as licensing revenue from “Flowcasting 2.0 or similar product”, a reference to a projected “2.0” version of the seller’s software. Purchaser’s future development of the 2.0 version had been discussed by the parties, but the agreement did not go into detail about what “Flowcasting 2.0 or similar product” meant, nor did it expressly impose an obligation on Purchaser to develop, or even to employ its best efforts to develop, such a product.</p> <p>As it turned out, Purchaser did not develop the Flowcasting 2.0 (or similar) product and – presumably partly as a result – the earnout to be paid was only $980,000.</p> <h3>Seller’s allegations</h3> <p>Seller brought proceedings in the U.S. District Court for the District of Vermont alleging:</p> <ul> <li>Breach of contract, on the basis that the unclear meaning of “Flowcasting 2.0 or similar product” created an ambiguity that could only be resolved by extrinsic evidence which would in turn show that there was an obligation to use best efforts to develop the product; and</li> <li>Breach of the implied covenant of good faith and fair dealing, on the basis that Purchaser’s failure to develop the “2.0” product had unreasonably deprived Seller of the fruits of its bargain.</li> </ul> <h3>Key issues on seller’s motion for summary judgment</h3> <p>Purchaser moved successfully for summary judgment, a decision that the Second Circuit upheld in this unpublished (and thus non-precedential) opinion.</p> <h4>Breach of contract</h4> <p>The breach of contract claim was quickly disposed of. Delaware law, which governed this contract, permits reference to extrinsic evidence to resolve contractual ambiguities (this also comes up in the <em>Fortis Advisors</em> decision, below). The Court held, however, that an ambiguity in the <em>description</em> of the product could not be used, as the Seller seems to have been attempting to use it, as an excuse to bring in extrinsic evidence relating to an obligation to produce the product that is “found nowhere in the [written agreement].”</p> <h4>Breach of the implied good faith duty</h4> <p>The good faith claim, while possibly more plausible, was equally unsuccessful. With respect to earnouts, Delaware’s implied “good faith and fair dealing” covenant may be breached if a purchaser acts with the intention of depriving the seller of its earnout payments. An example would be where a purchaser diverts sales from the acquired entity to another division of the company whose revenues are not factored into the earnout (<em>Winshall v. Viacom International, Inc.</em>, 76 A.3d 808, 811 (Del. 2013); <em>American Capital Acquisition Partners, LLC v. LPL Holdings, Inc.</em>, 2014 WL 354496 at 6-7 (Del. Ch.)). In spite of this, as a general principle, the implied covenant does not require a purchaser to run its business “so as to ensure or maximize the [seller’s] earn-out payments” (<em>Winshall</em>, 811).</p> <p>While Seller was able to produce an email suggesting that Purchaser had assured it that it would integrate Flowcasting features into its new products, Seller’s proposal during negotiations that language to this effect be included in the contract had been rejected by Purchaser. Under Delaware law, the implied term cannot be used to revive a provision that was rejected at the bargaining table.</p> <h4>Breach of the purchaser’s reasonable expectations</h4> <p>Seller’s final argument was that Purchaser had deliberately thwarted its reasonable expectations with respect to the earnout. As far as the Court was concerned, however, Purchaser had simply chosen to focus its business activities in areas that happened not to enhance Seller’s earnout. There was no evidence that this action had been taken to undermine the earnout payment.</p> <h3>Conclusion</h3> <p>The motion judge’s decision to grant summary judgment to the Purchaser was accordingly upheld.</p> <p><em>See our </em><a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/earnout-trends-one-small-step-for-good-faith-a-few-minor-tweaks-for-earnouts"><em>2015 article on good faith performance in earnouts</em></a> and our recent post on the <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/litigation/limitations-on-good-faith-damages-no-presumption-of-loss-for-breach-of-honest-performance">Ontario Court of Appeal ruling in <em>Bhatnagar v. Cresco Labs</em></a> for a Canadian perspective on this issue.</p> <h2>2. Everything Old Isn’t New Again: Earnout Provision Means What It Says</h2> <h3><a rel="noopener noreferrer" target="_blank" href="https://courts.delaware.gov/Opinions/Download.aspx?id=346840">Shareholder Representative Services LLC v. HPI Holdings, LLC, C.A. No. 2022-0166-PAF (Del. Ch., 26 April 2023)</a></h3> <p>This Delaware Court of Chancery summary dismissal ruling held the selling stockholders (“Selling Stockholders”) to the clear terms of an earnout agreement, rejecting their claim that the purchaser’s failure to pay out the $6 million contemplated in the agreement was a breach of contract. Purchaser’s motion to dismiss the claim for failure to state a claim upon which relief can be granted, under Court of Chancery Rule 12(b)(6), was granted.</p> <h3>The transaction</h3> <p>The dispute arose out of the 2021 merger of two U.S. healthcare businesses. The acquired company, AdvantEdge Healthcare Solutions, Inc. (“AHS”) was the survivor in the merger. The Selling Stockholders sold their stock to the defendant HPI Holdings, LLC (“HPI”), parent of the merged entity.</p> <h3>The earnout</h3> <p>The earnout included a $6 million payment if an agreement with BPA (a key customer of AHS before closing that had terminated its service agreement) of one of the following three types was entered into after closing:</p> <ol> <li>A new agreement with any [subsidiary of AHS] or an affiliate of [HPI] with substantially the same economic terms as [AHS’s] existing agreement with BPA but without the early termination clause contained therein;</li> <li>An amendment to [AHS’s] existing agreement with BPA that removed the early termination clause contained therein; or</li> <li>A new agreement with any [subsidiary of AHS] or Affiliate of [HPI] satisfactory to [HPI] in its sole discretion after the Closing.</li> </ol> <p>On December 22, 2021, BPA and the post-merger AHS did in fact come to terms. The “new” agreement (“December Agreement”) consisted of a copy of the old agreement with an attached page of riders titled “Agreement to Amend Service Agreement”. Among other things, the new provisions suspended BPA’s existing right to terminate on 90 days’ notice until September 30, 2022, which effectively precluded early termination for about one year.</p> <p>The following day, the CEO of AHS wrote a letter to HPI stating that the December Agreement triggered the $6 million earnout as it constituted a “new agreement” that was “satisfactory to HPI” and thus met condition (3) above.</p> <h3>Selling Shareholders’ allegations</h3> <p>The situation escalated quickly and on February 18, 2022 the Selling Shareholders initiated this breach of contract action (in which the Selling Stockholders added an “in the alternative” argument that the earnout was also triggered under condition (2) in virtue of the change to BPA’s termination rights). HPI moved to dismiss on a number of grounds which were eventually reduced to one: a failure to state a claim on which relief can be granted.</p> <h4>Was the December Agreement an amendment or a new agreement?</h4> <p>Selling Shareholders’ first argument, that the earnout had been triggered under condition (3), was denied by HPI on the ground that the December Agreement was not “new”. Delaware follows the “objective” theory of contracts: a contract means what an objective, reasonable third party would believe it to mean. If there is an ambiguity, it must, for the purposes of a motion to dismiss, be read in favour of the non-moving party. In this case, the Court held, there was no ambiguity: HPI’s interpretation of the contract was the only reasonable interpretation. The December Agreement did not constitute a new agreement under condition (3). It was an “amendment” (repeatedly referred to as such in the text) that had been entered into as contemplated in the original BPA agreement and, by definition “an amendment requires that the thing being amended continue to exist.” As the Court also put it, “a new agreement is not contingent on the presence of an existing agreement”. The fact that the December Agreement added a few “material new terms” to the original BPA agreement did not make it new.</p> <p>The Court added that, had the above not been clear as a matter of law, it would have been clear from the distinction that the December Agreement itself makes between an “amendment” (in (2)) and a “new agreement” (in (1) and (3)).</p> <h4>Was the early termination clause “removed”?</h4> <p>Selling Shareholders’ alternative argument, that the earnout had been triggered under condition (2) because the December Agreement had removed the early termination clause, was quickly dispensed with by the Court. As noted above, the December Agreement included a provision that effectively suspended the 90-day termination right for about a year. Selling Shareholders argued that this provision “entirely supplants” the old one. The Court held that the new provision “unambiguously supplements, rather than supplants” the old provision. It took a very literal view in doing so, insisting that “to remove” is not ambiguous and means “to eliminate, to delete, or to take out”. The December Agreement did none of those things: it merely “delayed BPA’s ability to exercise its early termination right”.</p> <p>It might be asked how far the Court would have taken this line of reasoning – e.g. if the delay had been for 10 years or some other period that made the right ineffectual. But clearly one year was not enough.</p> <h3>Conclusion</h3> <p>The motion to dismiss the earnout claim under Court of Chancery Rule 12(b)(6) was therefore granted.</p> <h2>3. Provision Tying Earnout to Sales of Target’s “Products” Includes New Products That Use Blocks of Target’s Source Code</h2> <h3><a rel="noopener noreferrer" target="_blank" href="https://courts.delaware.gov/Opinions/Download.aspx?id=342140">Fortis Advisors, LLC v. Dematic Corp., C.A. No. N18C-12-104 AML CCLD (Del. Sup. Ct., 29 December 2022)</a></h3> <p>In contrast with the other two cases, this Delaware decision illustrates what can happen when key terms of an earnout agreement are not clearly defined. The dispute in <em>Fortis Advisors v. Dematic</em> revolved around the meaning of the term “product”, particularly whether the selling company’s “products” included source code that purchaser used in applications that it developed after the merger. The value of the earnout was tied to post-merger sales of the seller’s products, but the purchaser did not include sales of new products containing the seller’s old source code in its earnout calculations. The selling shareholders objected and eventually sued. After resolving the ambiguity by examining the surrounding circumstances, the Court agreed that the code was a “product” that counts toward the earnout.</p> <h3>The transaction</h3> <p>In 2015, Dematic Corp. (“DC”) acquired Reddwerks Corp. (“RC”) in a share purchase deal. DC is a multinational engineering and supply-chain logistics company, while RC created and installed hardware and software products supporting supply-chain logistics and distribution systems. The terms of the deal were $45 million up-front (less a few expenses) plus an earnout over a 14-month post-merger period.</p> <h3>The earnout</h3> <p>The earnout had two elements: a scaled EBITDA adjustment that topped out at $3 million and a potentially much larger “Earn-Out Merger Consideration” (“EOMC”) element, under which Reddworks’ selling shareholders would receive an additional payment of up to $10 million “based upon the Order Intake Amount (“OIA”) achieved during the 14-month period”. EOMC kicked in when OIA exceeded $36 million and increased, on a straight-line basis, to the $10 million maximum when OIA hit $48 million.</p> <h4>“Company Products”: the key concept</h4> <p>OIA was defined as the amount paid for all “Company Products”, which was in turn defined by reference to Disclosure Schedules that itemized the RC products that were “currently distributed or offered to third parties”, many of which were “functionalities” described in just one or two words. This reflected the fact that (as the Court put it) RC was selling “intangible functionalities” consisting of “lines of source code that a computer reads to provide the functionality” rather than off-the-shelf software solutions that integrate a suite of functions into a packaged product.</p> <p>Despite their focus on functionalities, the Disclosure Schedules referenced in the “Company Products” definition did not expressly mention “source code”.</p> <h4>Representations and covenants by the Purchaser in relation to the Earnout</h4> <p>The $36-48 million earnout target range was considerably above RC’s pre-merger revenues, but certain representations by DC, set down in the Merger Agreement, appeared to make it realistic. In particular, DC:</p> <ol> <li>“acknowledged” that its 2016-2018 strategic plan would target orders for the sale of Company Products exceeding the earnout thresholds;</li> <li>agreed to incentivize its sales force to sell Company Products; and</li> <li>agreed that its engineers would integrate Company Products into its products and services.</li> </ol> <p>Despite the above representations, DC in the Merger Agreement “disclaimed any liability for any claim based on the methods or strategies [that it] used or [did not use] after closing”. Importantly, however, it did agree in the Merger Agreement to use “commercially reasonable efforts” to track and account for the above.</p> <h4>Post-merger reality</h4> <p>The reality, the Court found, was quite different. DC did not incentivize its sales force and did not develop a strategic plan for the period in question at all. While it did integrate some blocks of RC’s code into software products that it developed and sold after the merger, it did not treat sales of this “integrated” software as sales of “Company Products” for earnout purposes, nor did it appear to have adequately tracked such sales.</p> <p>DC calculated OIA in 2017 as $37.9 million. This generated just over $1.5 million of EOMC, all of which DC set off against certain litigation expenses and dissenter payouts. Fortis – the selling shareholders’ representative and formal plaintiff in the action – took issue with the calculation and sued DC, alleging (i) failure to incentivize its sales force and (ii) failure to include integrated Company Products in the earnout calculations.</p> <h3>Key issues at trial</h3> <h4>When is software a “Company Product”?</h4> <p>The definition of “Company Products” in the Merger Agreement consisted mainly of a reference to a schedule that listed RC products using non-technical “shorthand”. Because these one- and two-word descriptions were imprecise and unclear, “Company Products” was (in the Court’s view) “susceptible of different interpretations or … different meanings”. Resolving the ambiguity required the Court to consider extrinsic evidence. It found that the parties understood that the essence of RC’s business was the production of “modules” – blocks of code that execute specific functions – and that, after the merger, DC had integrated RC functionalities into its products by integrating RC source code into them. The court reasoned that, because those functionalities that RC sold “were entirely a function of its source code” and because the integration just described was expressly referred to in commitment (3) (see above), the best interpretation of “Company Products” encompassed RC’s source code.</p> <p>It followed from this that post-merger products that incorporated RC source code had to be accounted for in the earnout calculation, which had not been done.</p> <h4>“Distributing” vs. “selling”</h4> <p>On a related point, the Court noted that “Company Products” were defined as “products currently distributed or offered to third parties” by RC. In the Court’s opinion, “distributing” or “offering” a product is not the same thing as “selling” it to a customer. In other words, while the customer might have been shopping for a functionality, rather than buying source code as such, when RC “sold” it that functionality it also “distributed” the source code. This sufficed to make the code a “Company Product”, potentially putting DC in breach when it sold products or services into which RC functionalities had been integrated without crediting the amount toward the earnout threshold.</p> <p>The Court acknowledged that the Merger Agreement did not indicate how much source code must be integrated to make a product a Company Product, but in its view this was not enough to tilt the balance in favour of DC’s restrictive interpretation.</p> <h3>Conclusion</h3> <p>The decision was costly for DC. At an earlier stage of the proceedings, the Court had responded to certain shortcomings in DC’s disclosure by ruling that, if the RC source code was determined to be a “Company Product”, the selling shareholders (Fortis) would automatically be entitled to the maximum earnout – $10 million from the EOMC plus $3 million from the EBITDA adjustment, less some relatively small set-off amounts.</p>08-Nov-2023 07:53:00{23D7104C-606D-40E6-A4B4-39A9B515EA25}https://www.stikeman.com/en-ca/kh/litigation/limitations-on-good-faith-damages-no-presumption-of-loss-for-breach-of-honest-performanceSara Wrighthttps://www.stikeman.com/en-ca/people/w/sara-wrightLitigation UpdateCorporations & Commercial Law UpdateCanadian M&A LawLimitations on Good Faith Damages: No Presumption of Loss for Breach of Honest Performance<p><strong>In <em>Bhatnagar v. Cresco Labs Inc.</em>, </strong><a rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/on/onca/doc/2023/2023onca401/2023onca401.pdf"><strong>2023 ONCA 401</strong></a>,<strong> the Ontario Court of Appeal elaborated on the Supreme Court’s decision in </strong><strong><em>C.M. Callow Inc. v. Zollinger, </em></strong><a rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/ca/scc/doc/2020/2020scc45/2020scc45.html?autocompleteStr=C.M.%20Callow%20Inc.%20v.%20Zollinger&autocompletePos=1"><strong>2020 SCC 45 </strong></a><strong>(“<em>Callow</em>”), and clarified that a breach of the contractual duty of honest performance does not create an automatic presumption of loss. The court found that there must be evidence supporting a loss of opportunity to support an award for damages. </strong></p> <h2>Background</h2> <p>On February 19, 2019, an OBCA corporation in the vape products business was acquired by a U.S. public company buyer. Under the share purchase agreement (the “SPA”), the U.S. company paid the shareholders $25M on closing, with an earnout that could have entitled them to up to an additional $15M if the target corporation met certain revenue and license milestones in each of the first three years post-acquisition. Before the SPA was executed, the shareholders became aware of a potential acquisition of the buyer. They had a provision added to the SPA providing that a change of control of the buyer during the three year earn-out period would trigger the shareholders’ entitlement to the full amount of the earnout for the year of the change of control and for any following years that remained in the three-year earnout period. Such change of control payment was referred to as the “Unearned Milestone Payment”.</p> <p>On April 1, 2019, the buyer announced that it had entered into an agreement with the respondent, by which the respondent would purchase the buyer. It was initially expected that the transaction would close by the end of 2019; however, by June 13, 2019, it was known that there would be at least a several months closing delay. The shareholders asked what would happen if the transaction did not close, to which the buyer responded that there was no reason to believe that the transaction would not close. By October 20, 2019, the respondent informed the buyer that they were proposing a new closing date in January 2020. When the transaction ultimately closed in January 2020, (a) the revenue and license milestone had not been met by the target for the 2019 year, and (b) since the closing date was in 2020, the Unearned Milestone Payment was paid for 2020 and 2021 only.</p> <p>The shareholders claimed that the buyer breached the duty of honest performance by not informing them of the delayed closing date, and brought an application seeking payment of the 2019 revenue milestone pursuant to the terms of the SPA as damages, or alternatively, that any failure on their part to achieve the 2019 revenue and license milestones was a result of breaches of contract by the buyer.</p> <h2>The Parties’ Positions</h2> <p>In <em>Callow</em>, the Supreme Court confirmed the contractual duty of honest performance, but in doing so it did not confirm whether a finding of a breach of that duty would result in an automatic presumption that the injured party suffered a lost opportunity (<em>Callow</em> discussed further <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/litigation/scc-affirms-honesty-Is-the-best-policy-In-exercising-contractual-rights">here</a>). The shareholders submitted that, if the court found that the U.S. company had breached its duty of honest performance, the court was required to presume damages, and its only task was to quantify those damages. Specifically, the shareholders relied on paragraph 116 of <em>Callow </em>that states:</p> <p style="padding-left: 30px;">[E]ven if I were to conclude that the trial judge did not make an explicit finding as to whether Callow lost an opportunity, <span style="text-decoration: underline;">it may be presumed as a matter of law that it did,</span> since it was Baycrest’s own dishonesty that now precludes Callow from conclusively proving what would have happened if Baycrest had been honest. [Emphasis added]</p> <p>In response, the respondent submitted that there was no evidentiary foundation for the shareholders’ damages claim and that, even if a lost opportunity could be presumed, the evidentiary record needed to establish what was lost and support the claim that it was lost because of the breach of contract.</p> <h2>The Application Decision</h2> <p>The Application Judge found that the buyer had breached its duty of honest performance by repeatedly advising the shareholders that the transaction would close in 2019, and neither correcting nor updating that information once the buyer was informed that the closing date would be pushed to January 2020. However, no damages were awarded because the Application Judge concluded that, even if the shareholders had been informed of the change of closing date in October 2019, they would not have been able to meet their revenue or license milestones or force the transaction to close. Furthermore, the Application Judge would not presume that there had been a lost opportunity that should result in damages since no evidence of such an opportunity was presented.</p> <h2>The Ontario Court of Appeal Decision</h2> <p>The shareholders were unsuccessful on appeal. The Ontario Court of Appeal rejected the proposition that <em>Callow</em> created an automatic legal presumption of loss where a breach of the contractual duty of honest performance is found. The Court of Appeal held that evidence must be presented by the claimant to establish there has been a lost opportunity resulting from that breach.</p> <h3>No Legal Presumption of Loss</h3> <p>The shareholders again relied on para. 116 of <em>Callow</em> to support their proposition that <em>Callow</em> established a presumption of loss where there has been a breach of the duty of honest performance. However, the Court of Appeal pointed to the use of the word “may” in <em>Callow</em>, noting that there is no legal obligation for a court to presume that a loss has been suffered.</p> <p>The Court of Appeal also held that the Application Judge did not err in refusing to award damages on a basis other than expectation damages. The Court of Appeal drew on <em>Callow</em>, where Justice Kasirer explained that the ordinary approach to a breach of the duty of honest performance should result in expectation damages, which return the injured party to the position it would have been in had the duty been performed.</p> <h2>Key Takeaways</h2> <p>The decision of the Court of Appeal:</p> <ul> <li>elaborates on <em>Callow </em>and clarifies that there is no automatic presumption of loss when there has been a breach of honest performance;</li> <li>underscores that a claimant must bring evidence of the loss they suffered because of the breach of honest performance; and</li> <li>highlights that parties ought to carefully consider what evidence is available to support a claim of lost opportunity when bringing a claim for damages resulting from a breach of honest performance.</li> </ul>24-Oct-2023 04:56:00{3136712B-C8E6-4032-9993-304488712CAC}https://www.stikeman.com/en-ca/kh/canadian-ma-law/bill-s-211-in-context-five-ways-that-canada-regulates-forced-and-child-labourCandace Ceronehttps://www.stikeman.com/en-ca/people/c/candace-ceroneAndrew S. Cunninghamhttps://www.stikeman.com/en-ca/people/c/andrew-s-cunninghamBrendan Kennedyhttps://www.stikeman.com/en-ca/people/k/brendan-kennedyShawn C.D. Neylanhttps://www.stikeman.com/en-ca/people/n/shawn-c-d-neylanJean-Guillaume Shoonerhttps://www.stikeman.com/en-ca/people/s/jean-guillaume-shoonerIan Trimblehttps://www.stikeman.com/en-ca/people/t/ian-trimbleCanadian M&A LawCanadian Securities LawCanadian Employment, Labour & Pension LawCorporations & Commercial Law UpdateCanadian Mining LawBill S-211 in Context: Five Ways That Canada Regulates Forced and Child Labour<p><strong>Bill S-211 – the <em>Fighting Against Forced Labour and Child Labour in Supply Chains Act</em> – which requires businesses to report on their efforts to combat forced and child labour, is set to take effect in 2024. In this post, which supplements </strong><a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/canadian-legislation-on-forced-and-child-labour-in-global-supply-chains-takes-effect"><strong>our previous posts on Bill S-211</strong></a><strong>, we look at the new legislation in the context of the broader Canadian regulatory landscape affecting what is often referred to internationally as “modern slavery”. </strong></p> <p>In addition to the new legislation, this regulatory context encompasses:</p> <ul> <li>The Canadian Ombudsperson for Responsible Enterprise (“CORE”), with respect to the oil & gas, mining and garment sectors;</li> <li>The <em>Customs Tariff</em>, with respect to control of the importation of goods produced with forced or child labour;</li> <li>The <em>Criminal Code</em>, with respect to the trafficking or exploitation of individuals; and</li> <li>The class actions process, with respect to alleged misrepresentations by businesses of their internal practices, policies and past issues relating to forced and child labour.</li> </ul> <p>While these are arguably the key regulatory initiatives in this area, other factors may be relevant to businesses as they develop their anti-forced and child labour policies. Two of these are also referred to in this post: the international context of the legislation and role of securities regulation in encouraging and potentially enforcing accurate corporate disclosure in this area.</p> <h2>1. Bill S-211: Canada’s New Forced Labour and Child Labour Legislation</h2> <p>As discussed in our <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/canadian-legislation-on-forced-and-child-labour-in-global-supply-chains-takes-effect">earlier posts</a>, the <a rel="noopener noreferrer" target="_blank" href="https://laws.justice.gc.ca/eng/acts/F-10.6/index.html"><em>Fighting Against Forced Labour and Child Labour in Supply Chains Act</em></a> (the “Act”; previously Bill S-211) imposes certain reporting obligations in relation to efforts made to reduce the risk of forced and child labour.</p> <p>The stated purpose of the Act is to implement Canada’s international commitment to contribute to the fight against forced labour and child labour through the imposition of <strong>reporting obligations</strong> on business entities (described below) and government institutions (which includes <a rel="noopener noreferrer" target="_blank" href="https://laws-lois.justice.gc.ca/eng/acts/A-1/page-14.html#docCont">individual government departments and many federal agencies</a>).</p> <p>Under the Act, any “entity” – a term that encompasses a corporation, trust, partnership or other unincorporated organization – must file a report annually with the federal government, provided that it satisfies the two following tests:</p> <ol> <li>It is <strong>either</strong> (i) listed on a Canadian stock exchange (in which case, proceed directly to (2)); <strong>or</strong> (ii) does business, has a place of business or has assets in Canada and, in either of its two most recent financial years, has met or exceeded a size threshold based on its consolidated financial statements. The size threshold is any two of: $40 million in revenue, $20 million in assets or 250 employees;<br /> and</li> <li>It produces, sells or distributes goods in Canada or elsewhere and/or imports goods into Canada (or controls any entity that does so).</li> </ol> <p>The annual report must be filed with the Minister of Public Safety and Emergency Preparedness (the “Minister”) and published on the entity’s website before May 31 of each year. The legislation does not contemplate that an entity might not have a website.</p> <p>The exact format of the report, and of its website version, may be further specified by government guidance that is expected in the fall of 2023, but, in general, it will need to describe the steps the entity has taken during its previous financial year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity. The report must also include specified supplementary information pertaining to the entity’s structure, activities and supply chains, as well as information about its training programs and risk assessments as well as its responses to any forced or child labour situations that it has detected.</p> <p>The first report must be filed with the Minister no later than <strong>May 31, 2024</strong>.</p> <p>Persons and entities that fail to comply with certain provisions of the Act, including a failure to file and publish their report, are guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000. Further, the Act extends liability to an entity’s directors, officers, agents and mandataries to the extent that they directed, authorized, assented to, acquiesced in or participated in the commission of an offence.</p> <h3>International context</h3> <p>While new to Canada, many of the reporting requirements that the Act establishes will be familiar to many multinational corporations, because they overlap significantly with existing requirements in the United States (California), United Kingdom, Australia, France, Germany and elsewhere. However, the Canadian legislation has certain distinctive aspects that will require all companies – including multinationals that are already filing in foreign jurisdictions – to ensure that their responses are tailored to Bill S‑211’s specific requirements.</p> <p>The basic approach Canada has taken follows that of the <a rel="noopener noreferrer" target="_blank" href="https://modern-slavery-statement-registry.service.gov.uk/search-results?Search=&t=4&t=5&s=9">U.K.</a>, <a rel="noopener noreferrer" target="_blank" href="https://oag.ca.gov/SB657">California </a>and <a rel="noopener noreferrer" target="_blank" href="https://modernslaveryregister.gov.au/">Australia</a> by requiring entities to focus their disclosure on the steps they are taking to ensure that forced labour and child labour are not present in their supply chains. This “reporting” approach is less demanding than the “diligence” approach underlying the <a rel="noopener noreferrer" target="_blank" href="https://www.economie.gouv.fr/files/files/directions_services/cge/Duty-of-Vigilance.pdf?v=1620744564">French</a> and <a rel="noopener noreferrer" target="_blank" href="https://www.csr-in-deutschland.de/EN/Business-Human-Rights/Supply-Chain-Act/supply-chain-act.html">German</a> legislation (note that <a rel="noopener noreferrer" target="_blank" href="https://www.ag.gov.au/crime/publications/report-statutory-review-modern-slavery-act-2018-cth">Australia is considering whether to move to a diligence model</a>). That approach requires entities to actively investigate their suppliers and to report on the results of those investigations.</p> <p>Many multinational corporations that are subject to multiple forced and child labour reporting requirements produce a single combined statement to addresses the requirements across each regime, and it is likely that this approach can be extended to Canada to meet the requirement to post compliance information on the corporate website. However, unlike some other jurisdictions, Canada also requires that a report addressing a list of specified topics be filed with the government for publication on a searchable government website. (In other words, unlike the U.K., for example, the Canadian government website will not simply link to the website statements of the reporting entities.) In the absence (so far) of formal reporting guidelines under the Act, Canadian corporations not already subject to reporting requirements in foreign countries may find it useful to review reports filed by their peers in other jurisdictions to inform their responses. The <a rel="noopener noreferrer" target="_blank" href="https://modern-slavery-statement-registry.service.gov.uk/search-results?Search=&t=4&t=5&s=9">U.K. site</a>, for example, is easily searchable and can be broken down by sector and size of business.</p> <p>While the Act, like its counterparts in other jurisdictions, does not itself include substantive prohibitions on the use of forced and child labour, businesses should be mindful of the potential application of other statutes, notably the <em>Criminal Code</em>, in cases where forced and child labour are used, whether this occurs domestically or in foreign countries. The applicability of the <em>Criminal Code</em> is discussed in Section 4 of this post.</p> <h2>2. The CORE: Ongoing Investigations in the Mining and Garment Sectors</h2> <p>Canadian companies in three specific sectors – mining, oil & gas and apparel – are also subject to investigations into alleged human rights abuses in their international operations by the <a rel="noopener noreferrer" target="_blank" href="https://stikeman.com/en-ca/kh/canadian-energy-law/CORE-New-Federal-Office-to-Investigate-Human-Rights-Complaints-Against-Canadian-Multinationals">Canadian Ombudsperson for Responsible Enterprise</a>. Although the CORE does not have any direct enforcement powers, it can refer complaints that raise criminal liability to law enforcement, make recommendations to the company (e.g., compensation, mitigation measures, apologies) and monitor subsequent compliance, and make recommendations for the withdrawal of federal support (e.g., trade advocacy).</p> <p>On July 11, 2023, the CORE published its initial assessments into allegations that two businesses – <a rel="noopener noreferrer" target="_blank" href="https://core-ombuds.canada.ca/core_ombuds-ocre_ombuds/activities-nike-canada-corp-activities.aspx?lang=eng">one in the apparel sector</a> (the “First Apparel Business”) and <a rel="noopener noreferrer" target="_blank" href="https://core-ombuds.canada.ca/core_ombuds-ocre_ombuds/activities-dynasty-gold-corp-activities.aspx?lang=eng">one in the mining sector</a> (the “Mining Business”) have relationships with businesses based in China that have used or benefitted from Uyghur forced labour.</p> <p>On August 15, 2023, the CORE published two more initial assessments relating to allegations: one <a rel="noopener noreferrer" target="_blank" href="https://core-ombuds.canada.ca/core_ombuds-ocre_ombuds/activities-gobimin-activities.aspx?lang=eng">in relation to an investment company</a> that formerly held an interest in a mining company (the “Investment Business”) and one <a rel="noopener noreferrer" href="https://core-ombuds.canada.ca/core_ombuds-ocre_ombuds/activities-ralph-lauren-activities.aspx?lang=eng" target="_blank">into a second apparel business</a> (the “Second Apparel Business”).</p> <p>All four allegations were made by a coalition of 28 Canadian organizations (the “Complainants”) on June 21, 2022 (as noted below, three further allegations made by these organizations were also considered by the CORE in late August).</p> <h3>The First Apparel Business investigation</h3> <p>The initial assessment report for the First Apparel Business states that the company declined the CORE’s request for an initial meeting on the basis that its previously published statements responded fully to the concerns raised. The CORE assessment report states that upon receiving a draft of the initial assessment report, the First Apparel Business engaged with the CORE and requested a meeting at that point, which was declined by the CORE.</p> <p>On reviewing the submissions of the Complainants and the First Apparel Business, the ombudsperson agreed that there was a need for further investigation of relationships between certain suppliers and other entities that had been associated with forced labour and of the sufficiency of the human rights due diligence efforts of the First Apparel Business. The fact that the First Apparel Business had initially declined to meet with the CORE appears to have factored into the decision.</p> <h3>The Mining Business investigation</h3> <p>The Mining Business reportedly did not respond at all to repeated inquiries, although it did make submissions after receiving the CORE’s draft initial assessment. This case involved a mining operation in China that was established as a joint venture. The Mining Business was one of the joint venturers but had lost effective control over the mining operation 10 years ago due to an ongoing dispute with the other joint venturer. Nevertheless, the Mining Business was said to have continued to publicly assert 70% ownership of the joint venture and the Complainants argued that, even if there was a dispute, the company should have acted on human rights concerns about the mine. The ombudsperson characterized the Mining Business as having “deliberately avoided participating in and cooperating with the CORE’s dispute resolution process without providing any explanation” and agreed with the Complainants that serious issues had been raised that had not been adequately addressed by the Mining Business.</p> <h3><strong>The Investment Business investigation</strong></h3> <p>This allegation relates to the activities of an indirectly owned subsidiary of the Investment Business involved in the mining project that was the subject of the complaint. The Investment Business’ interest in the subsidiary was sold in July 2022. The Investment Business also provided substantive responses to the complaint, including submissions relating to certain employment practices of the subsidiary prior to the sale. </p> <p>The CORE declined to launch an investigation, but did provide recommendations to the Investment Business based on its mandate to advise Canadian companies on their practices and policies with regards to responsible business conduct. The CORE recommended that the Investment Business:</p> <ul> <li>Revise and update its policies on responsible exit or (if it does not have such policies) develop and adopt policies on responsible exit, including from high-risk areas, as part of its human rights due diligence;</li> <li>Share these policies with the CORE by December 29, 2023, and incorporate any feedback or comments from the CORE;</li> <li>Post the final policies on its website by March 15, 2024; and</li> <li>Publicly commit to implement and apply these policies in the context of its operations abroad.</li> </ul> <p>The CORE has stated that it will report publicly on the findings of its follow-up on the above.</p> <h3><strong>The Second Apparel Business investigation</strong></h3> <p>The initial assessment report states that the Second Apparel Business declined to attend an initial assessment meeting, but submitted responses in two emails which referred to policies and strategies. Upon receiving a draft of the initial assessment report, the Second Apparel Business provided further comments indicating that it had undertaken further investigations and expanding on measures taken. It also clearly stated that it was committed to cooperating with the CORE in good faith. </p> <p>The CORE agreed with the Complainants that there was a need for a limited investigation on specific points where, in the ombudsperson’s view, there was conflicting information. Given the Second Apparel Business’ willingness to cooperate in good faith, the CORE encouraged the parties to consider mediation as an option.</p> <h3>Early participation and clear indication of good faith cooperation could assist in early resolution</h3> <p>Of note, all four reports state that the Complainants were willing to participate in early resolution or mediation. However, in the cases of the First Apparel Business and the Mining Business the ombudsperson found that the companies were not willing to participate. The Apparel Business “did not confirm [its] intention to participate in mediation” when it was offered and the Mining Business simply stated it had no further comment. A clear indication from the Second Apparel Business of an intention to participate in good faith led to a recommendation for mediation.</p> <h3>Additional investigations announced</h3> <p>On August 24, 2023, <a rel="noopener noreferrer" target="_blank" href="https://core-ombuds.canada.ca/core_ombuds-ocre_ombuds/press-release_walmart-hugo-boss_diesel_communique.aspx?lang=eng">the CORE announced three additional investigations</a> with respect to companies in the apparel sector, in response to submissions from what appears to be the same group of Complainants. These cases were generally similar to the first four in that, while the Complainants’ allegations related only to imprecisely described indirect connections to forced labour, they met the CORE’s low threshold for proceeding. It should be noted that the CORE’s decisions in these cases appear to have been influenced by <span>what the CORE characterized as the</span> respondents’ reluctance to participate fully at each stage of the process and/or their failure to respond in sufficient detail (in the CORE’s view) to the Complainants’ allegations.</p> <h2>3. The Customs Tariff’s Import Prohibitions</h2> <p>Goods that are mined, manufactured or produced wholly or in part by forced labour, or goods manufactured or produced wholly or in part by prison labour, are currently prohibited from entering Canada pursuant to tariff item No. 9897.00.00 in the List of Tariff Provisions set out in the schedule to the <em>Customs Tariff.</em> As prohibited items, such goods cannot enter Canada and must therefore be abandoned, destroyed or re-exported by the importer.</p> <h3>Expanded definitions under the Act will mean more exclusions</h3> <p>The Act amends the <em>Customs Tariff</em> and also modifies the description of goods covered under tariff item <a rel="noopener noreferrer" target="_blank" href="https://www.cbsa-asfc.gc.ca/publications/dm-md/d9/d9-1-9-eng.pdf">No. 9897.00.00</a> by extending the existing prohibition on the importation of goods mined, manufactured or produced wholly or in part by forced labour so that it includes goods mined, manufactured or produced wholly or in part by child labour, whether coerced or not. Such amendments refer to the broad definitions of “forced labour” and “child labour” as provided for in section 2 of the Act.</p> <p>In practice, these broadened definitions will likely increase the risk of a violation for importers. For example, the new concept of “forced labour” may require less evidence of the involuntariness of the labour or service. Moreover, the definition of “child labour” in the Act should expand import prohibitions significantly when compared to the former definition of “forced labour”. Notably, the Act substantially supplements that definition by including labour or services provided by persons under the age of 18: under circumstances that are contrary to the laws applicable in Canada (where the labour or services are provided within Canada); and/or that interfere with schooling by depriving them of the opportunity to attend school, obliging them to leave school prematurely or requiring them to “combine school attendance with excessively long and heavy work”. </p> <p>The result of the above is that many goods that are not “mined, manufactured or produced wholly or in part by forced labour” under current legislation (and thus not subject to the import ban) could become subject to the import prohibition based on the new broadened definitions effective as of January 1, 2024.</p> <h3>Enforcement powers</h3> <p>To enforce the import ban, the Canada Border Services Agency (“CBSA”) has been granted significant powers such as: examination and detention of goods at the border, issuance of monetary penalties, seizure of goods, destruction or disposition of goods, application of ascertained forfeitures (i.e., imposition of monetary penalties when the goods cannot be seized), search of an entity's property, and criminal prosecution.</p> <p>In order to detain goods at the border, seize them, or take other enforcement actions, the CBSA must have reasonable grounds to believe that forced labour or child labour was involved in the production of the goods. Different elements can give rise to such suspicion, including, for example, information retrieved by the CBSA itself or by other government entities, warnings issued by foreign authorities, public reports, etc.</p> <p>Businesses may wish to reassess any contractual safeguards that they may have established to allocate these risks among the entities through which imported goods typically pass (importer, distributor, merchant, end user, etc.). In this respect, any entity named as “importer of record” on the Canada Customs Coding Form (Form B3) should be the first target of investigations and enforcement measures by the CBSA. It is worth noting that the CBSA may exercise its powers not only at the border, but also once the goods have been sold or passed on to other persons in Canada. In other words, the CBSA is authorized to enforce the import prohibition pursuant to the <em>Customs Act </em>post-importation. In essence, as the powers of the CBSA subsist even after the imported goods have changed hands, all businesses (irrespective of their size) that directly or indirectly deal with imported goods should make proper inquiries about their origins.</p> <p>Furthermore, it should be pointed out that the <em>Customs Act</em> specifically prohibits any person from possessing, purchasing, selling, exchanging or otherwise acquiring or disposing of any imported goods that are subject to an import ban. Therefore, this means that a Canadian retailer or end-user, for example, could also (in theory) face criminal charges just for selling or being in possession of goods subject to the import prohibition. Accordingly, all businesses dealing with imported goods (irrespective of their size) should take reasonable steps to ensure such goods are compliant with Canadian law. </p> <p>As the CBSA is the only federal department or agency in charge of enforcing the import prohibition, any business or end-consumer finding that they may be in possession of imported goods subject to the import prohibition should contact the CBSA’s Border Watch Tip Line. It is noteworthy that the acceptance of a voluntary disclosure by the CBSA does not necessarily preclude criminal prosecution. </p> <h2>4. Criminal Code Provisions</h2> <p>While the Act establishes reporting requirements, direct regulation of coercive exploitation of individuals (modern slavery) is left to the <a rel="noopener noreferrer" target="_blank" href="https://laws-lois.justice.gc.ca/eng/acts/c-46/page-41.html#h-120700"><em>Criminal Code</em></a>. Section 279.01 of the <em>Code</em>, “Trafficking in Persons”, establishes a sentencing range of 4 years to life imprisonment for anyone who transfers, holds, harbours (etc.) a person, or controls the person’s movements for the purpose of exploiting them or facilitating their exploitation (the most severe penalties apply where the exploitation involves a kidnapping or violent act). Since 2010, child labour has been dealt with by Section 279.011: where the person is a minor, the sentencing range is 5 years to life imprisonment (or 6 years to life, if a kidnapping or violent act occurs).</p> <p>“Exploitation” in this context is defined in Section 279.04 as causing a person to provide labour or a service by:</p> <p>“engaging in conduct that, in all the circumstances, could reasonably be expected to cause the other person to believe that their safety or the safety of a person known to them would be threatened if they failed to provide, or offer to provide, the labour or service.”</p> <p>The same words are used in the definition of “forced labour” in the Act. In determining whether exploitation has occurred, courts may consider factors such as the use of coercion (i.e., a threat or use of force) or deception by the accused and/or any abuse by the accused of a position of trust, power or authority (<em>Criminal Code</em>, s. 279.04(2)).</p> <p>Those who knowingly materially benefit from a breach of the trafficking provisions, whether directly or indirectly, can also face charges and up to 10 years incarceration or 14 in the case of the trafficking of a child.</p> <p>The above provisions apply extraterritorially to Canadian citizens and permanent residents. It appears that any conduct by a business within Canada, or material benefits derived from exploitation occurring in Canada, could create criminal liability under these sections. But so could conduct outside of Canada by a Canadian, or material benefits derived from such conduct.</p> <p><em>Criminal Code</em> provisions relating to extortion (s. 346(1)), kidnapping (s. 279(1)) and forcible confinement (s. 279(2)) could also be relevant in extreme situations, although there is no provision in the <em>Criminal Code</em> for applying them to conduct outside Canada.</p> <h2>5. Class Actions and Regulator Scrutiny</h2> <p>A recent British Columbia Court of Appeal <a rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/bc/bcca/doc/2023/2023bcca264/2023bcca264.html?autocompleteStr=Hershey%20Company%20v%20Leaf&autocompletePos=1">class action certification ruling</a> raises a significant issue for companies making “modern slavery” statements under Bill S-211 or otherwise. The representative plaintiff in the proposed class action (the “Plaintiff”) argued that he and other members of the proposed class had been influenced to purchase grocery items associated with the two defendants (the “Defendants”), a U.S.-based candy manufacturer (the “Appellant”) and its Canadian subsidiary (the “Canadian Defendant”).</p> <p>This ruling concerned the Appellant’s claim that the B.C. court lacked jurisdiction over it due to the lack of a real and substantial connection between the Appellant and British Columbia. The Court of Appeal agreed and dismissed the class action as regards the Appellant (the Canadian Defendant did not dispute the B.C. court’s jurisdiction in this hearing). Thus this ruling did not attempt to resolve the negligent misrepresentation issues themselves, the existence of which nonetheless provides some food for thought.</p> <p>The Plaintiff’s notice of civil claim noted two publications of the Defendants:</p> <ul> <li>Their <strong>2014 Corporate Social Responsibility Report,</strong> in which it was stated: <ul> <li>that the Defendants were “actively involved in large-scale efforts that are committed to rooting out forced labour, especially forced labour” in their cocoa supply chain; and</li> <li>that they “have zero tolerance for the ‘worst forms of child labour’ in their supply chain” as defined under two different ILO conventions; and</li> </ul> </li> <li>Their <strong>Supplier Code of Conduct</strong>, which stated: <ul> <li>that the Defendants are “committed to the elimination of the ‘worst forms of child labor’;” and</li> <li>that certain forms of child labour are prohibited from their supply chain.</li> </ul> </li> </ul> <p>The Plaintiff then went on to assert that child labour and slavery are in fact “prevalent” in the Defendants’ supply chain in the developing world and that the impression to the contrary created by the documents referred to above is false and misleading to retail purchasers of Defendants’ chocolate products given that it is not corrected by any disclosures on the packaging.</p> <p>Overruling the trial judge, the Court of Appeal held that the Plaintiff had not provided sufficient evidence of the facts surrounding the alleged misrepresentations to allow a B.C. court to take jurisdiction over the Appellant. Nor had the Plaintiff shown that the Appellant carried on business in the province, a fact that might also, in theory, have grounded an assertion of jurisdiction even if the tort had occurred elsewhere.</p> <p>Nevertheless, the case against the Canadian Defendant is apparently proceeding. One takeaway from this is that, while it is natural to make optimistic and positive assertions in public statements, advertising or more formal types of disclosure, all such disclosure should be subject to proper diligence and support to avoid the risk of this type of exposure. Furthermore, while the viability of this type of negligent misrepresentation class action is not clear, there may be exposure under applicable Canadian securities laws that impose liability for both primary and secondary market disclosure, and risk of regulatory action. As the popularity of “ethical investing” creates real economic advantages for organizations with strong CSR records, supply chain transparency claims may come under the scrutiny of the Competition Bureau and securities regulators – much as has already happened with “greenwashing” controversies surrounding some corporate environmental claims (see our post on <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/competitor/highlights-from-the-competition-bureaus-green-growth-summit">the Competition Bureau’s “Green Growth” summit</a> and, with respect to securities regulators, <a rel="noopener noreferrer" target="_blank" href="https://www.osc.ca/sites/default/files/2022-11/csa_20221103_51-364_continuous-disclosure-review.pdf">CSA Staff Notice 51-364 Continuous Disclosure Review Program Activities for the fiscal years ended March 31, 2022 and March 31, 2021</a>, at 9363-64).</p> <p><em>The authors would like to thank Ryan Albaum and David Kumar, summer students in the Toronto office of Stikeman Elliott LLP, for their contributions to this article.</em></p>06-Sep-2023 04:45:00{B7C04A6C-C5CC-4E5A-94BB-933385545ACB}https://www.stikeman.com/en-ca/kh/canadian-ma-law/british-columbias-beneficial-ownership-transparency-registerDenise Duifhuishttps://www.stikeman.com/en-ca/people/d/denise-duifhuisCanadian M&A LawCorporations & Commercial Law UpdateBritish Columbia's Beneficial Ownership Transparency Register: Overview and Status Update<p><strong>As part of a global effort to improve corporate transparency and combat serious financial crime, private companies incorporated under the British Columbia <em>Business Corporations Act </em>(“BCBCA”) have been required to prepare and maintain a Transparency Register since October 1, 2020. The Register must list individuals who directly or indirectly control 25% or more of the shares or votes of the company and include certain personal information about them. The British Columbia legislature recently approved changes to the BCBCA that would require BC companies to submit certain information from their respective Transparency Registers to the BC Registrar of Companies for publication. As discussed below, the public registry is expected to be up and running by 2025.</strong></p> <p><em>Note: This post updates and replaces our original March 5, 2020 and September 23, 2020 posts in light of recent legislative changes and other developments.</em></p> <h1>Overview and Status Update</h1> <h2>Comparison with the CBCA’s ISC Register</h2> <p>Private BCBCA companies have been required to prepare a Transparency Register since October 1, 2020. The Transparency Register is similar in principle to the <a rel="noopener noreferrer" target="_blank" href="https://stikeman.com/en-ca/kh/canadian-ma-law/Corporate-Control-Transparency-in-Canada">register of individuals with significant control</a> (“<strong>ISC Register</strong>”) under the <em>Canada Business Corporations Act</em> (“<strong>CBCA</strong>”), which has been in effect since mid-2019. However, the BCBCA Transparency Register does depart from the CBCA model in a number of significant respects, unlike the other provinces which, with a few exceptions, adopted transparency provisions that are virtually identical to those in the CBCA. Some of the differences between the BCBCA and CBCA registers are summarized at the end of this post. Additional analysis is available in our discussions of the <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/corporations-commercial-law/beneficial-ownership-transparency-in-canada-an-evolving-regulatory-landscape">progress of beneficial ownership transparency legislation across Canada</a> and of <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/cbca-beneficial-ownership-register-2-0-public-access-stronger-investigatory-powers">changes to the CBCA model</a> that have been recently been proposed and/or implemented.</p> <h2>Overview of the BCBCA provisions</h2> <p>As discussed below in greater detail, the Transparency Register provisions in <a rel="noopener noreferrer" target="_blank" href="https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/02057_055#part4.1">Part 4.1 of the BCBCA</a> impose the following obligations, among others:</p> <ul> <li>BCBCA private companies are<strong> required to prepare and regularly update </strong>a Transparency Register that includes for each person who is a significant individual, as discussed below:</li> <ul> <li>the significant individual’s name, birthdate, address, citizenship and tax jurisdiction;</li> <li>a description of how the individual is a significant individual; and</li> <li>the date on which the individual became or ceased to be a significant individual. </li> </ul> <li>There are <strong>several tests for determining who is a significant individual</strong>, as discussed below.</li> </ul> <ul> <li><strong>Wholly-owned subsidiaries of public companies</strong>, as well as certain other entities, as discussed below, are exempt from the requirement to maintain a Transparency Register. The B.C. Ministry of Finance may consider future exemptions.</li> </ul> <ul> <li>Access to the Transparency Register is currently <strong>restricted </strong>to directors of the company, police officers, the tax authorities of British Columbia and Canada and certain regulators (including but not limited to the British Columbia Securities Commission, the British Columbia Financial Services Authority, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and the Law Society of British Columbia). Those who access the Register may use the information for certain specific purposes only.</li> </ul> <ul> <li>A company that fails to maintain a Transparency Register or incorrectly includes or omits information could be <strong>liable to fines of up to $100,000</strong>, and individuals who fail to comply with the requirements can be liable to fines of up to $50,000.</li> </ul> <p>The Government of British Columbia (“<strong>BC Government</strong>”) has created a <a rel="noopener noreferrer" target="_blank" href="https://www2.gov.bc.ca/gov/content/employment-business/business/bc-companies/transparency-register/transparency-register-questions">website</a> that provides guidance on creating a Transparency Register and on how to decide who qualifies as a “significant individual”.</p> <h2>Proposed changes to the BCBCA to create a central repository for Transparency Registers</h2> <p>On March 29, 2023, the BC Government introduced proposed amendments to the BCBCA in <a rel="noopener noreferrer" target="_blank" href="https://www.bclaws.gov.bc.ca/civix/document/id/bills/billscurrent/4th42nd:gov20-1">Bill 20</a> (the “<strong>BCBCA Amendments</strong>”). The BCBCA Amendments received royal assent on May 11, 2023, but will come into force by regulation. The BCBCA Amendments will create a central corporate beneficial ownership registry to make public certain information regarding beneficial owners of BCBCA companies. The new registry would follow similar privacy practices as the British Columbia Land Owner Transparency Registry. According to the Ministry of Finance <a rel="noopener noreferrer" target="_blank" href="https://news.gov.bc.ca/releases/2023FIN0025-000395">news release</a>, “The registry is expected to be launched in 2025. Once it is up and running, businesses will be required to submit and confirm this information once per year and any time there is a significant change in ownership or control.”</p> <p>Other changes in the BCBCA Amendments include:</p> <ul> <li>Adding the social insurance number or individual tax number assigned to the significant individual by the Canada Revenue Agency to the information required to be included in the Transparency Register; and</li> <li>Reducing the time to update changes in information in the Transparency Register from 30 days to 15 days.</li> </ul> <p>The analysis for determining who is a significant individual is not expected to change as a result of the BCBCA Amendments, and private BC companies will continue to be required to prepare and maintain the Transparency Register. However, they will also need to file certain information from the Transparency Register with the BC corporate registry.</p> <p>Many provisions in the BCBCA Amendments refer to matters that may be prescribed by regulation. Therefore, further details may be provided before the BCBCA Amendments come into force. We also understand that the BC Government may hold public consultations with respect to the regulations, will update the information on its website, and expects to give presentations before the new requirements from the BCBCA Amendments come into effect.</p> <p>We will continue to monitor the BCBCA Amendments and any proposed regulations and will provide further updates as they become available.</p> <p>The balance of this post addresses the Transparency Register requirements currently in force in BC for BCBCA companies.</p> <h1>Frequently Asked Questions</h1> <h2>Which companies need a Transparency Register?</h2> <p>The requirement to maintain a Transparency Register applies to any “private company” incorporated under the BCBCA – specifically a company that is not a reporting issuer, a reporting issuer equivalent, listed on a <a rel="noopener noreferrer" target="_blank" href="https://www.canada.ca/en/department-finance/services/designated-stock-exchanges.html">designated stock exchange</a> within the meaning of section 248(1) of the <a rel="noopener noreferrer" target="_blank" href="http://canlii.ca/t/7vb7"><em>Income Tax Act</em></a> (Canada), or within a prescribed class of companies.</p> <p>The following classes of BC companies have been exempted by regulation from the requirement to maintain a Transparency Register:</p> <ul> <li>wholly-owned subsidiaries of reporting issuers, reporting issuer equivalents or companies listed on a designated stock exchange within the meaning of section 248(1) of the <em>Income Tax Act </em>(Canada) (“<strong>public companies</strong>”);</li> <li>trust companies and insurance companies, each as defined in the <em>Financial Institutions Act</em>;</li> <li>government corporations as defined in the <em>Financial Administration Act </em>(“<strong>government </strong><strong>corporations</strong>”);</li> <li>wholly-owned subsidiaries of a special act corporation;</li> <li>companies that operate as independent schools;</li> <li>companies resulting from the conversion of a corporation under the <em>School Act</em>; and</li> <li>wholly-owned subsidiaries of municipalities, regional districts, and Indigenous nations.</li> </ul> <p>Additional exemptions may be made by regulation in the future.</p> <p>All BCBCA companies that do not fall under an exemption are required to prepare and maintain a Transparency Register.</p> <h2>Where is the Transparency Register kept, and in what format?</h2> <p>A private company must keep its Transparency Register at its records office in British Columbia either in electronic form or in a bound or loose-leaf form. Provided that it is available for inspection and copying at its records office by means of a computer terminal or other electronic technology, the Transparency Register, in a bound or loose-leaf form, may be kept at a location other than the company’s records office.</p> <h2>Whose names go into the Transparency Register?</h2> <p>The Transparency Register must contain information for each “significant individual”. An individual will be considered significant with respect to the company if the individual has:</p> <ul> <li>any of the following interests or rights or a combination of them in a significant number of the shares (being 25% or more of the issued shares, or 25% or more of the voting rights):</li> <ul> <li>an interest as a registered owner of at least one of the company’s shares;</li> <li>an interest as a beneficial owner of at least one of the company’s shares (other than an interest contingent on the death of another individual); or</li> <li>indirect control of at least one of the company’s shares;</li> </ul> <li>the right, indirect control of the right, and/or the ability to exercise direct and significant influence over an individual who has the right or indirect control of the right to elect, appoint or remove a majority of the directors; or a prescribed interest, right or ability, or is subject to a prescribed criterion or circumstance.</li> </ul> <p>The regulations set out additional detail with respect to “indirect control” and when certain persons are deemed to control intermediaries, including corporations, partnerships and trusts.</p> <p>As noted above, the BCBCA provisions specifically exempt wholly-owned subsidiaries of public companies from the Transparency Register requirement. In addition, as discussed below, certain “Special Intermediaries” (and their owners) are not required to be listed in the Transparency Register.</p> <p>Some of the key concepts in the “significant individual” definition are considered below.</p> <h2>Significant influence</h2> <p>Under certain circumstances, an individual who would otherwise not qualify as a significant individual may nevertheless be able to influence a second individual who has or indirectly controls the right to elect, appoint or remove one or more of the company’s directors. If such influence is “direct and significant”, the first individual is a significant individual under the legislation and must be included the Transparency Register.</p> <p>Importantly, the BC Government states on its <a rel="noopener noreferrer" target="_blank" href="https://www2.gov.bc.ca/gov/content/employment-business/business/bc-companies/transparency-register/transparency-register-questions">website</a> that “direct and significant influence” for these purposes “must come from a legally binding or enforceable arrangement, such as a legal agreement or contract.” The corollary of this is that significant influence does not include non-legal forms of influence, such as the influence of familial relationships, major customers or other business circumstances involving economic dependence.</p> <p>Examples of arrangements that would count as “significant influence” include:</p> <ul> <li>share transfer agreements whereby the transferor retains approval rights for the replacement of the board of directors; and</li> <li>loan agreements (to finance the private company) whereby the lender retains the right, in its absolute discretion, to recall the loan <strong>and </strong>the following were made clear:</li> </ul> <ul> <ul> <ul> <li>the lender will recall the loan if the lender disagrees with who sits on the board of directors; <strong>and</strong></li> <li>the private company will not survive without the financial support of the loan.</li> </ul> </ul> </ul> <h2>Interests or rights held jointly</h2> <p>If two or more individuals jointly own one of the above interests or rights, then each such individual is “significant” for the purposes of the Transparency Register and must therefore be listed.</p> <h2>Interests or rights exercised in concert</h2> <p>Groups of individuals who, under an agreement or arrangement, are acting in concert must add their interests together for the purpose of the “significant individual” test. If the group as a whole has interests that meet either the 25% threshold or, alternatively, has the direct or indirect right to elect, appoint or remove a majority of the directors of a private company, the company must list every member of the group in its Transparency Register.</p> <p>The rules regarding acting in concert may have potentially significant impacts on family businesses because certain persons, such as a spouse or a son, daughter or other relative of the person or person’s spouse living in the same home, are all presumed to act in concert. This means that, when determining who is a significant individual, private companies must add together the interests of persons who are “associates” if their combined interests meet the requirements to be a significant individual. Associates include spouses as well as children or other relatives who live in the same home.</p> <h2>Registered vs. beneficial ownership</h2> <p>The BCBCA provides that beneficial ownership “includes ownership through any trustee, personal or other legal representative, agent or other intermediary,” but does not otherwise define “beneficial ownership”. The BC Government’s website differentiates “registered ownership” from “beneficial ownership” as follows:</p> <ul> <ul> <ul> <li>A registered owner holds the shares personally and is listed as a shareholder in the central securities register; and</li> <li>A beneficial owner is an individual who is legally entitled to receive benefits of property rights in equity even though legal title of the property belongs to another person (e.g. the trustee of a trust is the registered owner and the beneficiary is the beneficial owner).</li> </ul> </ul> </ul> <h2>Direct vs. indirect control</h2> <p>When shares are held by an intermediary, the following control concepts may be important in determining who the significant individuals of the company are:</p> <ul> <li><strong>Corporation: </strong>control is a product of the right to elect or appoint a majority of the directors of the corporation;</li> <li><strong>Partnership (other than a limited partnership): </strong>each partner is deemed to control a partnership;</li> <li><strong>Limited Partnership: </strong>the general partner and any limited partner with any of the following rights are deemed to control a limited partnership:</li> <ul> <li>entitlement to at least 25% of the profits of the limited partnership;</li> <li>entitlement to at least 25% of the assets of the limited partnership on windup;</li> <li>the right to at least 25% of the votes in partnership management; or</li> <li>the right to appoint or remove the majority of the partnership’s management.</li> </ul> <li><strong>Agent: </strong>controlled by the principal of the agent; and<strong></strong></li> <strong> </strong> <li><strong>Trustee or a legal representative: </strong>control derives from the ability to direct the exercise of the rights attached to shares or the rights creating the ability to appoint or remove one or more of the directors of a private company.</li> </ul> <p>An individual will have indirect control over shares if the individual (who is not an intermediary) controls an intermediary that is the registered owner of the shares or controls a chain of intermediaries, the last of which is the registered owner of the shares.</p> <p>An individual will have indirect control of rights relating to the ability to elect, appoint or remove one or more directors of a private company if the individual (who is not an intermediary) controls an intermediary that has the right or controls a chain of intermediaries, the last of which has that right. Additionally, an individual will be considered to have such a right if the individual is a trustee or personal or other legal representative in a chain of intermediaries, the last of which has that right.</p> <h2>Special Intermediaries not required to be included in Transparency Register</h2> <p>Under the indirect control rules described above, a natural person who indirectly controls the shares or the board of the company must generally be included in the Transparency Register. This is not the case, however, if an entity that is a “Special Intermediary” under the Regulations owns shares of the company or is in its chain of ownership. Where that is the case, the analysis with respect to those shares simply stops: it is not necessary to “look through” the entity for natural persons who own or control it and no such persons need be included in the Transparency Register (unless they qualify on another ground).</p> <p>Special Intermediaries include:</p> <ul> <li>public companies;</li> <li>wholly-owned subsidiaries of public companies;</li> <li>special act corporations and their wholly-owned subsidiaries;</li> <li>government corporations;</li> <li>corporations that are agents of or controlled by Canada or a province;</li> <li>companies incorporated or wholly-owned by municipalities or regional districts;</li> <li>trust companies, insurance companies and credit unions, each as defined in the <em>Financial Institutions Act</em>;</li> <li>certain schools;</li> <li>trustees of a testamentary trust; and</li> <li>the Public Guardian and Trustee (the “<strong>PGT</strong>”), or a public officer or corporation with functions similar to the PGT.</li> </ul> <p>For example, if a public company directly or indirectly owns 25% of the shares of the company, the company does not need to determine if any individual controls that public company. However, the company still needs to determine if there are significant individuals with respect to the remaining 75% of the shares of the company. On the other hand, if a company is wholly-owned by a public company, the company is not required to prepare a transparency register at all.</p> <h2>How do we prepare the Transparency Register?</h2> <p>For some private companies, it is relatively easy to determine who the significant individuals are. In other cases, the analysis is more complicated, particularly if:</p> <ul> <li>shares are registered in the name of an intermediary (whether a corporation, partnership, agent, trustee or personal or other legal representative); or</li> <li>there are multiple classes of shares or an agreement that governs voting rights and control of the company.</li> </ul> <p>The BC Government suggests that companies start by looking at the central securities register and the articles of the company to determine which individuals have one or both of the following:</p> <ul> <li>direct or indirect interests in 25% of the shares or 25% of the votes; or</li> <li>rights to elect, appoint or remove a majority of the directors of the company.</li> </ul> <p>Such a review might also help to identify individuals who are related to one another or who could be acting in concert.</p> <p>Once the company has identified who the significant individuals are or has determined that it needs more information from a shareholder that is an intermediary, the company will need to contact the shareholders in order obtain the required information for the Transparency Register.</p> <p>The BC Government’s website provides a <a rel="noopener noreferrer" target="_blank" href="https://www2.gov.bc.ca/assets/gov/employment-business-and-economic-development/bc-companies/sample-significant-individual-questionnaire.docx">sample questionnaire for shareholders</a> as well as a sample <a rel="noopener noreferrer" target="_blank" href="https://www2.gov.bc.ca/assets/gov/employment-business-and-economic-development/bc-companies/transparency-register-template.docx">Transparency Register template</a>.</p> <p>As noted below, once a company has prepared its Transparency Register, the company has an obligation to notify each individual who is listed on the Transparency Register within 10 days.</p> <h2>What information must the Transparency Register contain?</h2> <p>The Transparency Register must include the following details for each significant individual of the private company:</p> <ul> <li>full name, date of birth and last known address;</li> <li>citizenship;</li> <li>whether the individual is a resident of Canada for purposes of the <em>Income Tax Act </em>(Canada);</li> <li>a description of how the individual is a significant individual; and</li> <li>the date on which the individual became or ceased to be a significant individual. </li> </ul> <p>If there are no significant individuals, the Transparency Register must expressly say so.</p> <h2>What if a shareholder does not provide the required information to the company?</h2> <p>Shareholders have a duty to take reasonable steps to compile and promptly provide information to the private company following a request by the company for information for the Transparency Register. However, if a private company is unable to obtain or confirm some or all of the required information, the Transparency Register must set out the information that the company was able to obtain, together with the steps it took to obtain or confirm the missing or unconfirmed information.</p> <p>Certain penalties apply to shareholders who fail to provide accurate information, as noted below under “Penalties”.</p> <h2>Who has access to the Transparency Register?</h2> <p>Only the following persons currently have access to the Transparency Register:</p> <ul> <li>directors of the company;</li> <li>police officers;</li> <li>the tax authorities of British Columbia and Canada; and</li> <li>certain specific regulators, including but not limited to the British Columbia Securities Commission, the British Columbia Financial Services Authority, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and the Law Society of British Columbia.</li> </ul> <h2>For what purposes can these persons inspect the Register?</h2> <p>It is important to remember that those with access to the Transparency Register may do so only for specific purposes relating to their functions:</p> <ul> <li>Officials and employees of taxing authorities are permitted to inspect the Transparency Register only for specific purposes related to the administration and enforcement of tax laws.</li> <li>Police officers are permitted to inspect the Transparency Register only for specific law enforcement purposes.</li> <li>Officials and employees of other regulators are permitted to inspect the Transparency Register only for purposes related to administering or enforcing a law for which the regulator is responsible.</li> </ul> <p>In each case, the authorities may also inspect the Transparency Register to provide information to assist their counterparts in another jurisdiction if this assistance is authorized under an arrangement, written agreement or treaty.</p> <p>Unlike the CBCA’s ISC Register, shareholders and creditors are not permitted to access the Transparency Register (unless they are entitled to do so in their separate capacity as directors).</p> <h1>Ongoing Obligations</h1> <p>After the company has prepared its Transparency Register, it must notify each individual who is listed in the register within 10 days (the same applies whenever an individual is added to the register as well as when the company notes in its register that an individual is no longer a “significant individual”). Significant individuals must remain on the Transparency Register for 6 years after they cease to have that status and must then be removed from the register within 1 year.</p> <p>Companies with a Transparency Register are required to take reasonable steps to confirm or update the register annually within 2 months of the company’s anniversary of incorporation. In addition, if the company becomes aware of new information relevant to the Transparency Register (for example, because of a share transfer or issuance of shares), the register must be updated within 30 days.</p> <h1>Offences and Penalties</h1> <h2>Companies</h2> <p>A private company will be considered to have committed an offence (subject to a knowledge and diligence defence) if it does the following in respect of the company:</p> <ul> <li>incorrectly identifies an individual as a significant individual;</li> <li>excludes an individual who is a significant individual;</li> <li>includes information about a significant individual that is false or misleading in respect of a material fact; or</li> <li>omits information about a significant individual and the omission makes the information false or misleading.</li> </ul> <h2>Directors and officers</h2> <p>Any director or officer of the company who permits or acquiesces in the above listed offences also commits an offence, whether or not the company is prosecuted (similarly subject to a knowledge and diligence defence).</p> <h2>Shareholders</h2> <p>A shareholder commits an offence if the shareholder:</p> <ul> <li>fails to comply with its obligation to provide to the company the information for the Transparency Register; or</li> <li>provides information for the Transparency Register that is false or misleading or omits a material fact, and the omission is false or misleading (and the shareholder knows or should reasonably have known that such information or omission is false or misleading).</li> </ul> <h2>Amounts</h2> <p>A person other than an individual who commits one of these offences is liable to a fine of not more than $100,000.00, while an individual who commits one of these offences is liable to a fine of not more than $50,000.00. Imprisonment is not a penalty under the British Columbia legislation.</p> <h1>Notable Exclusions</h1> <p>These requirements do not apply to public companies, wholly-owned subsidiaries of public companies, extra-provincial companies or certain other companies (described above under <em>Which companies need a Transparency Register?</em>). The BC Government may consider additional exemptions in the future.</p> <h1>BCBCA and CBCA: Some Key Differences</h1> <p>There are several significant differences between BCBCA Transparency Register and the CBCA ISC Register, including those summarized below:</p> <h2>Individuals who belong on the Register</h2> <p>The following criteria and concepts are used in determining who is to be included in the CBCA ISC Register but not in the BCBCA Transparency Register:</p> <ul> <li>value of shares owned;</li> <li>“voting rights” (rather than “rights to vote at general meetings” in the BCBCA); and</li> <li>“direct control” of a company’s directors (rather than the right to elect, appoint or remove one or more of the company’s directors in the BCBCA).</li> </ul> <p>On the other hand, there are some things in the BCBCA provisions that are absent, or at least differently treated, in the CBCA, including:</p> <ul> <li>“indirect control” with respect to the company’s shares and/or the right to elect, appoint or remove one or more of the company’s directors is addressed in the British Columbia regulations, with specific reference to chains of intermediaries;</li> <li>a narrower definition “influential person” in the BCBCA; and</li> <li>the requirement that specific family members be included when making the determination for significant individuals under the BCBCA.</li> </ul> <h2>Form and contents of the Register</h2> <p>The BCBCA provides more specifications in some instances than the CBCA regarding content of the Transparency Register. Notably, it requires citizenship information (whether Canadian or otherwise). The Bill C-42 amendments to the CBCA, which are currently before Parliament, would add citizenship to the list of information to be collected under the federal statute as well.</p> <h2>Maintenance of the Register</h2> <p>Unlike the CBCA, the BCBCA specifically requires the following with respect to maintenance of the Transparency Register:</p> <ul> <li>A company must notify individuals within 10 days of such individual being placed on or removed from the Transparency Register.</li> <li>The Transparency Register must be reviewed annually within 2 months of the company’s anniversary of incorporation (whereas the CBCA ISC Register must be updated at least once during each financial year, but without a specific time frame for the update).</li> </ul> <p>Recent amendments to the CBCA regulations now require CBCA corporations to take certain steps if they are unable to identify any individuals with significant control, including sending a request for information to individuals listed in the ISC Register, shareholders, and any other person that the corporation has reasonable grounds to believe may have relevant knowledge regarding an individual with significant control.</p> <h2>Inspection rights</h2> <p>There are a number of differences between the two regimes when it comes to access rights, including the following:</p> <ul> <li>The tests for access to the Transparency Register by the tax authorities, police officers and regulators are different under the BCBCA than the CBCA (for example, the CBCA lists specific offences to which an access request must relate).</li> <li>Shareholders and creditors do not currently have access rights under the BCBCA, although under the BCBCA Amendments certain information will become publicly available.</li> <li>General public access rights have been proposed in the Bill C-42 amendments to the CBCA but have not yet been passed by Parliament.</li> </ul> <h2>Various requirements and penalties</h2> <p>Other distinctions between the BCBCA Transparency Register and the CBCA ISC Register include:</p> <ul> <li>The BCBCA’s prohibition against listing someone who is <strong>not </strong>a significant individual (the CBCA has no comparable provision).</li> <li>The heavier burden placed on the shareholders under the BCBCA by virtue of the fact that they must complete due diligence (rather than answering to the best of their knowledge as under the CBCA).</li> <li>The possibility of imprisonment as a penalty for individuals who fail to comply with the requirements under the CBCA (imprisonment is not a potential penalty under the BCBCA).</li> </ul> <h1>Exemptions</h1> <p>As discussed above under <em>Which companies need a Transparency Register?, </em>wholly-owned subsidiaries of public companies and certain other types of companies are exempt from the requirement to prepare a Transparency Register. There are now exemptions from the CBCA ISC Register requirements for wholly-owned subsidiaries of public companies, federal Crown corporations or provincial Crown corporations, but the other BC exemptions do not apply for CBCA corporations.</p> <p>As discussed under <em>Special Intermediaries not required to be included in Transparency Register</em>, Special Intermediaries, including public companies, are not required to be listed in the transparency register. Currently, there are no equivalent exemptions from the CBCA ISC Register requirements.</p>06-Sep-2023 02:03:00{500993CC-667D-4D36-960D-8EEE27536B35}https://www.stikeman.com/en-ca/kh/canadian-ma-law/corporate-finance-and-ma-in-quebec-finding-the-bright-spots-in-a-challenging-yearMary Opolkohttps://www.stikeman.com/en-ca/people/o/mary-opolkoTrevor Rowleshttps://www.stikeman.com/en-ca/people/r/trevor-rowlesCanadian M&A LawCorporate Finance and M&A in Québec: Finding the Bright Spots in a Challenging Year<p><strong>In 2023, private equity, mergers and acquisitions and venture capital financings have experienced a slowdown across Canada, on the heels of a historically strong year in 2022. In this post we look specifically at the province of Québec, which has not escaped this broader trend, but whose bright spots remain resilient, boding well for 2024 and beyond.</strong></p> <h2>Deal Flow in H1 2023</h2> <p>In Québec, as in most other Canadian provinces, the number of transactions and capital investments declined in Q1 2023 compared to the previous year. Though there appears to have been an uptick in deal flow in Q2 2023, inflation, rising interest rates and geopolitical events – as well as reverberations from U.S. regional bank failures – continue to affect transactional activity and financing availability.</p> <h2>Bright Spots</h2> <p>The overall picture, however, is not all negative. There are some bright spots.</p> <h3>Québec’s venture capital market</h3> <p>Québec’s venture capital market saw notable financing rounds and remained active in Q1 2023, despite market headwinds and an overall decline in activity. Québec-based institutional investors have continued to invest in home-grown companies. Within the province, Montréal continues to have the largest network of emerging companies and venture capital investors. </p> <h3>Montréal continues to develop as a global hub for AI research</h3> <p>The province of Québec remains at the forefront of artificial intelligence research and development. Montréal’s particularly robust ecosystem, influenced by the city’s universities and research centres, is a bright spot that continues to attract investment in academic research and private companies. As AI grows in importance politically, economically and socially, so too does the conversation around its governance and purpose. Quebecers are among the thought leaders in many aspects of AI – one example being its potential application to healthcare, as discussed in a recent <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/firm/news/danielle-miller-olofsson-spoke-about-the-growing-use-of-ai-technology-in-healthcare">article Danielle Miller Olofsson</a> of Stikeman Elliott.</p> <h2>Capital Raising</h2> <p><strong>Venture capital</strong></p> <p>While Québec’s venture capital market is a bright spot, raising capital in current market conditions has proven challenging for some companies as rising interest rates have resulted in increased borrowing costs. One consequence is that down-round equity financings – where the pre-money valuation of a company is below the post-money valuation of a previous financing round – have become a more palatable and necessary means for raising venture capital.</p> <h3>Midmarket trends</h3> <p>The midmarket saw a dip in valuations in 2022 compared to 2021. Whether valuations rebound will be closely watched by the market through the remainder of 2023. Midmarket companies with proven track records and strong financials also appear to be continuing to attract investors while – as might be expected – smaller or newer companies are finding it increasingly difficult to raise capital. Though this will inevitably require some companies to consider insolvency/restructuring options, rising borrowing costs may also present opportunities for strategic acquirors that could prompt an increase in the number of transactions in the lower midmarket</p> <p>For further discussion, see “Episode 88 – The Midmarket at Mid-Year: How 2023 Is Shaping Up” and other recent episodes of the <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/Views-from-the-Market-Midmarket-MandA-and-Private-Equity-Podcast">Views from the Market: Midmarket M&A and Private Equity podcast</a>, hosted by Stikeman Elliott’s Mario Nigro and featuring guests with a wide range of perspectives on the Canadian midmarket.</p> <h2>Exits</h2> <p>Though there may now be some potential signs of life, the IPO market largely remained dormant during H1 2023, continuing a trend that emerged in 2022. The typical alternative to an IPO for shareholders seeking an exit is through an acquisition of their company. M&A activity resulting from succession planning, particularly amongst small- and medium-sized, privately-owned enterprises, as well as from well-capitalized midmarket companies looking for strategic acquisitions, continues to be a source of transactions in the current environment.</p> <p>The phenomenon of companies with strong balance sheets acquiring smaller companies has not been limited to the private markets. In H1 2023, there have been some notable going-private transactions in Canada, including in the biopharmaceutical space.</p> <h2>Recent Legislative Changes in Québec</h2> <p>As Québec-based companies dealt with market factors, new legislative requirements came into force in H1 2023, notably the new corporate transparency requirements of Bill 78, and the new French-language requirements of Bill 96.</p> <p>Bill 78 (<em>An Act mainly to improve the transparency of enterprises</em>) came into force on March 31, 2023, introducing significant corporate transparency requirements to the <em>Act respecting the legal publicity of enterprises</em>. Although transparency initiatives have been adopted in other provinces and at the federal level, Québec is the first Canadian jurisdiction to make corporate and other ultimate beneficiary information publicly accessible. For example, the new rules require companies registered in Québec to obtain and file information regarding the individuals ultimately behind their investors when certain thresholds are met, such that affected companies may wish to discuss these requirements with any new investors at the outset. For more detail, please see our <a href="https://www.stikeman.com/en-ca/kh/corporations-commercial-law/quebec-announces-in-force-dates-for-new-corporate-transparency-requirements">blog post</a> on this topic.</p> <p>More recently, on June 1, 2023, amendments to Bill 96 (<em>An Act respecting French, the official and common language of Québec</em>) took effect, introducing, amongst other things, new rules applying to adhesion (standard form) contracts and filing requirements under the <em>Act respecting the legal publicity of enterprises. </em>In the latter case, enterprises employing between five and 49 people must disclose in their declaration to the REQ (Québec's enterprise register) the proportion of employees who are unable to perform their work in French. Obtaining this information has become a closing or post-closing action item for purchasers in acquisitions affecting Québec-based targets. For more detail on the amendments to Bill 96, please see our <a href="https://www.stikeman.com/en-ca/kh/corporations-commercial-law/quebecs-language-legislation-be-ready-for-important-changes-impacting-commercial-contracts-trademark">blog post</a> on this topic.</p>21-Aug-2023 04:22:00{9BF793B7-53AB-4FA0-8A7F-E8BA7C5FF50A}https://www.stikeman.com/en-ca/kh/canadian-ma-law/cbca-beneficial-ownership-register-2-0-public-access-stronger-investigatory-powersAndrew S. Cunninghamhttps://www.stikeman.com/en-ca/people/c/andrew-s-cunninghamJanene Charleshttps://www.stikeman.com/en-ca/people/c/janene-charlesDenise Duifhuishttps://www.stikeman.com/en-ca/people/d/denise-duifhuisTrevor Rowleshttps://www.stikeman.com/en-ca/people/r/trevor-rowlesCanadian M&A LawCorporations & Commercial Law UpdateCBCA Beneficial Ownership Register 2.0: Public Access, Stronger Investigatory Powers and Better Guidance are Coming<p><strong>Canada’s federal beneficial ownership transparency provisions are changing. Since 2019, most <em>Canada Business Corporations Act</em> (CBCA) corporations have been required to create and maintain registers of Individuals with Significant Control (“ISC Registers”). Now the federal government is clarifying certain existing requirements and adding new ones. One change that has attracted attention would – once in force and with certain exceptions – require information from ISC Registers to be submitted to the Government for publication in a public database. </strong></p> <p>Other changes, some of which are still proposals making their way through the legislative process, include:</p> <ul> <li>Exempting wholly-owned subsidiaries of public companies from the requirement to maintain an ISC Register;</li> <li>Clarification of the “reasonable steps” that must be taken to identify Individuals with Significant Control (“ISCs”);</li> <li>Providing for future regulations that may define key concepts such as “control in fact”;</li> <li>Adding citizenship and a residential address to the information that must be obtained for each ISC;</li> <li>Rules relating to the submission of ISC Register information to the Government;</li> <li>Whistleblower protection provisions;</li> <li>Significantly greater investigative powers for the Director of Corporations Canada; and</li> <li>Information-sharing with the CRA with respect to information about private companies.</li> </ul> <h2>Topics Covered in this Post</h2> <p>The main sections of this post are as follows:</p> <ul> <li>The new legislation and regulations</li> <li>Existing requirements that are being fine-tuned</li> <li>New provisions on investigations and information sharing</li> <li>Requirement to submit information to Corporations Canada</li> <li>Public access requirement</li> <li>Going forward</li> </ul> <h2>The New Legislation and Regulations</h2> <p>The changes to the federal transparency regime are contained in two distinct initiatives:</p> <ul> <li><a rel="noopener noreferrer" target="_blank" href="https://www.gazette.gc.ca/rp-pr/p1/2022/2022-10-29/html/reg3-eng.html?utm_campaign=ised-isde-cc_risc-22-23&utm_source=gazette_services_email&utm_medium=read_regs&utm_content=eng">Amendments to the <em>Canada Business Corporations Regulations, 2001</em></a> (“CBCA Regulations”), which <strong>took effect on May 4, 2023</strong>; and</li> <li>The <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/Content/Bills/441/Government/C-42/C-42_1/C-42_1.PDF">Bill C-42 amendments</a> to the CBCA (“CBCA Amendments”), which are still under consideration in Parliament. Bill C-42 passed First Reading on March 22, 2023 and MPs’ <a rel="noopener noreferrer" target="_blank" href="https://www.ourcommons.ca/DocumentViewer/en/44-1/house/sitting-177/hansard#12130180">speeches delivered on Second Reading</a> on March 31, 2023 suggest strong all-party support for the legislation.<a href="#_ftn1" name="_ftnref1"><sup>[1]</sup></a> Nevertheless, <strong>the final form of Bill C-42 (the CBCA Amendments) may differ from the First Reading version described in this post.</strong></li> </ul> <p>Over the longer term, the Government of Canada <a rel="noopener noreferrer" target="_blank" href="https://www.canada.ca/en/innovation-science-economic-development/news/2023/03/government-of-canada-tables-new-legislation-to-create-a-beneficial-ownership-registry.html">plans to make its public registry open to any province</a> that wishes to use it for its provincially incorporated corporations, with the goal of creating a <strong>single, integrated platform on which beneficial ownership can be searched across multiple federal, provincial and territorial jurisdictions</strong>. It is currently seeking provincial buy-in for this plan. Even if not all provinces join this effort, some may create their own public registers, <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/corporations-commercial-law/quebec-announces-in-force-dates-for-new-corporate-transparency-requirements">as Québec already has</a>. The ultimate intentions of Alberta, the only province that has not introduced transparency legislation, may become clearer after the May 29, 2023 provincial election.</p> <p><strong>UPDATE</strong>: Bill C-42 received Third Reading in the House of Commons on June 22, 2023, with the support of all members present, but as of August 1, 2023 has not progressed beyond <a rel="noopener noreferrer" href="https://www.parl.ca/LegisInfo/en/bill/44-1/C-42" target="_blank">First Reading in the Senate</a>.</p> <h2>Existing Requirements That Are Being Fine-Tuned</h2> <p>Before considering the new elements that the Government is introducing into the transparency law – submission of data to Corporations Canada, public access to that data and whistleblower protections – it is important to note the changes and clarifications that are being made to the existing requirements, which include the following:</p> <ul> <li>Subsidiaries of most public companies are now exempt;</li> <li>The “reasonable steps” that must be taken to identify ISCs are described more precisely;</li> <li>Some additional information must now be collected about a corporation’s ISCs; and</li> <li>Provision has been made for definition, by regulation, of several key concepts in the legislation.</li> </ul> <h3>Subsidiaries of most public companies now exempt</h3> <p>As passed in 2019, the CBCA transparency register requirements did not exempt subsidiaries of public companies from the register requirement even though their parent companies were already subject to extensive disclosure requirements. The new s. 34 of the CBCA Regulations exempts wholly-owned subsidiaries of federal and provincial business corporations that are:</p> <ul> <li>Reporting issuers under provincial securities laws; <strong>or</strong></li> <li>Listed on a “designated stock exchange”, a term that includes most of the world’s significant exchanges.</li> </ul> <p>Note that s. 34 applies to subsidiaries of both Canadian and foreign public companies. This corrects an oversight in the draft version of the amendment to the CBCA Regulations, under which the exemption would not have applied to wholly-owned subsidiaries of foreign public companies. A similar exemption in s. 34 that applies to subsidiaries of Crown corporations <strong>does not</strong> apply to subsidiaries of similar entities outside Canada.</p> <h3>“Reasonable steps” clarified</h3> <p>Section 21.1(2) of the CBCA currently requires that the corporation take “reasonable steps” at least once per year to ensure the accuracy of its ISC Register entries, which list the corporation’s “individuals with significant control” (ISCs) and certain information about them. Because the term “reasonable steps” was not defined in the original legislation, CBCA corporations have sometimes been uncertain about the sufficiency of their efforts. The amendments to the CBCA Regulations have clarified some of these issues, with the promise of further guidance to come, as follows.</p> <h4>Who to ask</h4> <p>According to s. 33(1) of the amended CBCA Regulations, “reasonable steps” include sending requests for information to each of the following:</p> <ul> <li>Existing ISCs;</li> <li>Shareholders; and</li> <li>Other persons whom the corporation has reasonable grounds to believe may have “relevant knowledge” with respect to an ISC (and to persons who may have relevant knowledge about those persons).</li> </ul> <h4>What to ask</h4> <p>All requests for information should ask for contact information about persons in the last of the three categories above. In addition:</p> <ul> <li>the notice to existing ISCs should ask them whether there are any changes in the information that is currently recorded in the register; and</li> <li>the notice to shareholders should ask them whether or not they have become ISCs of the corporation.</li> </ul> <p>Responses to these questions are to be requested “as soon as feasible” and each person is to answer “to the best of their knowledge”.</p> <h4>Guidance from ISED</h4> <p>Innovation, Science and Economic Development Canada (“ISED”) is planning to publish a <strong>template request for information</strong>, although details have yet to be released.</p> <h3>More information required about ISCs</h3> <p>The CBCA Amendments are proposing three significant changes to the information that is recorded in a corporation’s CBCA ISC register:</p> <ul> <li>The ISC’s residential address <strong>must</strong> be listed;</li> <li>An address for service <strong>may</strong> be listed; and</li> <li>The ISC’s citizenship <strong>must</strong> be listed.</li> </ul> <p>Previously, the requirement for an address did not specify a particular type of address. As noted below, if no address for service is provided, the ISC’s residential address will appear in the public version of the register, so most ISCs will want to include an address for service.</p> <h3>Definitions for other key concepts</h3> <p>Several other key concepts, in addition to “reasonable steps”, could in future be defined by regulation, under authority granted to the Governor in Council under the proposed s. 261(1)(a.2) of the CBCA. These concepts include:</p> <ul> <li>Direct influence;</li> <li>Indirect influence; and</li> <li>Control in fact.</li> </ul> <p>To date, no definitions for these terms have been publicly proposed.</p> <h2>New Provisions on Investigations and Information Sharing</h2> <p>The CBCA Amendments would amend s. 237 of the CBCA to give the Director the authority not only to make inquiries of any person (as s. 237 currently states) but also to require the person to provide “any records or other documents or information” as well as to require a response to any inquiry. This provision would not be restricted to ISC Register compliance.</p> <h3>Sharing tax information</h3> <p>Bill C-42 proposes to amend the <em>Income Tax Act</em>, adding a new paragraph 241(4)(u) under which ISED (Corporations Canada) would be authorized to request and receive – solely for the purpose of verifying and validating ISC Register information submitted under the proposed new s. 21.21 in respect of a private corporation – a variety of taxpayer information, including:</p> <ul> <li>With respect to a corporation (the “Related Corporation”) that is related to, or associated with, the corporation for which the ISC Register information was submitted (the “Submitting Corporation”), the Related Corporation’s <strong>name, business number </strong>and<strong> jurisdiction of residence</strong>, as well as its <strong>relationship with the Submitting Corporation</strong> including details of the Submitting Corporation’s shareholdings; and</li> <li>With respect to <strong>shareholders holding 10% or more</strong> of any class of the capital stock of the Submitting Corporation, each shareholder’s <strong>name</strong>, its <strong>legal status</strong> (individual, corporation, trust or partnership), the <strong>percentage of each class of capital stock that it owns</strong>, and its social insurance number, business number, trust account number or partnership number (as the case may be).</li> </ul> <h3>Whistleblower protection</h3> <p>The proposed amendments protect whistleblowers by forbidding the release (other than to FINTRAC or an investigative body referred to in s. 21.31(2)) of any information that could reasonably be expected to reveal the identity of someone who voluntarily provides information about the commission or potential commission of a wrongdoing, unless the person consents. In this context, “wrongdoing” refers not only to a contravention of the CBCA or its regulations but also to:</p> <ul> <li>The formation of a corporation for a fraudulent or unlawful purpose; and</li> <li>Any fraudulent or dishonest actions of person concerned with the formation, business or affairs of a corporation.</li> </ul> <h2>Requirement to Submit Information to Corporations Canada</h2> <p>In a major policy change, the information gathered for the ISC register would, once the CBCA Amendments are in force, no longer be held exclusively by the corporation itself. Instead, under the proposed s. 21.21(1)(a), the corporation would be required, on an annual basis, to provide the Director of Corporations Canada with such information from the Register as the Director required.<a href="#_ftn2" name="_ftnref2"><sup>[2]</sup></a> Some details relating to this process have yet to be clarified, including:</p> <ul> <li>The specific information from the ISC register that the Director will require (see additional discussion below);</li> <li>The timeline for providing the information; and</li> <li>The format in which the information may be submitted.</li> </ul> <h3>Annual and periodic updates</h3> <p>In addition to the annual update, the corporation would be required (once the CBCA Amendments are in force) to send the Director any information from any periodic updates that are made to the records of individual ISCs over the course of each year (to the extent that such information is among the information that the Director requires). This information would be required to be sent within 15 days after the day on which it is recorded in the register (which must in turn happen within 15 days of the corporation’s having become aware of the information – so the time limit for submission appears to be, at most, 30 days in total). Finally, the CBCA Amendments specify that a corporation that is newly incorporated, continued or amalgamated must submit the information that the Director requires within a period to be determined by the Director. (see proposed s. 21.21(1)(b) and s. 21.21(2))</p> <h3>Fees</h3> <p>The CBCA Amendments would allow a fee to be charged (in an amount to be established by regulation) in relation to the receipt, examination, filing, issuance or copying of any submitted information. (s. 261(1)(b))</p> <h3>Penalties, including dissolution</h3> <p>In addition to penalties for directors and officers who knowingly authorize, permit or acquiesce in the contravention of the reporting requirements, a corporation would be subject (once the CBCA Amendments are in force) to dissolution by the Director if it failed to comply with the requirements relating to the submission of information (including periodic updates) (proposed s. 212(3.1)) or if it were in default for one year (proposed s. 212(1)(a)(iii).</p> <p>While maximum penalties for offences relating to directors and officers would not be increased from the existing maximum of $200,000 or 6 months in prison, the press release surrounding the CBCA Amendments underscores the “strong compliance regime” that has been put in place, possibly signalling an intention to impose administrative sanctions and criminal penalties more readily than has previously been the case. The offences for which directors and officers are potentially liable would be expanded under the CBCA Amendments to include authorizing, permitting or acquiescing in the corporation’s failure to submit the required information to the Director.</p> <h3>Registers will continue to be kept by the corporation</h3> <p>It should be noted that <strong>nothing in the CBCA Amendments would limit the corporation’s obligation to maintain its ISC Register internally</strong>. In other words, <em>information from</em> the Register would be shared with the federal government, but the Register would continue to be kept by the corporation itself.</p> <h2>Public Access Requirement</h2> <h3>Form of public access</h3> <p>The CBCA Amendments do not provide significant direction with respect to the nature of the public access that the Director would be required to provide, beyond the general requirement that the submitted information be made available to the public, with certain limitations as discussed below.</p> <h3>Information to be made public</h3> <p>While, as noted above, the proposed new s. 21.21(1) ostensibly gives the Director discretion to determine which information from the ISC Register must be submitted to the Government, that discretion appears to be circumscribed by the proposed s. 21.303, which <strong>requires</strong> the Director to provide public access to the following submitted information for each ISC:</p> <ul> <li>Name;</li> <li>Address for service (if provided);</li> <li>Residential address (otherwise);</li> <li>Date on which the individual became or ceased to be an ISC;</li> <li>Description of how the individual is an ISC, including his or her rights and interests in the corporation.</li> </ul> <p>The Director would not have discretion to expand this list, although additional categories could be prescribed through the regulatory process.</p> <p>Note that if no address for service is provided, the ISC’s residential address would be included in the public register. <strong>It is therefore important for CBCA corporations to review their registers and add an address for service for any ISC who does not want his or her residential address made public.</strong></p> <h3>Exemptions for minors, those with safety concerns, incapable persons and others</h3> <p>Under the CBCA Amendments, information relating to persons under the age of 18 years could not be disclosed to the public. In addition, the proposed s. 21.303(3) would allow individuals with safety concerns, incapable persons, public office holders (with respect to certain <em>Conflict of Interest Act</em> disclosures) or other prescribed persons to apply to the Director to have some or all of their ISC Register information withheld from the public. Such requests could be granted if the Director was satisfied that the appropriate conditions had been met – for example, that there is or would be a “serious threat to the safety of an individual”.</p> <p>Under the proposed s. 262.2, the Director would be required to publish a public notice of any decision to grant such a request, but under a proposed amendment to s. 266(1), copies of the request itself (or of any related documentation) will not be made available to members of the public.</p> <p>The proposed s. 21.303(2) provides for the possibility of further exemptions by regulation.</p> <h2>Going Forward</h2> <p>While it is not certain when the CBCA Amendments will be passed by Parliament, or whether they will be revised before being finalized, there appears to be broad all-party agreement on the need for them and it is therefore highly likely that they will be passed. As we await Parliament’s further consideration of this legislation, CBCA corporations should take the opportunity to review their ISC Registers to ensure that they are up to date and ISCs should ensure that an address for service is provided and may also wish to consider whether an exemption might be available to them.</p> <hr /> <p><a href="#_ftnref1" name="_ftn1">[1]</a> Some of the Bill C-42 amendments supersede amendments that were passed in 2022 as Division 30 of <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/DocumentViewer/en/44-1/bill/C-19/royal-assent">Bill C-19</a> but never implemented.</p> <p><a href="#_ftnref2" name="_ftn2">[2]</a> This requirement was first created under Bill C-19, but was not proclaimed in force. The current CBCA Amendments would replace the relevant provision from Bill C-19 with a similar but slightly more detailed one.</p>30-May-2023 02:34:00{E57CC313-5FFD-41B8-ADBD-C1DEADE5BCF8}https://www.stikeman.com/en-ca/kh/canadian-ma-law/canadian-legislation-on-forced-and-child-labour-in-global-supply-chains-takes-effectGary T. Clarkehttps://www.stikeman.com/en-ca/people/c/gary-t-clarkeJean-Guillaume Shoonerhttps://www.stikeman.com/en-ca/people/s/jean-guillaume-shoonerShawn C.D. Neylanhttps://www.stikeman.com/en-ca/people/n/shawn-c-d-neylanDavid M. Pricehttps://www.stikeman.com/en-ca/people/p/david-priceCandace Ceronehttps://www.stikeman.com/en-ca/people/c/candace-ceroneAndrew S. Cunninghamhttps://www.stikeman.com/en-ca/people/c/andrew-s-cunninghamCanadian M&A LawCanadian Securities LawCanadian Employment, Labour & Pension LawCorporations & Commercial Law UpdateCanadian Mining LawCanadian Legislation on Forced and Child Labour in Global Supply Chains Takes Effect: First Reports Due by May 2024<p><strong>On May 11, 2023, the </strong><a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/LegisInfo/en/bill/44-1/S-211?view=progress"><strong><em>Fighting Against Forced Labour and Child Labour in Supply Chains Act</em></strong></a><strong>, S.C. 2023, c. 9 (the “New Act”) received Royal Assent and became law. Formerly known as Bill S-211, the New Act requires certain companies to file reports on their efforts to combat forced and child labour, the first of which will be due by May 31, 2024. As noted below, the legislation also amends the <em>Customs Tariff</em> to prohibit the importation of goods produced by either forced or child labour – concepts that it defines more broadly than previously.</strong></p> <p>This post also considers the global context of the legislation and the possibility that the New Act will not be Parliament’s “last word” on the issue of forced and child labour, often referred to as “modern slavery”. For a discussion of this new legislation in the context of the broader Canadian regulatory landscape, please see <a href="https://can01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.stikeman.com%2Fen-ca%2Fkh%2Fcanadian-ma-law%2Fbill-s-211-in-context-five-ways-that-canada-regulates-forced-and-child-labour&data=05%7C01%7CKPrintsios%40stikeman.com%7C4cc6564468404f1dd22d08dbb3cfa3c0%7C394646dfa1184f83a4f46a20e463e3a8%7C0%7C0%7C638301476599345666%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=GqGnJiQtbEGqBTZImoZecT7fHPER9V6Bye7bm6qOU6E%3D&reserved=0">our post of September 6, 2023 which considers five ways that Canada regulates forced and child labour</a>.</p> <h2>Supply Chain Reporting Obligations</h2> <p>Our <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-securities-law/canadas-modern-slavery-bill-nears-final-approval-new-reporting-requirements-are-coming">post from August 2022 explains the reporting obligations under the New Act in detail</a>. In brief, the reporting obligations apply to all entities<a href="#_ftn1" name="_ftnref1"><sup>[1]</sup></a> that:</p> <ul> <li>are <strong>either</strong> (i) listed on a Canadian stock exchange <strong>or</strong> (ii) do business, have a place of business or have assets in Canada and meet a size threshold based on their consolidated financial statements (any two of: $40 million in revenue, $20 million in assets or 250 employees); <strong>and</strong></li> <li>produce, sell or distribute goods in Canada or elsewhere and/or import goods into Canada (or which control any such entity).</li> </ul> <p>The size threshold does not specify that the revenue, assets or employees must be from or in Canada. Thus the obligations might apply to a <strong>multinational business</strong> even if its Canadian operations do not independently meet the threshold. Note also that the requirement that the entity produce, sell, distribute or import goods has <strong>no <em>de minimis</em> exception</strong>. In other words, even entities that deal only incidentally with small quantities of goods, or which import goods only for internal or office use rather than dealing in goods commercially, will need to consider whether a report is required.</p> <p>In terms of substance, the New Act:</p> <ul> <li>Requires a publicly accessible report to be made about each entity’s corporate structure and supply chains, as well as any measures it has taken with respect to forced labour and child labour (see our previous post for an <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-securities-law/canadas-modern-slavery-bill-nears-final-approval-new-reporting-requirements-are-coming">extensive review of the requirements relating to these reports</a>);</li> <li>Adopts definitions of “child labour” and “forced labour” that are broader than those used in International Labour Organization (“ILO”) conventions (these definitions are discussed in the “Import Prohibitions” section, below);</li> <li>Includes some special rules for corporate groups, including a provision that allows a single report to be filed on behalf of multiple related entities;</li> <li>Includes warrantless search provisions;</li> <li>Creates a maximum penalty of $250,000, which can apply to the entity itself or to corporate directors, officers, and other individuals; and</li> <li>Will take effect on January 1, 2024, with the first Annual Report due on May 31, 2024.</li> </ul> <p>Please refer to our previous post for a <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-securities-law/canadas-modern-slavery-bill-nears-final-approval-new-reporting-requirements-are-coming">detailed review of the reporting requirements</a> under the New Act. The legislation, which originated in the Senate, passed through the House of Commons after that post was written but was not altered in any significant respect.</p> <p><strong>It is important for entities that are required to report to attend to this issue well in advance of the May 2024 deadline, as understanding how the obligations apply to a particular organization may take some time.</strong></p> <h2>Import Prohibitions</h2> <p>In addition to the reporting requirement, the New Act amends the <em>Customs Tariff</em> – specifically tariff item No. 9897.00.00 – in two important respects. First, it extends the existing prohibition on the importation of goods mined, manufactured or produced wholly or in part by <strong>forced labour</strong> so that it includes goods mined, manufactured or produced wholly or in part by <strong>child labour</strong>. Second, it broadens the definitions of the terms “forced labour” and “child labour”. Specifically, under the general definitions section of the New Act:</p> <ul> <li>The <strong>“forced labour”</strong> provision includes the traditional definition under the ILO’s <a rel="noopener noreferrer" target="_blank" href="https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C029">Forced Labour Convention, 1930</a> – essentially, and with certain exceptions, <em>involuntary work exacted from a person under the menace of any penalty</em> – but supplements that definition with an alternative definition that refers to <em>work or services provided by a person who reasonably believes that the person’s safety, or the safety of another person known to him or her, would be threatened if the person did not perform the labour or provide the service</em>. It is not apparent why this addition was considered to be necessary, although superficially it appears that it may require less evidence of the involuntariness of the labour or service.</li> <li>The <strong>“child labour”</strong> provision expands import prohibitions significantly with respect to child labour, which was previously not distinguished from the broader category of “forced labour”. The New Act’s definition incorporates the definition from the ILO’s <a rel="noopener noreferrer" target="_blank" href="https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C182">Worst Forms of Child Labour Convention, 1999</a>, which includes, <em>inter alia</em>, all forms of slavery and similar bondage, the use of children in pornography, prostitution and the illegal drug trade and the recruitment of child soldiers. However, the New Act substantially supplements that definition by including labour or services provided by persons under the age of 18: <ul> <li>under circumstances that are contrary to the laws applicable in Canada (where the labour or services are provided within Canada); and/or</li> <li>that interfere with schooling by depriving them of the opportunity to attend school, obliging them to leave school prematurely or requiring them to “combine school attendance with excessively long and heavy work”.</li> </ul> </li> </ul> <p>These broadened definitions may require businesses that import, distribute, sell, or use imported goods to reassess their risks under the <em>Customs Act</em>, which can include trade compliance verifications by the Canada Border Services Agency (“CBSA”) that could lead, among other things, to the seizure of goods or ascertained forfeitures in lieu of seizure in certain situations. The issuance of penalties under the Administrative Monetary Penalty System (AMPS) could also be used for less serious offences. In all cases, criminal prosecution could be undertaken where warranted.</p> <p>While the extent of the necessary compliance effort may depend on a situation-specific assessment of the real risk of a violation, in theory all importers of goods (and all users of imported goods) should <strong>implement appropriate compliance procedures to identify any potential supply chain risks</strong>. The key element would in all cases be to determine where and how the imported goods are mined, manufactured, or produced (as applicable).</p> <p>Businesses may wish to reassess any <strong>contractual safeguards</strong> that they have established to allocate these risks among the entities through which imported goods typically pass (importer, distributor, merchant, end user, etc.). In this respect, any entity named as “importer of record” on the <strong>Canada Customs Coding Form (B3 Form)</strong> should be the first target of verifications and enforcement measures by the CBSA. However, it is noteworthy that even if the imported goods are sold or transferred to third parties in Canada subsequent to their importation, the CBSA would still be authorized to enforce the import prohibition pursuant to the <em>Customs Act</em>.</p> <h2>Global Context of the Legislation</h2> <p>The New Act is part of a worldwide effort to enact “modern slavery” legislation. Such legislation aims to curtail the use of child and forced labour by preventing products made with such labour from entering global supply chains. To date, the legislation that has been introduced internationally has been of one of two types:</p> <ul> <li><strong>Due diligence</strong> legislation, under which companies are required to actively investigate their supply chains, with a due diligence defence. This type of legislation, which exists in France and Germany, generally allows for third-party lawsuits against allegedly non-complying entities on human rights grounds.</li> <li><strong>Reporting</strong> legislation, under which companies are only required to file public reports on what, if anything, they have done to combat forced labour and child labour in their supply chains, with penalties generally limited to failure to file reports (and no provision for third-party suits).</li> </ul> <p>While “due diligence” legislation sets a higher bar, it is also costly to comply with. Thus, in the jurisdictions that have implemented this type of legislation, it has been limited to very large business enterprises with thousands of employees. According to John McKay, MP for Scarborough-Guildwood and the New Act’s sponsor in the House of Commons, fewer than 100 Canadian companies would be large enough to be required to comply if the French or German standards applied here. Accordingly, <strong>the New Act has been framed as broadly applicable “reporting” legislation</strong> that will require thousands of Canadian entities to file reports.</p> <p>At Third Reading, Mr. McKay characterized the philosophy behind the New Act as follows:</p> <p style="padding-left: 30px;">“Bill <a rel="noopener noreferrer" target="_blank" href="http://apps.ourcommons.ca/ParlDataWidgets/en/bill/11474494">S-211</a> is a supply chain transparency bill. Companies of a certain size would be expected to examine their supply chains annually and certify that they are free of slave products, or if they are not, what are they going to do about it. Powers would be given to the Minister of Public Safety to examine the filing, and if not satisfied, cause an investigation to be made. We expect that the mere existence of the bill will create a high level of compliance as companies worry about their reputational damage, government investigations, consumer disapproval and increased financial costs for non-compliance and additional financial risk. Keeping it simple is the essence of this bill: examine our supply chains; certify there is no slavery; and if there is, tell us what they are going to do about it.”</p> <h2>Future Developments</h2> <p>While support for Bill S-211 had been unanimous at earlier stages of the legislative process, at its third and final reading it was supported only by members of the Liberal and Conservative parties, together with one of the two Green Party MPs and all three Independents. The NDP and Bloc Québécois agreed with the legislation’s intent but voted against it because they preferred the due diligence approach. To that end, the NDP (with Bloc support) has introduced alternative legislation, <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/DocumentViewer/en/44-1/bill/C-262/first-reading">Bill C-262</a>, that would potentially require entities of all sizes to examine and report on their supply chains and would include third-party litigation rights. While Bill C-262 is unlikely to become law, Mr. McKay, a member of the governing Liberal Party, recently stated that the New Act may be only a first step on a road toward more extensive requirements.</p> <h2>For Further Reading</h2> <p>The Library of Parliament has provided a <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/LegisInfo/en/bill/44-1/S-211?view=about">set of readings on modern slavery issues</a>. On the same page, they have also provided links to several similar bills that were introduced into Parliament in recent years, none of which ultimately became law.</p> <hr /> <p><a href="#_ftnref1" name="_ftn1">[1]</a> Part I of the legislation, which imposes similar reporting obligations on Crown entities (“government institutions”), is not discussed in this post.</p>26-May-2023 07:00:00{DAED5D63-426E-4DE5-AE54-D597E71C5D62}https://www.stikeman.com/en-ca/kh/canadian-ma-law/private-equity-in-canada-market-and-regulatory-overview-2023Sophie Lamondehttps://www.stikeman.com/en-ca/people/l/sophie-lamondeKim Lehttps://www.stikeman.com/en-ca/people/l/kim-leMario Nigrohttps://www.stikeman.com/en-ca/people/n/mario-nigroWarren Silversmithhttps://www.stikeman.com/en-ca/people/s/warren-silversmithTrevor Rowleshttps://www.stikeman.com/en-ca/people/r/trevor-rowlesCanadian M&A LawPrivate Equity in Canada: Market and Regulatory Overview<p><strong>Five lawyers from our private equity practice recently authored a <a href="/-/media/files/kh-general/private-equity-in-canada-2023.ashx">Q&A guide to private equity law in Canada</a> for a Practical Law publication by Thomson Reuters. This chapter provides a high-level overview of the key practical issues, including the following topics:</strong></p> <ul> <li>Level of activity and recent trends in the market</li> <li>Funding sources/Investment incentives for institutional and private investors</li> <li>Mechanics involved in establishing a private equity fund</li> <li>Equity and debt finance in a private equity transaction</li> <li>Buyouts and relationships</li> <li>Management incentives</li> <li>Exit strategies</li> <li>Reform</li> </ul> <p>We are pleased to be able to make this <a href="/-/media/files/kh-general/private-equity-in-canada-2023.ashx" target="_blank">31-page publication</a> available for downloading</p>10-May-2023 04:00:00{6ED25233-0BD5-4AED-B248-1D1F167E1CB8}https://www.stikeman.com/en-ca/kh/corporations-commercial-law/quebec-announces-in-force-dates-for-new-corporate-transparency-requirementsTrevor Rowleshttps://www.stikeman.com/en-ca/people/r/trevor-rowlesCorporations & Commercial Law UpdateCanadian M&A LawQuébec Announces In-force Dates for New Corporate Transparency Requirements<p><strong>The Québec Government has announced that the transparency requirements set out in Bill 78, </strong><a rel="noopener noreferrer" target="_blank" href="https://assnat.qc.ca/en/travaux-parlementaires/projets-loi/projet-loi-78-42-1.html"><strong><em>An Act mainly to improve the transparency of enterprises</em></strong></a><strong>, will come into force on March 31, 2023. These requirements will apply to all entities operating an enterprise in Québec, without regard to their jurisdiction of formation.</strong></p> <p><em><em>Note: This post updates our previous post from January 24, 2023.</em></em></p> <h2><strong><strong>Background</strong></strong></h2> <p>Bill 78, which passed with the unanimous support of the National Assembly on June 3, 2021, introduces significant transparency disclosure requirements to Québec's <em><em>Act respecting the legal publicity of enterprises</em></em> ("Québec Legal Publicity Act").</p> <p>While these changes follow the implementation of corporate transparency initiatives in the <em><em>Canada Business Corporations Act</em></em> ("CBCA") and in a number of other provinces (for further details, see our post: <a href="https://www.stikeman.com/en-ca/kh/corporations-commercial-law/beneficial-ownership-transparency-in-canada-an-evolving-regulatory-landscape">Beneficial Ownership Transparency in Canada: An Evolving Regulatory Landscape</a>), Québec is the first Canadian jurisdiction to put in place a system that will make corporate and other ultimate beneficiary information publicly accessible. Furthermore, these requirements will apply to all corporations, partnerships, commercial trusts and other entities ("Registrants") required to register with the Québec enterprise register (the "REQ"), which includes all such entities operating an enterprise in Québec, not just those formed under Québec laws.</p> <h2><strong><strong>In-force Dates</strong></strong></h2> <p>The transparency obligations will come into force on March 31, 2023 and it is expected that searches by names of individuals on the REQ will be possible starting on March 31, 2024.</p> <p>While the in-force date is fast approaching, as of the date of publication, various related amendments and regulations remaining pending. As such, the remainder of this post is based on our understanding of which of these amendments and regulations are expected to come into force, and will be updated if that changes.</p> <p>Based on the information on the current version of the Government's corporate transparency <a rel="noopener noreferrer" target="_blank" href="https://www.quebec.ca/entreprises-et-travailleurs-autonomes/demarrer-entreprise/immatriculer-constituer-entreprise/nouvelles-obligations-transparence/declarer-beneficiaire-ultime/faire-declaration"><strong><strong>website</strong></strong></a> (available in French only), entities registered with the REQ will be required to file the required corporate transparency information by no later than the filing of their annual updating declarations filed after March 31, 2023. As such, based on the current regulations, we expect that the applicable periods for filing such updating declarations would be as follows:</p> <ul> <li>in the case of a legal person required to file a fiscal return under section 1000 of Québec's <em><em>Taxation Act</em></em>, the period that starts on the day after the end date of its taxation year and ends on the day that is 6 months after that date (for example, a July 1, 2023 deadline for corporations with a December 31, 2022 taxation year-end and that file tax returns in Québec – if they have not already filed a 2023 updating declaration prior to March 31, 2023);</li> <li>in the case of a trust required to file a fiscal return under section 1000 of Québec's <em><em>Taxation Act</em></em>, the period that starts on the day after the end date of its taxation year and ends on the day that is three months after that date (for example, a March 31, 2024 deadline for trusts with a December 31, 2022 taxation year-end);</li> <li>in the case of a natural person or a partnership, the period that starts on 1 January and ends on 15 June (i.e., a June 15, 2023 deadline – if they have not already filed a 2023 updating declaration prior to March 31, 2023); and</li> <li>in all other cases, the period that starts on 15 May and ends on 15 November (i.e., a November 15, 2023 deadline for corporations and trusts that do not file tax returns in Québec).</li> </ul> <h2><strong><strong>Ultimate Beneficiaries</strong></strong></h2> <p>A key concept in Québec's transparency regime is that of "ultimate beneficiaries". In respect of a Registrant, ultimate beneficiaries are individuals who are holders, "even indirectly", or beneficiaries of, or control, a number of shares or units of the Registrant:</p> <ul> <li>conferring on the person the power to exercise 25% or more of the voting rights attached to the shares or units issued by the Registrant, or</li> <li>the value of which corresponds to 25% or more of the fair market value of all the shares or units issued by the Registrant.</li> </ul> <p>Where individuals, or the entities they control, agree to jointly exercise voting rights attached to such shares or units, and the agreement confers on them, together, the power to exercise those voting rights (a "Voting Agreement"), their holdings are aggregated for these purposes and each such individual is an ultimate beneficiary if these aggregated voting rights exceed the 25% threshold.</p> <p>Ultimate beneficiaries also include (i) any person who has any direct or indirect influence that, if exercised, would result in control in fact of the Registrant within the meaning of sections 21.25 and 21.25.1 of Québec's <em><em>Taxation Act</em></em> ("control in fact" is often not a simple determination – see further discussion below); (ii) in respect of partnerships, their general partners or the ultimate beneficiaries of the general partners and (iii) in respect of trusts, their trustees and certain beneficiaries. There are additional rules that apply to determining the ultimate beneficiaries of trusts and partnerships, as well as entities that are directly or indirectly owned by trusts or partnerships.</p> <p>Entities that are themselves exempt from disclosing their ultimate beneficiaries (further discussed below) are considered to be natural persons for the purposes of determining the ultimate beneficiaries of non-exempt entities (i.e., exempt entities can be ultimate beneficiaries of non-exempt entities, for example, if a reporting issuer controls a private company, the reporting issuer will need to be disclosed as an ultimate beneficiary of that private company).</p> <h2><strong><strong>Obligations on Registrants</strong></strong></h2> <p>When the transparency regime comes into effect, Registrants that are subject to the ultimate beneficiary disclosure obligations will be required to "take the necessary measures to locate them and to ascertain their identities".</p> <p>An earlier draft of Bill 78 had proposed that this obligation be to take "reasonable measures". The Québec Government has made clear with the wording of the final version of the legislation - “take the necessary measures”, that it is imposing a more onerous standard. The Government's corporate transparency <a rel="noopener noreferrer" target="_blank" href="https://www.quebec.ca/entreprises-et-travailleurs-autonomes/demarrer-entreprise/immatriculer-constituer-entreprise/nouvelles-obligations-transparence/declarer-beneficiaire-ultime/qui-doit-declarer"><strong><strong>website</strong></strong></a> further interprets this obligation as follows (our translation from the original French version):</p> <p style="padding-left: 30px;">"Enterprises must take the necessary measures to locate and identify their ultimate beneficiaries. This means all measures which are necessary to locate and identify their ultimate beneficiaries. Necessary measures are greater than reasonable measures.</p> <p>The enterprise must proceed with a legal, documentary and factual analysis of its situation. For example, in the case of a corporation, it must analyze its share capital as well as any agreements that are likely to influence the manner in which voting rights are exercised.</p> <p>Furthermore, ultimate beneficiaries are sometimes different from the shareholders of the enterprise. In complex cases, we recommend that you consult with legal counsel."</p> <p>Certain Registrants, however, are exempt from the ultimate beneficiary disclosure requirements, including non-profit legal persons established for a private interest (i.e., private non-profit corporations), associations, legal persons established in the public interest (i.e., crown corporations), reporting issuers within the meaning of the <em><em>Securities Act</em></em> (Québec) and certain financial institutions. Notably, unlike several of the other transparency regimes in Canada, there is currently no exemption for foreign listed companies that are not reporting issuers in Canada.</p> <p>Non-exempt Registrants will be required to file with the REQ, in respect of each of their ultimate beneficiaries, (i) their name, (ii) residential address, (iii) date of birth, (iv) any other names they use in Québec and by which they are identified and (v) the condition in respect of which they became an ultimate beneficiary, including, if applicable, the percentage of shares or units they hold or are the beneficiary of (expressed in terms of ranges of 25% to 50%, over 50% to 75% or over 75%), as well as the date on which they became an ultimate beneficiary. As with other information filed with the REQ, Registrants must file an updating declaration within 30 days of any change in this information or immediately upon discovering any inaccuracy in it.</p> <p>Bill 78's amendments to the Québec Legal Publicity Act leave intact its existing penalties for non-compliance, which can include fines of up to $25,000 (which can be doubled in the case of a subsequent offence) and the cancellation of a registration.</p> <h2><strong><strong>Uncertainties and Challenges</strong></strong></h2> <p>While it may be simple to determine an entity's ultimate beneficiaries in many cases, more complex ownership structures or the presence of indicia of control in fact could make this a much more cumbersome exercise for Registrants.</p> <h3><strong><em><strong><em>Indirect holdings</em></strong></em></strong></h3> <p>Most other transparency regimes in Canada only apply to indirect holdings to the extent that the indirect holder has direct or indirect control over the requisite amount of equity securities of the subject entity (such that non-controlling interests in entities up the chain of ownership would not need to be disclosed). The wording of Bill 78 is ambiguous on this point, but the REQ, in its recently published <a rel="noopener noreferrer" target="_blank" href="https://www.registreentreprises.gouv.qc.ca/documents/publications/IN-914(2023-03).pdf"><strong><strong>guide</strong></strong></a> (available in French only), has made clear that it believes that Québec has opted for a more expansive concept of indirect ownership which will require Registrants to analyze whether any individual (or exempt entity) has, through direct or indirect holdings, an interest in shares or units of the Registrant which meets or exceeds the specified threshold. As such, in Québec, non-controlling interests in entities up the chain of ownership may need to be disclosed in certain circumstances.</p> <h3><strong><em><strong><em>Fair market value</em></strong></em></strong></h3> <p>The 25% threshold for determining ultimate beneficiaries applies to both voting rights and to the fair market value of a Registrant's issued shares or units and we expect that the latter test may be more difficult to determine in certain instances (although a similar test applies under the CBCA). For example, it may be very difficult to assess the fair market value of one block of shares or units if there are multiple classes of shares or units with different economic entitlements and/or with contingent economic entitlements.</p> <h3><strong><em><strong><em>Control in fact (also known as “de facto control”)</em></strong></em></strong></h3> <p>In cross-referencing tax laws for determinations of control in fact, Québec's transparency regime has brought in a complex and uncertain set of rules. The Government's corporate transparency <a rel="noopener noreferrer" target="_blank" href="https://www.quebec.ca/entreprises-et-travailleurs-autonomes/demarrer-entreprise/immatriculer-constituer-entreprise/nouvelles-obligations-transparence/declarer-beneficiaire-ultime/trouver-identifier"><strong><strong>website</strong></strong></a> offers the following guidance (our translation from the original French version):</p> <p style="padding-left: 30px;">"Control in fact of an enterprise exists when a person is able to influence the decisions of the enterprise in an important way. To determine if such an influence exists, articles 21.25 and 21.25.1 of the <em><em>Taxation Act </em></em>(chapter I-3) apply, with the necessary adaptations. As such, to determine if a person has, in respect of an enterprise, a direct or indirect influence which, if exercised, would result in control in fact, you must take into account all of the factors that are relevant in the circumstances. This requires a legal, documentary and factual analysis. This could include, for example, the influence on the management of the enterprise of a family member, a long-term employee, a client or a creditor. It should be noted that control in fact situations are not limited to the foregoing examples."</p> <p>Certain commentators have pointed out that, because of the complexity of the relevant jurisprudence on control in fact, Registrants may need to consult with tax experts to determine whether any individuals hold de facto control over them.</p> <h2><strong><strong>Additional Filing Obligations</strong></strong></h2> <p>In addition to the new corporate transparency regime, Bill 78 has introduced the following new requirements into the Québec Legal Publicity Act, which are also expected to come into force on March 31, 2023 and necessitate compliance by each Registrant in conjunction with their annual updating declarations in 2023:</p> <ul> <li>Registrants will be required to file copies of government issued identification for each of their directors;</li> <li>Registrants will be required to provide the dates of birth for the individuals who are listed in their filings (i.e., their directors, officers, three largest shareholders, ultimate beneficiaries, etc.); and</li> <li>Registrants will be permitted to declare a professional address for their listed individuals in addition to their residential address.</li> </ul> <p>Dates of birth, the residential addresses of any individual who has also filed a professional address and the names and addresses of minors will not be accessible to the public (although bailiffs may access residential addresses). Copies of identification filed with the REQ are to be destroyed after the applicable registration or updating date.</p> <h2><strong><strong>Next Steps</strong></strong></h2> <p>With the in-force date for Québec's new transparency regime fast approaching, Registrants would be well advised to start preparations for obtaining and disclosing the necessary information. We will be available to assist our clients in interpreting how these new requirements may apply to their situation, and plan to make additional resources available.</p>Wed, 16 Nov 2022 12:00:00 Z27-Mar-2023 05:20:00{A6284B5E-0456-4253-B5D2-90C92AF8F437}https://www.stikeman.com/en-ca/kh/canadian-ma-law/employee-ownership-trusts-a-potential-new-option-for-sellers-of-canadian-businessesMichael Deciccohttps://www.stikeman.com/en-ca/people/d/michael-deciccoSimon A. Romanohttps://www.stikeman.com/en-ca/people/r/simon-a-romanoJill Wintonhttps://www.stikeman.com/en-ca/people/w/jill-wintonMeaghan Obee Towerhttps://www.stikeman.com/en-ca/people/o/meaghan-obee-towerCanadian M&A LawEmployee Ownership Trusts: A Potential New Option for Sellers of Canadian Businesses<p><strong>Employee ownership trusts (EOTs) may soon become one additional avenue for Canadian business owners looking to sell their enterprises. The goal of EOTs is to enable owners to effectively sell their businesses to their employees. As a Canadian EOT framework may be on the horizon, it is important for business owners and other stakeholders to understand the mechanics, and possible advantages, of these trusts. </strong></p> <p>The Government of Canada initially expressed interest in exploring EOTs in its 2021 Federal Budget. A year later, Parliament committed to finalize the development of rules for EOTs and assess remaining barriers to their creation. Recently, the Canadian Employee Ownership Coalition, a non-partisan group of leaders in Canada’s academic, banking, business, and non-profit sectors, called on the federal government to create a tax-advantageous framework for EOTs under Canadian law in its 2023 Budget, which is expected to be released on March 28, 2023.</p> <p><strong><em><span style="color: black;">UPDATE:</span></em></strong><em><span style="color: black;"> The Government’s 2023 Fall Economic Statement contained new measures that, once adopted, are expected to make Canadian EOTs a more attractive option. Please read this post in conjunction with the developments discussed in <a href="https://can01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.stikeman.com%2Fen-ca%2Fkh%2Fcanadian-ma-law%2Femployee-ownership-trusts-full-steam-ahead-after-governments-fall-economic-statement&data=05%7C01%7CKPrintsios%40stikeman.com%7Caff6526725d0400bc03608dbec531524%7C394646dfa1184f83a4f46a20e463e3a8%7C0%7C0%7C638363613798846241%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=6RsnO%2FODKFnuDT95LZpJXwPrzKk17tOulzHRz%2FA65mc%3D&reserved=0">our November 22, 2023 post</a>.</span></em></p> <h2>Mechanics of EOTs</h2> <p>The structuring of EOTs in jurisdictions in which they have been implemented (including in the United States and the United Kingdom) typically involves the following four steps: (1) a trust is formed and the employees of the target business are made beneficiaries of the trust; (2) debt financing is arranged in order to finance the purchase of shares of the target business by the trust; (3) the trustees of the trust negotiate the terms and conditions relating to the purchase of the shares of the target business; and (4) the trust repays the debt over time using the earnings that are distributed to it from the business. In essence, EOTs are a leveraged buyout for the benefit of employees and the sellers.</p> <h2>Advantages of EOTs</h2> <h3>Benefits for business owners seeking to exit</h3> <p>EOTs in non-Canadian jurisdictions typically allow business owners to benefit from deferred or eliminated capital gains taxes, discussed in further detail below. To seek to ensure that the owner receives a price comparable to that of a sales process, an independent appraiser is typically retained to assist in establishing a fair market valuation of the business being sold. Finally, retiring entrepreneurs who are keen on preserving their firms’ legacy and culture can utilize EOTs to avoid selling to competitors or private investors. This can help ensure the business stays in local communities with continuity of management.</p> <h3>Benefits for lenders</h3> <p>Leveraged EOTs can provide lenders with strong returns on their capital with attractive debt coverage. In addition, EOTs can help improve environmental, social and corporate governance (<strong>ESG</strong>) metrics via wealth creation for employees. In many cases, businesses owned through an EOT structure have significantly outperformed their counterparts in employee retention. The resilient businesses and high-quality jobs attributed to EOTs can positively affect the “social” criterion in ESG, which measures the relationship of a business with various stakeholders, including its employees.</p> <h3>Benefits for employees</h3> <p>EOTs can lead to increased wealth for employees. Studies have shown that <a rel="noopener noreferrer" target="_blank" href="https://www.ownershipeconomy.org/wp-content/uploads/2017/05/employee_ownership_and_economic_wellbeing_2017.pdf">employee-owners have 92% more wealth and 33% higher median wage income</a> than their counterparts at non-employee-owned enterprises. EOTs can also lead to improved job stability during crises and provide insulation from economic cycles, with <a rel="noopener noreferrer" target="_blank" href="https://cleo.rutgers.edu/wp-content/uploads/2020/11/EOF-REPORT-EMPLOYEE-OWNED-FIRMS-IN-THE-COVID-19-PANDEMIC.pdf">studies showing employee-owned businesses retaining jobs at a 4 to 1 rate</a> compared to non-employee-owned businesses.</p> <h2>The United States EOT regime</h2> <p>Employee stock ownership plans in the United States (<strong>US ESOPs</strong>) have, based on data published in 2023, enabled some 14 million participants across more than approximately 6,000 businesses to hold a combined US$1.6 trillion in wealth. In US ESOPs, a company establishes a trust fund, which will then be financed in one of two ways. In non-leveraged US ESOPs, the company will contribute newly issued shares to the trust, or contribute cash to the trust, which will then be used to purchase existing shares of the company at no more than fair market value. In leveraged US ESOPs, the trust will take out a loan to purchase new or existing company shares whilst the company makes annual contributions to the trust, which are used to repay the loan. The trustees are the legal shareholders of US ESOPs and have fiduciary duties, which include retaining an independent appraiser to determine, on an annual basis, the value of the company’s shares and voting the trust’s shares in the company to select a board of directors.</p> <p>Employees have accounts within US ESOPs to which shares are allocated; employees do not pay for the shares with payroll deductions or otherwise with their own funds. Plan participants generally accumulate account balances and their shares begin vesting after one year of full-time service. Contributions, either in cash or shares, accumulate in the US ESOP until an employee quits, dies, is terminated, or retires. Distributions may be made in a lump sum or installments and may be immediate or deferred. Employees do not pay tax on shares allocated to their account and are only taxed on US ESOP distributions received on shares allocated to them. However, mechanisms exist to allow distributions to be taxed at favourable rates.</p> <p>US ESOPs carry with them various tax advantages. In the case of non-leveraged trusts, a company’s contribution of shares to the trust is tax-deductible to the company. In leveraged transactions, a company can make tax-deductible contributions to enable the trust to repay the loan. Notably, owners of C corporations who sell 30% or more of the company’s shares to US ESOPs may be able to defer any capital gains tax on the transaction. Where a US ESOP holds an interest in an S corporation, both the S corporation and the trust are exempt from all federal income tax (and most state income tax) on the share of the income of the S corporation that is attributable to the trust.</p> <h2>The United Kingdom EOT Regime</h2> <p>Employee ownership trusts in the United Kingdom (<strong>UK EOTs</strong>) were modernized through the Finance Act, 2014. As of June 2021, approximately 730 companies employing nearly 90,000 workers utilize these statutory trusts. In UK EOTs, employees do not directly own shares of their employer firms but rather are beneficiaries of a trust that holds a controlling interest in their employer. The company can then provide annual distributions to participating employees from profits. A business seeking to transition control to a UK EOT can do so in two ways: (1) through an indirect ownership model where employees do not own shares directly but rather are beneficiaries of a trust that owns a majority of the shares; or (2) through a hybrid model that combines trust ownership and direct ownership of the company’s shares.</p> <p>Business owners in the United Kingdom can also benefit from significant tax breaks through UK EOTs. Importantly, founding sellers will be exempt from capital gains tax on the sale of qualifying shares to the trust. Sellers and their heirs will also be exempt from inheritance tax on this transfer of shares. Lastly, qualifying companies can pay each employee an annual tax-free distribution of £3,600.</p> <p>There are several conditions that must be satisfied before owners and companies can unlock these tax exemptions. First, only trading companies or principals of trading groups can utilize UK EOTs.<a href="#_ftn1" name="_ftnref1"><sup>[1]</sup></a> Secondly, the trust must hold a controlling interest – more than 50% of the voting rights attached to the company’s shares. Third, trust property must usually be applied for the benefit of all eligible employees “on the same terms”. Lastly, the number of continuing direct shareholders who are directors or employees (and any persons connected with such directors or employees) must not exceed 40% of the company’s entire workforce.</p> <h2>Canada</h2> <p>In Canada, the lack of a dedicated trust vehicle under the current tax regime is often cited as the primary obstacle to creating EOTs. Following the creation of a framework for EOTs in Canada, estimates suggest that in the first eight years, 500 to 700 small to medium sized businesses could be sold using an EOT structure, which in turn could create up to $9 billion in wealth for up to 114,000 Canadian workers. We are hopeful the 2023 Federal Budget will contain detailed proposals in respect of EOTs. Stikeman Elliott LLP is monitoring developments in Canada pertaining to EOTs and will be ready to assist our clients in understanding the latest developments in the space. We invite you to contact us with any questions regarding EOTs.</p> <p><em><span style="color: black;">The authors would like to acknowledge the support and assistance of <span style="color: black;"><a href="/en-ca/people/f/parsa-farhangdoost">Parsa Farhangdoost</a></span>, articling student at law.</span></em></p> <hr /> <p><a href="#_ftnref1" name="_ftn1">[1]</a> A company which has significant cash, land or other investments may not be a trading company.</p>22-Mar-2023 04:00:00{17644F64-A1F8-43C9-A78A-B0800562A354}https://www.stikeman.com/en-ca/kh/corporations-commercial-law/beneficial-ownership-transparency-in-canada-an-evolving-regulatory-landscapeJanene Charleshttps://www.stikeman.com/en-ca/people/c/janene-charlesTrevor Rowleshttps://www.stikeman.com/en-ca/people/r/trevor-rowlesAndrew S. Cunninghamhttps://www.stikeman.com/en-ca/people/c/andrew-s-cunninghamCorporations & Commercial Law UpdateCanadian M&A LawBeneficial Ownership Transparency in Canada: An Evolving Regulatory Landscape<p><strong>As of April 1, 2023, the number of Canadian jurisdictions with beneficial ownership transparency requirements in force will have risen to ten. With the implementation of new transparency regimes in Saskatchewan, Québec and Nova Scotia, only four jurisdictions – Alberta and the three Territories – have not proposed or implemented this type of legislation at this time. Below we explore some of the key similarities and differences among the laws enacted to date, with particular attention to Québec’s unique approach, which include</strong><strong>s </strong><strong>transparency filing obligations in respect of corporations and other entities registered</strong><strong> to do business in the province, even if they were incorporated or established outside the province or outside Canada.</strong></p> <h2>Introduction</h2> <p>As noted above, the number of Canadian jurisdictions with transparency legislation will soon rise to ten. Three new beneficial ownership transparency laws are taking effect in early 2023:</p> <ul> <li><strong>Saskatchewan</strong>: March 12, 2023;</li> <li><strong>Québec</strong>: March 31, 2023 (see our detailed <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/corporations-commercial-law/quebec-announces-in-force-dates-for-new-corporate-transparency-requirements">blog post</a>); and</li> <li><strong>Nova Scotia</strong>: April 1, 2023.</li> </ul> <p>Information about earlier developments is available in a series of blog posts that we released, beginning in 2019, dealing specifically with the legislation in the following jurisdictions:</p> <ul> <li><a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/Corporate-Control-Transparency-in-Canada"><strong>Canada</strong></a>, under the <em>Canada Business Corporations Act</em> (“CBCA”);</li> <li><strong><a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/british-columbias-beneficial-ownership-transparency-register">British Columbia</a></strong>, under the <em>Business Corporations Act</em> (“BCBCA”) ; and</li> <li><a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/corporations-commercial-law/ontarios-new-transparency-register-getting-your-obca-corporation-ready-for-january-1-2023"><strong>Ontario</strong></a>, under the <em>Business Corporations Act</em> (“OBCA”).</li> </ul> <p>The provinces of Manitoba, New Brunswick, Newfoundland & Labrador and Prince Edward Island also implemented transparency legislation between 2019 and 2022. As noted above, only Alberta, Yukon, Northwest Territories and Nunavut have yet to propose or adopt transparency laws.</p> <p>On March 22, 2023, the <a rel="noopener noreferrer" href="https://www.canada.ca/en/innovation-science-economic-development/news/2023/03/government-of-canada-tables-new-legislation-to-create-a-beneficial-ownership-registry.html" target="_blank">Government of Canada introduced proposed legislative amendments</a><em><a rel="noopener noreferrer" href="https://www.parl.ca/legisinfo/en/bill/44-1/c-42" target="_blank"></a> “</em>as part of the government’s commitment to corporate transparency and the implementation of a free, publicly accessible and scalable beneficial ownership registry of corporations governed under the CBCA.” If passed, <a href="https://www.parl.ca/legisinfo/en/bill/44-1/c-42" target="_blank">the proposed amendments</a> (along with consequential and related amendments to other statutes) will, among other things, make public certain information regarding beneficial owners of CBCA corporations, introduce an exemption regime for individuals who may face harm from public disclosure, provide Corporations Canada with additional enforcement and compliance powers, and facilitate enforcement efforts through information-sharing and data validation among Corporations Canada, the Canada Revenue Agency and Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). We will continue to monitor the progress of Bill C-42 and will provide further updates as they become available.</p> <h3>Regulator guidance</h3> <p>As might be expected of new legislation, there is still significant uncertainty about the interpretation of some aspects of Canada’s transparency laws. To date, published regulator guidance has been relatively minimal, although the Government of British Columbia has produced a <a rel="noopener noreferrer" target="_blank" href="https://www2.gov.bc.ca/assets/gov/employment-business-and-economic-development/bc-companies/webinar-presentation-bc-companies.pdf">useful guide to the B.C. legislation</a> and the Government of Québec is expected to publish guidance in time for the implementation of the Québec transparency regime.</p> <h2>Canada’s Transparency Laws: Common Ground</h2> <p>The federal CBCA was the first Canadian legislation to adopt amendments relating to beneficial ownership transparency. Those provisions, which took effect on June 13, 2019, influenced the transparency regimes that were subsequently established at the provincial level, with the result that the ten legislative regimes share most (and in many cases all) of the following features:</p> <ul> <li>A requirement that individuals<strong> be listed in a register</strong> that also includes their name, address, birthdate, and other specified information;</li> <li>Requirements relating to disclosure of the <strong>steps taken</strong> by entities to determine which individuals, if any, should be listed in the register, and what should be done if an entity is unable to identify any ISCs;</li> <li>Criteria for <strong>identifying the individuals</strong> to be listed (referred to as “Individuals with Significant Control” or “ISCs” under the CBCA), such as: <ul> <li>Direct or indirect ownership/control/direction of or over <strong>at least 25% of the shares</strong> of the corporation (“indirect direction” may be found where an individual who controls the top entity of a corporate group is able to control how corporations “down the chain” vote their shares of the subject corporation);</li> <li>In most jurisdictions, the possession by an individual of <strong>“influence” </strong>that, if exercised, would give the individual <strong>“control in fact”</strong> of the corporation, as these (or similar) concepts are understood under the governing legislation;</li> <li>Being a <strong>joint holder</strong> of (or party to a <strong>voting agreement or arrangement</strong> that encompasses) shares that in the aggregate meet the 25% threshold;</li> </ul> </li> <li>An exemption for qualifying <strong>publicly-traded corporations</strong> from the requirement to maintain a register (including, in most jurisdictions, their wholly-owned subsidiaries);</li> <li>Criteria for <strong>accessing and searching</strong> the register: in all cases, those who may access the register include police forces, tax authorities and such regulators as may be listed in the statute or provided by regulation (and also, in many cases, the equivalent foreign entities, where the necessary arrangements or agreements exist). Certain jurisdictions also give shareholders and/or creditors rights of access, while only one (Québec, as discussed below) currently provides for broad public access.</li> <li>Rules for reviewing and <strong>updating the register:</strong> typically one mandatory review and update per financial year to ensure the information is accurate and up to date, plus a requirement for periodic updates whenever the entity learns of new information that affects prior disclosure.</li> <li><strong>Penalties for violations</strong> of the requirements: both the corporation and its directors and officers can be liable for violations, although some statutes create potential liabilities for other persons and may include incarceration as a possible penalty.</li> </ul> <p>For the sake of simplicity we have used the term “corporation” in the above discussion, but it should be noted that in Québec the transparency rules apply to certain entities that are not corporations.</p> <h2>Canada’s Transparency Laws: Key Differences</h2> <p>While there are many similarities among the regimes, some provinces have diverged from the CBCA model more than others, as highlighted below (from least to most divergent):</p> <ul> <li>The provincial laws of <strong>Saskatchewan, Manitoba, Prince Edward Island, Nova Scotia </strong>and<strong> Newfoundland & Labrador </strong>closely follow the CBCA model;</li> <li>The <strong>Ontario</strong> and <strong>New Brunswick</strong> provisions are broadly similar to the CBCA provisions but include some substantive differences;</li> <li><strong>British Columbia</strong>’s provisions were influenced by the CBCA model, but diverge from it in a number of significant respects;</li> <li>The <strong>Québec</strong> transparency regime, while based on many of the same concepts as the CBCA, is the most distinct of all, in both approach and substance.</li> </ul> <p>The remainder of this post looks at some of the key differences among Canada’s beneficial ownership transparency regimes. We have focused on differences that have the broadest impact, but there are a number of others, such as those relating to the treatment of limited partnership entities in chains of corporate ownership.</p> <h3>1. Québec’s register will be publicly accessible in 2023 and will be searchable by individual names in 2024</h3> <p>While <a rel="noopener noreferrer" href="https://www.parl.ca/DocumentViewer/en/44-1/bill/C-19/royal-assent#ID0E4DA" target="_blank">amendments to the CBCA</a> will, once in force, require the filing of ISC information with the federal regulator, Corporations Canada, and proposed amendments to the CBCA will require some information regarding the beneficial owners of federal corporations to be made public, for the time being ISC registers are generally kept at a corporation’s registered office, to be produced on request to those who are entitled by law to examine them. The same is currently true under most of the provincial statutes. However, as noted above, on March 22, 2023,  <a rel="noopener noreferrer" href="https://www.parl.ca/legisinfo/en/bill/44-1/c-42" target="_blank">a new bill proposing further amendments to the CBCA</a> was published that if passed, would create a publicly accessible beneficial ownership registry for CBCA corporations that would bring the federal approach into alignment with Québec’s as described below. </p> <p>Québec’s approach is currently different than all other Canadian jurisdictions: its transparency information is not maintained in a stand-alone register, rather it is included as part of a registrant’s submission <strong>filed with the Québec Enterprise Registrar (“Enterprise Registrar”)</strong>. Two important points to note are that:</p> <ul> <li>Much of the information will be <strong>publicly available</strong>; and</li> <li>As of March 31, 2024, the information is expected to be <strong>searchable by individuals’ names</strong>.</li> </ul> <p>This broad accessibility presently stands in contrast to the other Canadian jurisdictions where registers are available for inspection only to the government itself as well as to tax authorities, police services and designated regulators (which vary from jurisdiction to jurisdiction, but often include securities commissions and financial regulators, including those from other jurisdictions where certain conditions are met). Shareholders and creditors also have a limited right of access under the CBCA and the corporate statutes of many provinces (exceptions include British Columbia and Ontario). If the new CBCA amendments are adopted as currently proposed, Québec’s broad accessibility may soon become the norm across Canada.</p> <h3>2. Québec’s statute applies to entities doing business in Québec generally – not just to QBCA corporations</h3> <p>Québec’s transparency rules <strong>apply territorially</strong> to any entity that is required to register with the Enterprise Registrar to conduct business in the province, <strong>without regard to the statute under which the entity was incorporated or formed</strong>. This means the Québec transparency rules apply to limited partnerships, business trusts and other entity types in addition to corporations, even if not formed under the laws of Québec, if they are required to be registered with the Enterprise Registrar.</p> <p>The reason is that Québec’s transparency rules, unlike those of other jurisdictions, were enacted under its <strong>business registration legislation</strong> – <em>An Act Respecting the Legal Publicity of Enterprises</em> (ALPE) – rather than under the Québec <em>Business Corporations Act</em> (QBCA). Under the ALPE, registration is required of almost any entity that operates a business or performs any act for profit in Québec, including corporations and other entities formed in other Canadian and foreign jurisdictions. As a result:</p> <ul> <li>Non-Québec corporations established under Canadian or foreign corporate statutes that are registered with the Enterprise Registrar may <strong>effectively have <em>two</em> transparency registers</strong> – one for their jurisdiction of incorporation and one for Québec; and</li> <li>Businesses incorporated or formed under<strong> legislation (in Canada or elsewhere) that does not currently require transparency registers</strong>, such as the Alberta <em>Business Corporations Act</em> or provincial limited partnership statutes, need to be aware of the transparency disclosure requirements in Québec if they are or plan to be registered with the Enterprise Registrar.</li> </ul> <p>Furthermore – and very importantly – where both Québec and the jurisdiction of incorporation require transparency disclosure, <strong>it may sometimes be the case that different individuals will need to be identified </strong>based upon differing statutory criteria for identifying ISCs.</p> <h3>3. Economic interests vs. legal control: a potentially important difference between Québec’s legislation and other Canadian legislation</h3> <p>Generally, to be listed in a transparency register, an individual must have control (as defined) over at least 25% of the shares of the corporation as measured by voting rights or (in all jurisdictions except B.C.) by value. Such control may be “indirect” – achieved, for example, by “influence”, through an individual’s stake in a holding company, or by means of a shareholder agreement – but it must, at the end of the day, result from interests or rights that the individual holds in connection with specific shares of the corporation constituting at least 25% of the total.</p> <p>Importantly, it follows from this that, under the CBCA and most of its provincial equivalents, <strong>an individual is not an ISC merely because the individual has a 25% economic</strong><strong>interest</strong> in the corporation that derives from the individual’s holdings in another entity that sits above the corporation in a “stacked” ownership structure, if this economic interest is <strong>not</strong> accompanied by 25% control of the corporation’s shares.</p> <p>The following corporate structure illustrates this point:</p> <p><em>In a corporate group, Individuals A and B own 60% and 40%, respectively, of the only class of shares in Holdco X. Holdco X, in turn, owns 100% of the shares of Corporation Y, for which a transparency register is being prepared. In this very simple structure, there are no shareholder agreements or other voting arrangements, no family relationships and no influential persons other than the two shareholders.</em></p> <p>In this example, if Y were a CBCA corporation, <strong>only A would be listed</strong> in Y’s CBCA transparency register. While B might be said to hold a 40% indirect “economic interest” in Y, B is not in a position of control over 40% (or even 25%) of Y’s shares – in fact, A’s <strong>60%</strong> holding in Holdco X gives A control over the voting of <strong>100%</strong> of the shares of Y. An identical analysis would apply under the B.C. and Ontario legislation and most of the other provincial statutes.</p> <p>Québec appears to be different, however, as it refers to indirect <strong>holdings</strong> of the specified thresholds of shares or units, and not only indirect <strong>control</strong>. While the precise implications of this distinct approach are debatable, particularly for entities with separate legal personality, some prominent commentators have drawn the plausible conclusion that the references in the Québec law to direct or indirect holdings of 25% or more are intended to refer to economic interests.</p> <p>If this analysis is correct, it would follow that, in the example above, both <strong>A </strong><strong>and B</strong> would be ultimate beneficiaries of Corporation Y. B would have this status by virtue of being the beneficiary of shares that represent 40% (25% or more) of the value of Y (40% of X’s 100%). As already noted, B would <strong>not</strong> be an ISC under the CBCA or the statutes of the other provinces.</p> <p>Note that the control analysis that applies under the CBCA and other provincial legislation also applies under the Québec legislation – the possible scenario discussed in above would essentially establish an <em>additional</em> criterion under which certain individuals might have to be listed.</p> <h3>4. The jurisdictions differ about what constitutes “influence”, particularly with respect to the applicability of the “control in fact” concept from tax law</h3> <p>In addition to individuals who satisfy the 25% control test, individuals with sufficient “influence” over the corporation must also be listed in the transparency register. In eight of the ten jurisdictions that have adopted transparency legislation to date, “influence” is expressly defined as the possession of “control in fact” (“<strong>CIF</strong>”), which many will recognize as a concept in Canadian tax law. One apparent difference among these jurisdictions is how closely their respective concepts of influence and CIF track the understanding of CIF that has developed in the taxation context. Jurisdictions that have taken a different approach include British Columbia (discussed below) and New Brunswick, which does not include influence among the factors to be considered when creating an ISC Register.</p> <p>In <strong>Ontario </strong>and<strong> Québec</strong>, the CIF definition to be applied under ISC analysis is based on the understanding of CIF in tax law. The Ontario legislation takes its CIF language almost word-for-word from the <a rel="noopener noreferrer" target="_blank" href="https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-256.html"><em>Income Tax Act</em> (Canada)</a> (“<strong>ITA</strong>”), while Québec’s legislation explicitly states that the <a rel="noopener noreferrer" target="_blank" href="https://www2.publicationsduquebec.gouv.qc.ca/dynamicSearch/telecharge.php?type=2&file=/I_3/I3_1_A.html"><em>Taxation Act </em>(Québec)</a> (“<strong>QTA</strong>”) definition of CIF applies in this context. The two key components of both definitions are:</p> <ul> <li>that an individual can have “influence” even in the absence of a legally enforceable right or ability to effect a change in the membership or powers of the board (ITA s. 256(5.11)(b); QTA s. 21.25.1(b)); and</li> <li>that franchising, licensing, leasing, distribution and supply management arrangements, and other similar arrangements, do not, in and of themselves, result in “control in fact” (ITA s. 256(5.1) QTA s. 21.25).</li> </ul> <p>The consequence may be that, as is the case under tax law, <strong>operational control</strong> can be sufficient to produce CIF (and, by extension, to give an individual who has such control “influence”), even in the absence of <strong>legal control</strong> over the board’s composition and/or powers.</p> <p>It is important to note that the second component of the definition does not exclude individuals involved in the listed arrangements from consideration for inclusion in the transparency register. It does mean, however, that they will not be included <strong>merely</strong> because they are involved in such arrangements.</p> <p>The <strong>federal legislation</strong> – the CBCA – also defines “influence” in terms of CIF, but because it does not include an express reference to tax law (as the Québec statute does) or incorporate the ITA’s definition of CIF (as the Ontario statute does), the relevance of the tax law analysis of CIF for CBCA corporations is unclear. In the absence of guidance from the Government of Canada, this could make some questions about influence difficult to resolve with confidence.</p> <p><strong>British Columbia</strong> has taken a distinct and very clear approach, defining “influence” as “significant influence”, which refers to the direct or indirect power to appoint or remove at least one director. According to the B.C. Government’s website, this requires a legally binding or enforceable arrangement. In other words, B.C. appears to have deliberately rejected the application of the CIF concept as reflected in the tax legislation. There is no express exclusion in the BC legislation for franchising, licensing, leasing, distribution and supply management arrangements, but few of these would involve the legally enforceable power to appoint or remove board members.</p> <h3>5. Ontario and British Columbia create a presumption relating to family/household members</h3> <p>When it comes to deciding whether an <strong>informal voting arrangement</strong> exists among small shareholders (so that their interests must be considered collectively), both the British Columbia and Ontario statutes create a presumption that the interests of those from the same family and/or household should be aggregated. The persons whose holdings must be combined in this way are defined differently under the two statutes, however. The federal, Québec and other provincial statutes <strong>do not</strong> include a provision of this type, although family and household members could still be “caught” under the more general provisions in those statutes.</p> <h3>6. The 25% threshold is defined more narrowly in the B.C. legislation</h3> <p>In most Canadian jurisdictions, the 25% interest that generally triggers inclusion in the register is defined as an interest in 25% of the corporation’s shares, <strong>either in terms of voting rights or fair market value</strong>. The only exception is <strong>British Columbia</strong>, where the legislation defines the 25% interest in terms of <strong>voting rights only</strong> – an approach that will simplify the analysis for many B.C. companies.</p> <h3>7. The Québec legislation does not require shareholders to provide information to the corporation if requested</h3> <p>Unlike the other Canadian statutes, <strong>the Québec law does not include a provision specifically requiring shareholders to respond to inquiries</strong> that the corporation makes in the course of completing its beneficial owner analysis or register entries. All of the other statutes require a prompt response to such an inquiry, with substantial fines and (in most jurisdictions) a potential prison sentence imposed on shareholders who fail to respond, or who knowingly respond inaccurately. By contrast, the Québec law places responsibility solely on the registrant, requiring it to “take the necessary measures” to ascertain the identity of its ultimate beneficiaries.</p> <h2>Conclusion</h2> <p>The similarities and differences in transparency legislation across Canada discussed above are by no means an exhaustive list. Nevertheless, this overview should help Canadian, U.S. and overseas readers understand how beneficial ownership transparency is evolving in Canada – while underscoring the fact that, as is so often the case in this country’s corporate and commercial law, there is no single, uniform “Canadian” approach.</p>22-Mar-2023 01:22:00{A4CADF23-A8EF-4542-B60F-A37663E01B17}https://www.stikeman.com/en-ca/kh/canadian-ma-law/Search-Funds-in-Canada-Podcast-part-2Mario Nigrohttps://www.stikeman.com/en-ca/people/n/mario-nigroJared Bachynskihttps://www.stikeman.com/en-ca/people/b/jared-bachynskiKevin Guentherhttps://www.stikeman.com/en-ca/people/g/kevin-guentherCanadian M&A LawSearch Funds in Canada Podcast – Part 2: Investor Perspectives<p><strong>In this Q&A-style podcast, recorded before a live audience, top U.S. and Canadian search fund investors talk about what they look for in searchers and target businesses. Their insights into the state of the search market in Canada, its relationship with the U.S. market and its prospects moving forward will be of interest to all market participants.</strong></p> <p>Topics discussed include, among many others:</p> <ul> <li>The market’s growing visibility and credibility, and whether it is becoming saturated;</li> <li>U.S. investor experience in Canadian search;</li> <li>Investor experience with self-funded searchers;</li> <li>Personal characteristics that investors look for in searchers;</li> <li>Whether an MBA is needed for funding;</li> <li>Openness to nonstandard or novel investment terms;</li> <li>Relative merits of multiple small investors vs. larger investors with multiple units; and</li> <li>Recent changes in the market as rates rise and the economy slows.</li> </ul> <p>This podcast is the second in a two-part series developed from a seminar and networking event held in Stikeman Elliott’s Toronto office on November 29, 2022. In the <a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/Search-Funds-in-Canada-Podcast-part-1">first part</a>, several Canadian searchers provided their unique perspectives on the market, with additional contributions from Stikeman Elliott counsel.</p> <p>Listen and subscribe on <a href="https://soundcloud.com/se-perspectives/search-funds-part-2?si=d91d5f68f6da4769a97e2a154cfaa558&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing">SoundCloud</a>, <a href="https://open.spotify.com/episode/3Rb5bqj7NZ36RX18XH7zJk?si=s8xkv4MaQHaaE8tOLcXp-g ">Spotify</a>, or <a href="https://podcasts.apple.com/ca/podcast/search-funds-in-canada-part-2-investor-perspectives/id1671877812?i=1000601117511 ">Apple Podcasts</a>.</p> <iframe width="100%" height="166" scrolling="no" frameborder="no" allow="autoplay" src="https://w.soundcloud.com/player/?url=https%3A//api.soundcloud.com/tracks/1441805734%3Fsecret_token%3Ds-FL1fiuDdeaD&color=%23a50034&auto_play=false&hide_related=true&show_comments=false&show_user=false&show_reposts=false&show_teaser=false"></iframe> <div style="font-size: 10px; color: #cccccc;line-break: anywhere;word-break: normal;overflow: hidden;white-space: nowrap;text-overflow: ellipsis; font-family: Interstate,Lucida Grande,Lucida Sans Unicode,Lucida Sans,Garuda,Verdana,Tahoma,sans-serif;font-weight: 100;"><a rel="noopener noreferrer" href="https://soundcloud.com/se-perspectives" title="Stikeman Elliott Perspectives" target="_blank" style="color: #cccccc; text-decoration: none;">Stikeman Elliott Perspectives</a> · <a rel="noopener noreferrer" href="https://soundcloud.com/se-perspectives/search-funds-part-2/s-FL1fiuDdeaD" title="Search Funds in Canada – Part 2: Investor Perspectives" target="_blank" style="color: #cccccc; text-decoration: none;">Search Funds in Canada – Part 2: Investor Perspectives</a></div> <br /> <p><a href="https://www.stikeman.com/en-ca/kh/guides/videos-podcasts">> See all Stikeman Elliott multimedia content</a></p>22-Feb-2023 05:00:00{0D268115-4950-4009-BC0E-1EDD6E459784}https://www.stikeman.com/en-ca/kh/canadian-ma-law/Search-Funds-in-Canada-Podcast-part-1Mario Nigrohttps://www.stikeman.com/en-ca/people/n/mario-nigroJared Bachynskihttps://www.stikeman.com/en-ca/people/b/jared-bachynskiKevin Guentherhttps://www.stikeman.com/en-ca/people/g/kevin-guentherCanadian M&A LawSearch Funds in Canada Podcast – Part 1: Searcher and Adviser Perspectives<p><strong>In this Q&A-style podcast, recorded before a live audience, experienced searchers share their stories, insights and strategies. If you’ve ever wondered how to start and conduct a search fund, you will find candid answers here, with added insights from Stikeman Elliott specialists in the field.</strong></p> <p>Topics discussed include, among many others: </p> <ul> <li>Solo searching or partnership? Which works better?</li> <li>Understanding the role of your investors.</li> <li>Trust and relationship-building: keys to the process.</li> <li>Keeping your perspective through the ups and downs.</li> <li>Strategies for finding good companies.</li> <li>The role of professional advisors in the process.</li> </ul> <p>This podcast is the first in a two-part series developed from a seminar and networking event held in Stikeman Elliott’s Toronto office on November 29, 2022. In the <a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/Search-Funds-in-Canada-Podcast-part-2">second part</a>, leading U.S. and Canadian investors provided their unique perspectives on the search market.</p> <p>Listen and subscribe on <a rel="noopener noreferrer" href="https://soundcloud.com/se-perspectives/search-funds-part-1?si=cb83d994e73f46299ef000113b730ada&utm_source=clipboard&utm_medium=text&utm_campaign=social_sharing" target="_blank">SoundCloud</a>, <a rel="noopener noreferrer" href="https://open.spotify.com/episode/0b5rU2k7bvYW5PTrraUrJ4?si=sjHnY6p9S5y1o8Xt6uBHFw" target="_blank">Spotify</a>, or <a rel="noopener noreferrer" href="https://podcasts.apple.com/ca/podcast/search-funds-in-canada-part-1-searcher-and-adviser/id1671877812?i=1000599754072" target="_blank">Apple Podcasts</a>.</p> <iframe width="100%" height="166" scrolling="no" frameborder="no" allow="autoplay" src="https://w.soundcloud.com/player/?url=https%3A//api.soundcloud.com/tracks/1441805269%3Fsecret_token%3Ds-eyH8Wjv76yT&color=%236f263d&auto_play=false&hide_related=true&show_comments=false&show_user=false&show_reposts=false&show_teaser=false"></iframe> <div style="font-size: 10px; color: #cccccc;line-break: anywhere;word-break: normal;overflow: hidden;white-space: nowrap;text-overflow: ellipsis; font-family: Interstate,Lucida Grande,Lucida Sans Unicode,Lucida Sans,Garuda,Verdana,Tahoma,sans-serif;font-weight: 100;"><a rel="noopener noreferrer" href="https://soundcloud.com/se-perspectives" title="Stikeman Elliott Perspectives" target="_blank" style="color: #cccccc; text-decoration: none;">Stikeman Elliott Perspectives</a> · <a rel="noopener noreferrer" href="https://soundcloud.com/se-perspectives/search-funds-part-1/s-eyH8Wjv76yT" title="Search Funds in Canada – Part 1: Searcher and Adviser Perspectives" target="_blank" style="color: #cccccc; text-decoration: none;">Search Funds in Canada – Part 1: Searcher and Adviser Perspectives</a></div> <br /> <p><a href="https://www.stikeman.com/en-ca/kh/guides/videos-podcasts">> See all Stikeman Elliott multimedia content</a></p>15-Feb-2023 04:12:00{D8063C76-24FB-4828-8829-B2844A4445C9}https://www.stikeman.com/en-ca/kh/canadian-ma-law/ten-key-considerations-for-growth-equity-investments-in-canada-part-3Alethea Auhttps://www.stikeman.com/en-ca/people/a/alethea-auEvan Marcushttps://www.stikeman.com/en-ca/people/m/evan-marcusTrevor Rowleshttps://www.stikeman.com/en-ca/people/r/trevor-rowlesCanadian M&A LawTen Key Considerations for Growth Equity Investments in Canada: Part 3<p><strong>As growth equity investment strategies gain prominence in global private equity fundraising and institutional capital allocation, we have seen an increase in this type of investment in Canadian companies, particularly by U.S. and other non-Canadian private equity and growth equity funds interested in mid-stage companies in software, technology and other high growth industries. </strong></p> <p>Non-Canadian investors interested in making these types of investments should be aware of some unique features of the applicable legal regimes and market practices in Canada. Topics considered in the previous posts in the series include:</p> <ul> <li><a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/ten-key-considerations-for-growth-equity-Investments-in-canada-part-1">First post</a>: primary vs. secondary transactions; key Canadian taxation issues.</li> <li><a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/ten-key-considerations-for-growth-equity-investments-in-canada-part-2">Second post</a>: foreign investment and merger review; corporate structures and transaction documentation).</li> </ul> <p>In the final installment in this three-part series, we look at the last four of our ten key considerations:</p> <ul> <li>Shareholder approval considerations</li> <li>Employment considerations</li> <li>Corporate transparency</li> <li>Working with existing investors</li> </ul> <h2>7. Shareholder Approval Considerations</h2> <p>Where the negotiated terms of a growth equity investment require changes to a company’s shareholders’ agreement and other fundamental organizational documents, it is often preferable to have all of the company’s existing investors sign-on to the amendments. When that is not feasible, it may be possible to rely on mechanisms in the company’s existing documents to amend them without unanimity or certain statutory mechanisms that can be used to effect transactions via approval from two-thirds of a company’s shareholders voting at a meeting.</p> <h2>8. Employment Considerations</h2> <p>There are certain distinctive aspects of the employment regime in Canada that foreign investors should be aware of when assessing opportunities and structuring transactions.</p> <p>Restrictive covenants, such as <strong>non-compete and/or non-solicitation obligations</strong>, can be important tools for protecting the interests of the company's business. However, introducing new, enforceable, restrictive obligations into an employment relationship in Canada can be difficult. Due diligence of existing restrictive obligations in respect of key employees is therefore important to assess the nature of any risk that potential departures could pose. Where growth equity investments involve secondary transactions, if key employees are participating as selling securityholders, an investor can also use this as an opportunity to introduce restrictive covenants outside the employment relationship.</p> <p>There is no concept of “at will” employment in Canada and accordingly, in terminating the employment of an employee without cause, an employer must provide notice of termination or pay in lieu of notice to the employee in accordance with applicable provincial employment standards legislation and, in the case of non-unionized employees, at common law (which can be quite significant, particularly for employees with seniority). However, written employment contracts may circumscribe the applicable notice or pay in lieu of notice so long as the notice is not less than that which is required by minimum employment standards legislation. If any sort of post-closing restructuring of the business is contemplated, investors should pay close attention to the severance liabilities that may be triggered.</p> <h2>9. Corporate Transparency</h2> <p>The Canadian federal government and various provincial governments have been pursuing corporate transparency objectives in recent years. Federally incorporated corporations are now required to maintain registers of individuals with significant control. These registers are private, but available to law enforcement, tax and other governmental and quasi-governmental authorities. With the exception of Alberta, all of the other provinces have adopted, or are in the process of adopting, similar regimes. Québec’s regime – one of those that is not yet in force – is closer to European models than the others and will apply to any corporation, partnership or trust operating a commercial enterprise in that province (regardless of its jurisdiction of formation). It will also give the public online access to reported ultimate beneficial owner information.</p> <p>The Canadian federal government had also announced its intention to launch a public registry of individuals with significant control by the end of 2023 and, in the meantime, has introduced amendments to the existing regime that will, when in force, require corporations to file information regarding their individuals with significant control with Corporations Canada annually and in connection with certain changes (although such information will not be accessible to the public, at least at the outset).</p> <p>Investors in Canadian companies should be aware that, if their investments exceed certain thresholds (generally 25%), they (or, if they are not individuals themselves, their own significant investors or controlling individuals) may be subject to having their identities and certain additional personal information disclosed in filings that while initially private may in future be made public (depending on the governing jurisdiction).</p> <h2>10. Working With Existing Investors</h2> <p>Our final consideration, while not unique to Canada, is highly important. Balancing the interests of founders and other existing investors with those of new investors who may have different time horizons or other expectations can be one of the challenges for a company seeking growth equity financing. Given the possibility for such varying expectations to derail negotiations, both founders and growth equity investors can benefit from being forthright about their expectations, particularly in respect of post-closing control and governance matters, from the outset.</p> <p>Furthermore, taking on new investors often involves granting new investor rights and potentially limiting the rights granted to outside investors on prior rounds. As such, it is important for these companies to involve their key existing investors in the growth equity fundraising process and to manage their expectations. Companies should also consider the possibility of such competing interests when conducting earlier stage financing rounds or when issuing shares to employees, and include mechanisms that will help to simplify future fundraising.</p>20-Jan-2023 03:05:00{DBC9144F-1A10-4AC2-AB76-A4892630A31E}https://www.stikeman.com/en-ca/kh/canadian-ma-law/private-equity-investment-in-canada-overview-of-recent-developmentsSophie Lamondehttps://www.stikeman.com/en-ca/people/l/sophie-lamondeWarren Silversmithhttps://www.stikeman.com/en-ca/people/s/warren-silversmithCanadian M&A LawPrivate Equity Investment in Canada: Overview of Recent Developments <p><a href="/en-ca/people/l/sophie-lamonde">Sophie Lamonde</a> and <a href="/en-ca/people/s/warren-silversmith">Warren Silversmith</a>, members of Stikeman Elliott’s M&A group, have published <a href="/-/media/files/kh-general/alm-500-private-equity-in-canada-2023.ashx">an article</a> on the latest developments in private equity investment in Canada.</p> <p>This article, which appears in the 2023 edition of the Lexpert/American Lawyer <em>Guide to the Leading 500 Lawyers in Canada</em>, focuses on the regulatory and tax issues that most typically arise when such investments are being considered, notably foreign investment and competition regulation and tax structuring issues.</p> <p>We are pleased to be able to make <a href="/-/media/files/kh-general/alm-500-private-equity-in-canada-2023.ashx">this article</a> available for downloading.</p>10-Jan-2023 06:12:00{574B794A-FC30-4F7D-823C-76B69F0657A6}https://www.stikeman.com/en-ca/kh/competitor/merger-control-canada-overview-of-key-regulatory-issuesMichael Laskeyhttps://www.stikeman.com/en-ca/people/l/michael-laskeyPeter Flynnhttps://www.stikeman.com/en-ca/people/f/peter-flynnLaura Rowehttps://www.stikeman.com/en-ca/people/r/laura-roweThe CompetitorCanadian M&A LawMerger Control in Canada: Overview of Key Regulatory Issues<p>Three members of our <strong><a href="/en-ca/expertise/competition-foreign-investment">Competition and Foreign Investment Group</a></strong> recently co-authored the Canada chapter in <em><a href="/-/media/files/kh-general/iclg-merger-control-2023.ashx">Merger Control</a></em>, part of the International Comparative Legal Guides series published by Global Legal Group. This publication provides an excellent overview of the key regulatory issues affecting M&A in Canada, notably with respect to:</p> <ul> <li>Relevant Authorities and Legislation</li> <li>Transactions Caught by Merger Control Legislation</li> <li>Notification and its Impact on the Transaction Timetable</li> <li>Substantive Assessment of the Merger and Outcome of the Process</li> <li>The End of the Process: Remedies, Appeals and Enforcement</li> <li>Miscellaneous</li> <li>Is Merger Control Fit for Digital Services & Products?</li> </ul> <p>We are pleased to be able to make this <a href="/-/media/files/kh-general/iclg-merger-control-2023.ashx">9-page publication </a>available for downloading.</p>03-Jan-2023 08:55:00{D52C6E1B-39A6-47E2-A569-CCC2ADE53266}https://www.stikeman.com/en-ca/kh/canadian-ma-law/the-role-of-the-efficiencies-defence-in-canadian-competition-law-a-closer-lookMichael Kilbyhttps://www.stikeman.com/en-ca/people/k/michael-kilbyLawson A.W. Hunterhttps://www.stikeman.com/en-ca/people/h/lawson-a-w-hunterThe CompetitorCanadian M&A LawThe Role of the Efficiencies Defence in Canadian Competition Law: A Closer Look<p><strong>Michael Kilby and Lawson Hunter of our Competition & Foreign Investment Group recently co-authored </strong><a rel="noopener noreferrer" target="_blank" href="https://www.theglobeandmail.com/business/commentary/article-mergers-efficiencies-defence-overrated/">an opinion piece </a><strong>in the Globe & Mail on the Canadian “efficiencies defence” under which a merger with anti-competitive effects may be allowed to proceed if those anti-competitive effects would be outweighed by economic efficiency gains.</strong></p> <p>In recent months, public discussion of Canada’s competition laws has reached an all-time high. That is a good thing, given the importance of the subject to the Canadian economy.</p> <p>Much of the public discussion has, however, assumed facts not in evidence. And the more often and loudly certain things are said, the more obvious and indisputable they seem to become – often to the detriment of sound policy making.</p> <p>This is particularly true in the case of Canada’s “efficiencies defence,” under which a merger with anti-competitive effects may be allowed to proceed if those anti-competitive effects would be outweighed by economic efficiency gains.</p> <p>The efficiencies defence is often pointed to as an impediment to robust enforcement of competition laws in Canada. Our point is that, as a statement of historical fact, this view is mistaken. Put differently, setting aside whether the efficiencies defence is justifiable on policy grounds, its existence has not played nearly the role in Canadian competition law enforcement that has been recently suggested.</p> <p>What are the facts? The most important fact is that only a very small number of deals, of limited consequence to the Canadian economy, have gone ahead because of the defence.</p> <p>To back up a step, the Competition Act was last significantly amended in 2009, to considerable fanfare. A U.S.-style merger-review regime was ushered in, allowing the Competition Bureau to seek and obtain tremendous volumes of company data and documents in deciding whether to challenge a merger. As the commissioner of competition at the time rightly said: “The result is an updated Competition Act that facilitates more effective enforcement, aligns us with our international counterparts, and ensures that both businesses and consumers benefit from a competitive marketplace.”</p> <p>Since these 2009 amendments, only two merger challenges have been fully decided by the courts. In a 2022 transaction, the tribunal rejected the efficiencies defence, just as it had in the first transaction in 2012 – the main difference being that, in that earlier case, its decision was overturned on final appeal to the Supreme Court in a split decision on the most technical of grounds.</p> <p>There are also two merger challenge decisions pending, including the high-profile Rogers-Shaw transaction. It is entirely possible, but not widely understood, that the tribunal could rule in favour of Rogers Communications Inc. force the sale of Freedom Mobile to Quebecor Inc. and yet still reject the efficiencies defence.</p> <p>There is of course the far greater body of transactions that do not make it all the way to the tribunal. Are these all being saved by the efficiencies defence? Clearly not. Since 2009, the bureau has obtained about 60 negotiated, public settlements with merging companies where they agreed to sell off businesses to fix competition problems. The efficiencies defence did not prevent these important fixes from happening. Just days ago, for example, the $600-million sale of a 50-per-cent stake in the Key Access Pipeline System as required by a bureau settlement was announced.</p> <p>At the level of these far more numerous negotiated settlements – which tend to pass with little public notice – the Competition Act seems to be working well, without any undue role for the efficiencies defence. Indeed, since 2009, the bureau has, we believe, cited the defence only four times (including one transaction that did not proceed in any event) as the reason for its decision not to challenge a merger. In context, roughly 3,000 transactions were reviewed in that same period.</p> <p>If more transactions are quietly being saved by the efficiencies defence, then they should be publicly disclosed, as that would inform and influence debate on this important topic. Our experience has instead been the very opposite: the Competition Bureau typically rejects the defence, as it has done in the Rogers-Shaw transaction.</p> <p>Our point here is a basic one. It is that discussion around competition policy in Canada should be grounded in the actual transactions and cases that have (or have not) arisen and that the growing echo-chamber effect should be resisted. This data-driven approach suggests that tossing the efficiencies defence into the waste bin of history is an entirely disproportionate response. Surgical – but material – changes addressing issues arising from the Supreme Court’s split decision in 2012 would be a far better outcome.</p> <p><span style="background-color: #ffffff; color: #000000;"><em>Originally published in the Globe and Mail, Report on Business Opinion section, December 22, 2022. </em></span></p>22-Dec-2022 11:04:00{8487BA86-F715-4176-9C06-7284D5193C8A}https://www.stikeman.com/en-ca/kh/canadian-ma-law/ten-key-considerations-for-growth-equity-investments-in-canada-part-2Alethea Auhttps://www.stikeman.com/en-ca/people/a/alethea-auEvan Marcushttps://www.stikeman.com/en-ca/people/m/evan-marcusTrevor Rowleshttps://www.stikeman.com/en-ca/people/r/trevor-rowlesCanadian M&A LawTen Key Considerations for Growth Equity Investments in Canada: Part 2<p><strong>As growth equity investment strategies gain prominence in global private equity fundraising and institutional capital allocation, we have seen an increase in this type of investment in Canadian companies, particularly by U.S. and other non-Canadian private equity and growth equity funds interested in mid-stage companies in software, technology and other high growth industries. </strong></p> <p>Non-Canadian investors interested in these types of investments will find Canada to be a congenial environment, but they still need to be aware of a few important and distinctive features of Canadian law, regulation and market practice. The <a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/ten-key-considerations-for-growth-equity-Investments-in-canada-part-1">first post in this series</a> looked at the distinction between primary and secondary transactions and reviewed some key Canadian taxation issues. In this second installment, we consider three more factors that can affect the structuring of growth equity investments into Canada:</p> <ul> <li>Regulatory review thresholds</li> <li>Canadian corporate considerations</li> <li>Key transaction documents</li> </ul> <h2>4. Regulatory Review Thresholds</h2> <p>Growth equity investments (typically minority investments) often fall below the thresholds for foreign investment reviews under the <em>Investment Canada Act</em> (<strong>“ICA”</strong>) and below the notification thresholds for antitrust review under the <em>Competition Act</em> (see our <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/-/media/files/kh-guides/dbic/se-canada---competition-law-overview.ashx">Competition Law Overview</a> for more information on current threshold levels).</p> <p>Foreign investment review under the ICA is only triggered on an <strong>acquisition of control</strong>. An acquisition of control is <strong>“deemed”</strong> if an investor acquires majority voting control but only <strong>“presumed”</strong> if an investor acquires more than one-third (but less than a majority) of a Canadian company’s voting shares. As a consequence, for growth equity investments falling between one-third and majority voting control post-investment, the parties must consider whether <strong><em>de facto</em> control</strong> is being acquired for the purposes of determining ICA filing requirements. This concept of “control in fact” is not clearly defined, but is often understood as the ability to determine the strategic direction of the business, or to manage its day-to-day operations, including through the exercise of special voting rights, the ability to appoint directors or veto decisions, etc. In practice, a minority investment has been found to constitute control in fact where no larger voting interest is held by another person or group.</p> <p>If control is being acquired and if the transaction meets certain financial thresholds, it may be subject to <strong>economic review,</strong> which would require the investor to demonstrate to the government, based on factors such as the nature of the acquired business and the identity of the investor, that the transaction is of “net benefit to Canada.”</p> <p>Investments by non-Canadians are also potentially subject to <strong>national security review</strong> under the ICA. Under this process, growth investments could potentially be reviewed even where they do not meet the control or financial thresholds for economic review. The national security process is initiated relatively rarely, with only 24 transactions receiving a notice of potential review or of immediate review in the 2020-21 year. Full reviews are rarer still, but when they do occur they take an average of 225 days to complete and – where a proposed investment is found to be injurious to Canadian national security – can result in the prohibition, abandonment or unwinding of a transaction, or in the imposition of conditions to its completion. However, reviews are becoming more common, with the number of national security reviews in the most recent year approximately equal to the number in the previous four years combined.</p> <p>Transactions are particularly likely to receive close scrutiny under the national security framework where they involve <strong>specific sensitive technologies, sensitive personal data </strong>or<strong> critical minerals</strong>. Investors that are under <strong>state ownership or influence</strong>, or (more generally) whose countries of origin may be viewed as potentially hostile to Canadian interests, are also likely to be considered carefully.</p> <p>Canada’s <em>Competition Act</em> requires mandatory <strong>pre-merger notification</strong> if certain financial thresholds are met, but in the case of growth investments, these only need to be considered in respect of acquisitions of 35% or more of the voting shares of a private company or 20% or more of the voting shares of a public company.</p> <h2>5. Canadian Corporate Considerations</h2> <p>There have been recent initiatives in certain provinces, including Alberta and Ontario, to modernize their corporate statutes in the hopes of encouraging investment. Certain of these amendments, such as reduced thresholds for written shareholder approvals in Alberta and Ontario, and increased protections and flexibility for directors in Alberta, may make these jurisdictions more attractive for investors. Furthermore, most provinces, including Alberta, British Columbia, Ontario and Québec, have now eliminated resident director requirements, although such requirements continue to apply for corporations incorporated under Canada’s federal corporate statute.</p> <p>U.S. investors should also be aware that Canada does not have an equivalent to U.S. limited liability companies. For those accustomed to the flexibility offered by LLCs, for example, the ability with an LLC structure to create certain kinds of investment waterfalls at the portfolio company level, creativity may be required to achieve similar objectives with other structuring options in Canada.</p> <h2>6. Key Transaction Documents</h2> <p>While the model documents published by the Canadian Venture Capital & Private Equity Association (<strong>“CVCA”</strong>), which are based on the U.S. National Venture Capital Association models, have become ubiquitous on venture capital transactions in Canada, there is generally more variety in the style of documentation used in growth equity financing of later stage companies.</p> <p>A key document in any financing of a private Canadian company is a unanimous shareholders’ agreement. In most Canadian corporate jurisdictions, a shareholders' agreement signed by all shareholders is an effective way to set out how the company will be governed, as well as any agreements amongst the investors regarding the transfer and ownership of their shares, amongst other things. The core documents in a transaction generally include:</p> <ul> <li>the unanimous shareholders’ agreement (often broken into 3 separate agreements if the CVCA’s model is being followed);</li> <li>the preferred share terms;</li> <li>depending on whether a transaction is primary or secondary, either <ul> <li>the subscription, investment or share purchase agreement (primary transaction), or</li> <li>a master transaction or similar agreement, under which the target company agrees to the transaction steps and often provides representations and warranties in respect of itself and its business operations, together with any secondary share purchase agreements. (secondary transaction)</li> </ul> </li> </ul> <h2>Next Up</h2> <p>The final installment in this three-part series will look at:</p> <ul> <li>Shareholder approval considerations</li> <li>Employment considerations</li> <li>Corporate transparency</li> <li>The company’s perspective</li> </ul>Tue, 08 Nov 2022 12:00:00 Z08-Nov-2022 02:14:00{C81B6035-F803-4E12-8B6F-57A61B7824C0}https://www.stikeman.com/en-ca/kh/competitor/restraint-of-trade-and-dominance-under-canadian-competition-law-an-overviewMichael Kilbyhttps://www.stikeman.com/en-ca/people/k/michael-kilbyLaura Rowehttps://www.stikeman.com/en-ca/people/r/laura-roweThe CompetitorCanadian M&A LawRestraint of Trade and Dominance Under Canadian Competition Law: An Overview<p>Two members of our Competition & Foreign Investment Group recently co-authored the <a href="/-/media/files/kh-general/restraints-of-trade-and-dominance-in-canada---overview-2022.ashx">“Canada” chapter on Restraint of Trade and Dominance</a> in <a rel="noopener noreferrer" target="_blank" href="https://uk.practicallaw.thomsonreuters.com/Browse/Home/PracticalLaw?transitionType=Default&contextData=(sc.Default)&comp=pluk">Thomson Reuters</a>’ <em>Practical Law</em> – <em>Competition Global Guide 2022</em>. Topics considered in this 16-page publication include:</p> <p>With respect to <strong><strong>restraint of trade</strong></strong>:</p> <ul> <li>Canada’s regulatory framework, including both criminal enforcement and regulatory review processes as well as the role of the Competition Bureau;</li> <li>Treatment of anti-competitive conduct in relation to intellectual property;</li> <li>Exemptions and defences, including the efficiencies defence;</li> <li>Exclusions and limitation periods;</li> <li>Obtaining informal guidance and opinions;</li> <li>Investigations, including capacity of third parties to instigate inquiries;</li> <li>Privacy and confidentiality of investigations;</li> <li>Penalties, fines, orders and settlements;</li> <li>Class actions; and</li> <li>Rights of appeal.</li> </ul> <p>With respect to <strong><strong>monopolies and abuse of market power</strong></strong>:</p> <ul> <li>The regulatory framework under the reviewable practices provisions of the <em><em>Competition Act</em></em>;</li> <li>Elements of abuse of dominance;</li> <li>Types of abusive conduct;</li> <li>Exemptions and exclusions;</li> <li>Investigations; and</li> <li>Penalties and enforcement.</li> </ul> <p>Other topics addressed in the article include the treatment of joint ventures, inter-agency co-operation and recent cases, trends and reform proposals.</p>19-Oct-2022 05:46:00{56A2596B-8EA1-4B5F-9272-3841496A6396}https://www.stikeman.com/en-ca/kh/canadian-ma-law/merger-control-in-canada-overview-of-key-regulatory-issuesMichael Kilbyhttps://www.stikeman.com/en-ca/people/k/michael-kilbyDavid M. Feldmanhttps://www.stikeman.com/en-ca/people/f/david-feldmanCanadian M&A LawMerger Control in Canada: Overview of Key Regulatory Issues<p>Michael Kilby and David Feldman of our <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/expertise/competition-foreign-investment"><strong></strong></a><strong><a href="/en-ca/expertise/competition-foreign-investment">Competition & Foreign Investment Group</a></strong> recently co-authored the <a href="/-/media/files/kh-general/merger-control-in-canada-2022.ashx">Canada chapter</a> on Merger Control published by <a rel="noopener noreferrer" target="_blank" href="https://uk.practicallaw.thomsonreuters.com/6-500-7423?transitionType=Default&contextData=(sc.Default)&firstPage=true"><strong>Thomson Reuters</strong></a> in their <em>Practical Law</em> - <em>Competition Global Guide 2022</em>. This revised chapter provides an excellent overview of merger control in Canada, including the following topics:</p> <ul> <li>Regulatory framework</li> <li>Triggering events/thresholds</li> <li>Rights of third parties</li> <li>Substantive test</li> <li>Remedies, penalties and appeal</li> <li>Automatic clearance of restrictive/ancillary provisions</li> <li>Powers of intervention and foreign investment review</li> <li>Joint ventures</li> <li>Inter-agency co-operation</li> <li>Recent mergers, cases, trends and statistics</li> </ul> <p>We are pleased to be able to make this newly revised <a href="/-/media/files/kh-general/merger-control-in-canada-2022.ashx">14-page chapter</a> available for downloading.</p>Mon, 03 Oct 2022 04:00:00 Z12-Oct-2022 01:14:00{1E73EB54-AF9C-4ED9-8A42-DA66FD4240C1}https://www.stikeman.com/en-ca/kh/canadian-ma-law/ten-key-considerations-for-growth-equity-Investments-in-canada-part-1Alethea Auhttps://www.stikeman.com/en-ca/people/a/alethea-auEvan Marcushttps://www.stikeman.com/en-ca/people/m/evan-marcusTrevor Rowleshttps://www.stikeman.com/en-ca/people/r/trevor-rowlesCanadian M&A LawTen Key Considerations for Growth Equity Investments in Canada: Part 1<p><strong>As growth equity investment strategies gain prominence in global private equity fundraising and institutional capital allocation, we have seen an increase in this type of investment in Canadian companies, particularly by U.S. and other non-Canadian private equity and growth equity funds interested in mid-stage companies in software, technology and other high growth industries. </strong></p> <p>Growth equity transactions are material minority investments in high growth companies that are somewhere between the start-up and exit-ready stages. These types of investments typically take the form of preferred equity securities.</p> <p>Non-Canadian investors interested in making these types of investments should be aware of some unique features of the applicable legal regimes and market practices in Canada. This three-part series looks at ten key considerations that can impact decision-making by growth equity investors and the structuring of their investments into Canada. The issues dealt with in this first post are:</p> <ul> <li>Primary vs. secondary transactions</li> <li>Maximizing paid-up capital (PUC)</li> <li>CCPC status considerations</li> </ul> <h2>1. Primary vs. Secondary Transactions</h2> <p>Growth equity investments can include <strong>primary </strong>investment transactions (where shares are purchased directly from treasury), <strong>secondary </strong>transactions (where shares are purchased from some or all of a company’s existing shareholders, sometimes with mechanisms to facilitate optionholder participation), or a combination of the two.</p> <p>Any growth equity investment that involves a secondary component generally involves more structuring considerations. Nevertheless, including a secondary component can be a useful way for companies to provide liquidity to their existing securityholders, especially in the face of more challenging IPO and M&A markets. Secondary transactions also entail certain commercial considerations, which should be part of the advance planning and negotiations. Often best addressed while negotiating the term sheet, these considerations can include the structuring that may be undertaken to provide the selling securityholders or investor (or both) with a more tax-efficient position (together with the allocation of any risk in connection with such structuring), as well as the allocation of responsibility for the representations in connection with the business to be provided to the investor.</p> <h2>2. Maximizing Paid-up Capital</h2> <p>Paid-up capital (<strong>“</strong>PUC<strong>”</strong>) is a tax attribute of shares related to the amount paid to the issuer on subscription. PUC can be returned to investors without incurring Canadian tax – a particularly valuable feature for non-Canadian investors who might otherwise be subject to Canadian withholding taxes on distributions. However, PUC is aggregated across shares of a class (or series), so it is often important for up-round investors in a primary transaction to invest in a new class or series of shares in order to segregate their elevated PUC level.</p> <p>Secondary transactions can also be structured to permit an investor to obtain elevated PUC, although that generally requires more steps, including the formation of a Canadian acquisition company to purchase the secondary shares and subsequently exchanging the shares of that acquisition company for a new class of shares of the target company (via certain customary transaction structures). Such share-exchange structures also offer a mechanism to give a new investor its bargained-for economic and other rights in the terms of a new class of shares.</p> <h2>3. CCPC Status Considerations</h2> <p>Non-Canadian investors in Canadian businesses should be aware that Canadian tax laws afford advantageous tax treatment to “Canadian-controlled private corporations” (“CCPCs”) and that the retention of CCPC status may significantly impact transaction structuring. Specifically, CCPC status may be lost if investors who are not Canadian residents are collectively considered to be in a position to "control" the private corporation.</p> <p>The preferential tax treatment enjoyed by CCPCs includes enhanced and refundable R&D tax credits, reduced corporate tax rates, capital gains exemptions for individual Canadian-resident selling shareholders and preferential treatment of employee stock options. Losing CCPC status can therefore have measurable impacts on the cash flow of a business (particularly with respect to a loss of refundable tax credits). The target company may already have non-resident Canadian shareholders with the result that even a relatively modest additional investment from non-Canadian funds could tip the balance so that CCPC status is lost. It is important for non-Canadian investors to mindful of the impacts that different transactions structures can have on CCPC status and, if applicable, take those implications into account when evaluating a Canadian investment opportunity and/or negotiating the governance entitlements that would attach to such an investment.</p> <h2>Next Up</h2> <p>The <a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/ten-key-considerations-for-growth-equity-investments-in-canada-part-2">second</a> and third posts in this series will look at:</p> <ul> <li>Regulatory review thresholds</li> <li>Canadian corporate considerations</li> <li>Key transaction documents</li> <li>Shareholder approval considerations</li> <li>Employment considerations</li> <li>Corporate transparency</li> <li>Working with existing shareholders</li> </ul>Fri, 07 Oct 2022 14:13:00 Z03-Oct-2022 03:05:00{29E2891F-7767-4C86-80E8-D5BD44A44E4B}https://www.stikeman.com/en-ca/kh/corporations-commercial-law/ontarios-new-transparency-register-getting-your-obca-corporation-ready-for-january-1-2023Stikeman ElliottCorporations & Commercial Law UpdateCanadian M&A LawOntario’s New Transparency Register: Getting Your OBCA Corporation Ready for January 1, 2023<p><strong>Under new rules in force as of January 1, 2023, private corporations incorporated or continued under Ontario’s<em> Business Corporations Act</em> (“OBCA”) will be required to maintain a register (“Transparency Register”) of “individuals with significant control” (“ISCs”) over the corporation. </strong><strong>The <a href="https://can01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.ola.org%2Fen%2Flegislative-business%2Fbills%2Fparliament-42%2Fsession-2%2Fbill-43%23BK4&data=05%7C01%7CAToure%40stikeman.com%7Cbf59fada46cc40c5fd4a08dad14d219c%7C394646dfa1184f83a4f46a20e463e3a8%7C0%7C0%7C638052426444467349%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=z90IYaSteZIwLEI5zFQowvWGbVxm3mHYyo9ou3Fkxgw%3D&reserved=0">new rules</a> are part of a global effort aimed at improving corporate transparency by preventing and detecting the use of corporations for tax evasion, money laundering or other illicit financial activities. Ontario’s provisions are similar to those that are already in force for </strong><strong><a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/Corporate-Control-Transparency-in-Canada">federal corporations</a></strong><strong> and corporations in several other Canadian provinces.</strong></p> <h2>Which Ontario Corporations Must Maintain a Transparency Register?</h2> <p>All <strong>private Ontario corporations</strong> will need to prepare and maintain a Transparency Register (other than private corporations that are <strong>wholly-owned subsidiaries</strong> of a public company). <strong>Public companies </strong><strong>are exempt</strong> if they are offering corporations and/or are listed on a <a rel="noopener noreferrer" target="_blank" href="https://www.canada.ca/en/department-finance/services/designated-stock-exchanges.html">“designated” Canadian or foreign stock exchange</a>, which includes most of the world’s significant stock exchanges. The Ontario Government may consider additional exemptions in the future.</p> <p>Corporations should take steps prior to the January 1, 2023 implementation date to gather the information required to prepare their Transparency Registers. Ontario private corporations with <strong>complex ownership structures, in particular, may want to get an early start on their ISC analyses.</strong> Our experience with similar requirements under other corporate statutes is that identifying ISCs – the people whose information needs to go on the register – can take time. This is especially true for stacked corporate structures and structures that include foreign entities and/or non-corporate entities such as partnerships and trusts.</p> <h2>What Information is Required in the Transparency Register?</h2> <p>The Transparency Register must record the following information for each ISC:</p> <ul> <li>name, date of birth and last known address;</li> <li>jurisdiction of residence for tax purposes;</li> <li>the date on which the individual became or ceased to be an ISC;</li> <li>a description of how the individual is an ISC (including a description of the ISC’s rights and interests in respect of the corporation’s shares); and</li> <li>any other information that may be required under future regulations.</li> </ul> <p>The Transparency Register must also describe the reasonable steps taken (at least once during each financial year of the corporation) to ensure the Register is accurate, complete and up-to-date.</p> <h3>How often does the Transparency Register need to be updated?</h3> <p>As noted above, the Transparency Register must be reviewed and, if necessary, updated to reflect changes in a corporation’s ISCs or their required information <strong>at least once during each financial year</strong>. The update does not have to be conducted on any particular date or on the same date each year, as long as there is one update in each financial year. If new information is discovered in the course of a review, it must be recorded in the Register within 15 days of the date on which the corporation becomes aware of it.</p> <p>In addition to annual updates, Registers must also be updated on an <em><strong>ad hoc</strong></em><strong> basis</strong> whenever relevant information comes to light, within 15 days of the date on which the corporation becomes aware of it.</p> <h3>What obligations do the corporation’s shareholders have?</h3> <p>The legislation requires <strong>shareholders</strong> to respond to any related inquiries from the corporation promptly and to the best of their knowledge, with accurate and complete information.</p> <h3>Where is the Register kept?</h3> <p>Corporations must keep the Transparency Register at the corporation’s registered office in Ontario, unless the directors designate another location in the province.</p> <h2>Who Must Be Listed on the Register?</h2> <p>Information for each individual identified as an “individual with significant control” of the private corporation must be included in the Register.</p> <h3>The basic tests</h3> <p>An individual will be considered an ISC of the corporation if they meet either of the following tests:</p> <ul> <li>The individual holds a <strong>25% or greater interest</strong> in the corporation, either by votes or by fair market value (including registered shareholdings, beneficial ownership of shares and direct/indirect control or direction over the shares, and also including certain joint interests); or</li> <li>The individual has <strong>direct or indirect influence</strong> that, if exercised, would give him or her “control in fact” of the corporation.</li> </ul> <p>Importantly, the <strong>“indirect control”</strong> concept means that an individual at the top of a corporate chain may be an ISC of entities lower down the chain in which he or she does not hold a direct personal interest.</p> <p>If there is <strong>no individual identified who meets either of the tests</strong>, then no one needs to be listed (although a Transparency Register must still be created and maintained, describing the steps taken as required under the legislation).</p> <p>The description above covers the basic considerations, but<strong> the tests have important nuances that are discussed in the final section of this post</strong>. Note that only individuals can be ISCs and that it is possible for new classes of ISC to be created by regulation.</p> <h2>Who Will Have Access to the Register?</h2> <p>The legislation provides for access by the Ontario Government for compliance purposes, and by law enforcement and regulators for investigative purposes as they relate to the administration or enforcement of applicable Ontario or federal laws (or similar laws of other provinces or of foreign jurisdictions, in certain circumstances).</p> <p>Only the following persons may make requests to access an Ontario corporation’s Transparency Register:</p> <ul> <li>the Minister;</li> <li>police forces;</li> <li>tax authorities of Ontario and Canada; and</li> <li>certain specified regulators, including the Ontario Securities Commission, the Financial Services Regulatory Authority of Ontario and the Financial Transactions and Reports Analysis Centre of Canada (others may be designated by regulation).</li> </ul> <p>Other than as described below, the Transparency Register will not be publicly available, nor do the OBCA provisions require disclosure to shareholders or creditors.</p> <h3>The Minister</h3> <p>The Minister’s authorized representative may make any inquiry considered necessary for the purposes of enforcing the requirement to maintain a Transparency Register and for the making of required disclosures.</p> <h3>Law enforcement, tax authorities and certain regulators</h3> <p>A request to access a Transparency Register may be made only for law enforcement, tax or regulatory purposes:</p> <ul> <li>Requests from <strong>police forces</strong> must be “for the purpose of conducting an investigation into an offence under a law of Ontario or Canada” or to provide information to a law enforcement agency outside Ontario for a similar purpose.</li> <li>Requests from <strong>tax authorities</strong> must be “for the purpose of administering or enforcing a law of Ontario or Canada that provides for the imposition or collection of a tax, royalty or duty”, or to provide information to the officials of other jurisdictions to assist in the administration or enforcement of a similar law of that jurisdiction.</li> <li><strong>Designated regulators</strong> may make requests for the purpose of assisting agencies with similar mandates in other provinces and foreign jurisdictions. Such requests must be for the purpose of administering or enforcing a law for which the regulatory body is responsible.</li> </ul> <p>In each case, requests may be made on behalf of entities outside of Canada only where authorized under an arrangement, written agreement, treaty or law.</p> <p>Note that these provisions appear to contemplate requests with respect to investigations of unrelated entities and do not appear to require any suspicion of wrongdoing by the corporation itself.</p> <h2>Penalties</h2> <h3>The Corporation</h3> <p>Fines of up to $5,000 for failing, without reasonable cause, to comply with any of the requirements to prepare and maintain a Transparency Register, respond to inquiries or meet disclosure obligations under the legislation.</p> <h3>Directors and officers</h3> <p>Fines of up to $200,000 and/or up to 6 months imprisonment for knowingly authorizing, permitting or acquiescing in an Ontario corporation’s failure to perform any of its duties relating to the creation, maintenance or disclosure of the Transparency Register, whether or not the corporation has been prosecuted or found guilty.</p> <p>The same penalties apply where a director or officer records false or misleading information in the Transparency Register, or provides false or misleading information relating to the Register to any person or entity (or who knowingly authorizes, permits or acquiesces in any of these acts).</p> <h3>Shareholders</h3> <p>Fines of up to $200,000 and/or up to 6 months imprisonment for knowingly failing to reply to the corporation’s Transparency Register requests as required by the legislation).</p> <h3>General</h3> <p>Fines of up to $5,000 for failing, without reasonable cause, to respond promptly to enforcement inquiries authorized by the Minister. This could apply to anyone to whom such an inquiry is made.</p> <h2>Identifying Your ISCs: Detailed Discussion</h2> <p>We noted above that, at the most basic level, an individual is an ISC if either of the following is true: (i) the individual has control or direction over a 25% shareholding, or (ii) the individual has “any direct or indirect influence that, if exercised, would result in control in fact of the corporation”. However, there are a number of nuances that can complicate the ISC analysis for each of these tests:</p> <h3>First test: control or direction over a 25% shareholding</h3> <p>As noted above, an individual will be considered an ISC with respect to a corporation where the individual holds a <strong>25% or greater interest</strong> in the corporation, either by votes or by fair market value. This includes registered shareholdings, beneficial ownership of shares and direct/indirect control or direction over the shares.</p> <p>Combinations of the above are sufficient (e.g. an individual can meet the 25% threshold by virtue of being the registered holder of some shares and the beneficial owner of other shares).</p> <h4>Situations involving multiple individuals, including family groups</h4> <p>The legislation addresses certain situations in which two or more individuals jointly or collectively hold or exercise rights or interests in an OBCA corporation, including the following:</p> <ul> <li>Where two or more individuals <strong>jointly hold rights or interests meeting the 25% threshold</strong>, each of those individuals will be considered an ISC.</li> <li>Where a <strong>voting agreement or similar arrangement</strong> exists between two or more individuals under which individuals agree to exercise any rights that they hold in the corporation <strong>“jointly or in concert”</strong>, and those rights collectively meet the 25% threshold, all individuals who are party to the agreement or arrangement will generally be considered ISCs.</li> <li>An individual may also be considered an ISC by virtue of being <strong>a member of a family group</strong> with interests or rights that collectively meet the 25% threshold. Under the OBCA's definition of “related persons”, such groups include spouses and children and potentially other relatives if they live in the family home.</li> </ul> <p>In situations such as those described above, each individual who is identified as an ISC must be included in the Transparency Register.</p> <h3>Second test: control in fact through direct or indirect influence</h3> <p>An individual will also be considered an ISC if the individual has direct or indirect influence that, if exercised, would result in control in fact of the corporation. The legislation provides that, in making the “control in fact” determination, <strong>“all relevant factors”</strong> should be taken into consideration and that those “factors” <strong>need not include</strong> the existence (or non-existence) of a legally enforceable right or ability to effect a change in the board of directors or its powers (not even in the looser sense of having influence over shareholders that have such a right or ability).</p> <p>Despite the open-endedness of this definition, the legislation includes an important and useful set of <strong>exclusions</strong>. Control in fact, it states, <strong>does not</strong> arise only by reason of an individual’s influence that derives from an arm’s length relationship involving any of the following kinds of agreements affecting the “manner in which a business carried on by the corporation is conducted”:</p> <ul> <li>Franchising;</li> <li>Licensing;</li> <li>Leasing;</li> <li>Distribution;</li> <li>Supply; or</li> <li>Management.</li> </ul> <p>The express presumptive exclusion of these common commercial arm’s-length arrangements will provide welcome certainty for many businesses that fall into these categories.</p> <h2>Going Forward</h2> <p>As the OBCA amendments will take effect on January 1, 2023, Ontario private corporations should take steps to assemble the required information as soon as practicable.</p>20-Sep-2022 06:56:00{59E74E32-2E58-497A-A51F-488B1FD2D7A0}https://www.stikeman.com/en-ca/kh/canadian-securities-law/canadas-modern-slavery-bill-nears-final-approval-new-reporting-requirements-are-comingAndrew S. Cunninghamhttps://www.stikeman.com/en-ca/people/c/andrew-s-cunninghamCanadian Securities LawCanadian Employment, Labour & Pension LawCorporations & Commercial Law UpdateCanadian M&A LawCanada’s Modern Slavery Bill Nears Final Approval: New Reporting Requirements Are Coming<p><em>Update: This legislation has now been passed and received Royal Assent on May 11, 2023. It was not altered in any significant respect after this post was written, but please note that references to a possible January 1, 2023 implementation date in this post should be disregarded. The legislation is in effect as of January 1, 2024, with first reports due by May 31, 2024. Please see our <a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/canadian-legislation-on-forced-and-child-labour-in-global-supply-chains-takes-effect">May 26, 2023 post for additional details about the legislation</a>.</em></p> <p><strong>Canada’s proposed “modern slavery” legislation – the <em>Fighting Against Forced Labour and Child Labour in Supply Chains Act</em></strong><strong> (“New Act”) – is currently awaiting consideration by the House of Commons Standing Committee on Foreign Affairs and International Development. Once passed, the New Act could become law as early as January 1, 2023, creating new reporting obligations for many Canadian businesses across all sectors, including many Canadian-listed public companies and potentially foreign businesses that do business in Canada. The reports will be accessible to the general public.</strong> </p> <h2>What You Need To Know</h2> <p>The New Act is part of <a rel="noopener noreferrer" target="_blank" href="https://www.parl.ca/legisinfo/en/bill/44-1/s-211"><strong>Bill S-211</strong></a>, which passed Second Reading in the House of Commons on June 1, 2022. While broadly similar to the <a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/canadian-employment-labour-pension-law/canadian-modern-slavery-bill-would-cast-a-wide-net-on-supply-chain-transparency-practices">other modern slavery bills</a> that Parliament has considered in recent years, some of its requirements are more onerous than the corresponding requirements in those bills.</p> <p>Briefly, the New Act:</p> <ul> <li>Requires a publicly accessible report to be made about each entity’s<strong> corporate structure and supply chains</strong>, as well as of measures taken with respect to forced labour and child labour. The extent of disclosure may be more than some companies are expecting.</li> <li>Applies to <strong>Canadian-listed companies and other entities that meet a size threshold</strong> (any two of: $40 million revenue, $20 million assets, 250 employees).</li> <li>Might apply to a <strong>foreign business that meets the size threshold globally</strong>, even if its Canadian operations do not meet the threshold independently.</li> <li>Extends the reporting obligation to entities that produce, sell, distribute or import goods into Canada, with <strong>no <em>de minimis</em> exception</strong> – even entities that deal only incidentally with goods will need to consider whether a report is required.</li> <li>Includes some special rules for <strong>corporate groups</strong>, including a provision that allows a single report to be filed on behalf of multiple entities.</li> <li>Includes <strong>warrantless search </strong>provisions</li> <li>Creates a <strong>maximum penalty</strong> of $250,000, which can apply to the entity itself or to corporate directors, officers and other individuals.</li> <li>Could become law as early as <strong>January 1, 2023</strong>, with the first Annual Report due (in that case) on <strong>May 31, 2023</strong>.</li> </ul> <h2>Which Businesses Must File Reports?</h2> <p>Determining whether an entity has obligations under the New Act will generally involve two tests.</p> <h3>First Test</h3> <p>First, the organization must determine whether it falls under the definition of “entity” in the New Act, which applies to:</p> <ul> <li>Any <strong>listed entity</strong> (on a Canadian stock exchange);</li> <li>Any<strong> other corporation, </strong>or to any<strong> trust, partnership or other unincorporated organization</strong>, that in at least one of its two previous financial years, has met at least two of the following three conditions (the “Size Threshold”): <ul> <li>C$20 million in assets;</li> <li>C$40 million in revenue; and</li> <li>250 employees (on average); and</li> </ul> </li> <li>Any other entity that may be <strong>prescribed</strong> by regulation.</li> </ul> <h4>Note: This could potentially apply to non-Canadian entities with a nexus of some sort to Canada.</h4> <p>The Size Threshold applies to any corporation, trust, partnership, or other unincorporated organization that “does business in Canada” and/or has assets or a place of business in Canada. <strong>This appears to bring foreign entities within the ambit of the New Act</strong> and it is noteworthy that the definition of the Size Threshold does not state that the asset, revenue and employment figures on which it is based refer to assets, revenue or employees in Canada. It is hoped that the application of this test to non-Canadian entities will be addressed prior to implementation.</p> <h3>Second Test</h3> <p>An organization that is an “entity” under the First Test will have a reporting obligation if it does any of the following (“Qualifying Activities”):</p> <ul> <li>Produces, sells or distributes goods in Canada or elsewhere;</li> <li>Imports into Canada goods produced outside Canada; or</li> <li>Controls an entity that does either of the above.</li> </ul> <p>While some key terms are left undefined, the proposed legislation does provide definitions for the following: </p> <ul> <li><strong>“Production of goods”</strong> is defined to include “the manufacturing, growing, extracting and processing of goods”.</li> <li><strong>“Controlled by another entity”</strong> is defined broadly, as direct or indirect control “in any manner”. Any entity that controls another entity is deemed to control any entities controlled by that other entity.</li> </ul> <h4>Note: This could potentially apply to entities that deal in goods only incidentally</h4> <p>In its current form, the New Act does not include any <em>de minimis</em> threshold or exemption with respect to the Qualifying Activities. <strong>As such, an entity may have a reporting obligation even if the production, sale, distribution and/or importation of goods is not its core business. </strong>For example, a services business might need to consider whether the importation of office supplies for its internal use could trigger a duty to report.</p> <h4>Note: Distributors are now included</h4> <p>A key change from previous versions of this legislation is that the New Act includes the<strong> distribution of goods</strong> in the list of Qualifying Activities.</p> <h2>The Reports: Form and Content</h2> <p>Every entity must file a report (“Annual Report”) with the Minister of Public Safety and Emergency Preparedness (“Minister”). As discussed below, it is also possible to submit a revised report (“Revised Report”) that updates or corrects the Annual Report.</p> <h3>Focus on avoidance of child labour and forced labour</h3> <p>The Annual Report must report on the steps taken during the financial year “to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity.”</p> <p>The definitions section of the New Act includes definitions of “child labour” and “forced labour”. <strong>“Child labour”</strong> is broadly defined to include labour by persons under the age of 18 years that has any of a range of negative impacts, including (for example) physically dangerous work and work that interferes with schooling. <strong>“Forced labour”</strong> includes labour performed under duress, e.g. under the reasonable expectation that the personal safety of the labourer or another person would be threatened if they failed to perform the labour. The complete definitions and underlying <strong>international conventions</strong> should be consulted with respect to the meaning of these terms.</p> <h3>Required information</h3> <p>In addition to describing specific steps taken during the financial year, the Annual Report must include the following information in respect to each entity covered by the report (the language is taken directly from section 11(3) of the proposed legislation):</p> <ul> <li>Its structure, activities and supply chains;</li> <li>Its policies and due diligence processes in relation to forced labour and child labour;</li> <li>The parts of its business and supply chains that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk;</li> <li>Any measures taken to remediate any forced labour or child labour;</li> <li>Any measures taken to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labour or child labour in its activities and supply chains;</li> <li>The training provided to employees on forced labour and child labour; and</li> <li>How the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.</li> </ul> <p>While no specific format is set out in the New Act, the Minister may issue a public written statement that sets out the required form and manner of reporting.</p> <h3>Extent of public disclosure of structure, activities and suppliers</h3> <p>The content of the Annual Report has been expanded considerably from previous “Modern Slavery” bills. One potentially significant change is a result of what initially appears to be a minor change in wording: while the previous version of the legislation required only that <strong>“information respecting” each entity’s structure (etc.)</strong> be provided, the corresponding section in the New Act states that each entity must provide<strong> “the following information …: its structure, activities and supply chains”.</strong></p> <p>The new wording could be understood to require something more than just unspecified “information respecting” an entity’s structure (etc.) – for example, to be requiring that <strong>precise information identifying each entity’s suppliers and setting out its corporate structure</strong> be made available in these public documents. It is hoped that additional clarity about this aspect of the Annual Report will be available before the first reports are to be filed.</p> <h3>Revised reports</h3> <p>An entity may submit a Revised Report provided that the approval process outlined above has been followed and provided that the report includes a description of the changes made to the original report.</p> <p>There is no explicit restriction on the reasons for which a Revised Report may be submitted and the provision of such a report is always at the option of the company.</p> <h2>The Reports: Timelines, Processes and Access</h2> <h3>Timelines</h3> <p>The period of the Annual Report is the entity’s<strong> financial year</strong>. The filing deadline is the following <strong>May 31</strong>.</p> <h3>Joint filing process</h3> <p>A single Annual Report may be filed on behalf of multiple entities (“Joint Report”), although information must still be broken down by entity within that report. There is no express requirement that the multiple entities be related in any particular way.</p> <h3>Internal approval process</h3> <p>The New Act requires that entities filing a report include specific steps in their internal approval process.</p> <h4>Approval by board of directors (or other governing body)</h4> <p>The Annual Report must be <strong>approved by the “governing body”</strong> of each entity to which the report applies, except in a case where, in a Joint Report, one entity controls each of the others – in that circumstance, only the governing body of the controlling entity need approve the report. “Governing body” is defined as “the body or group of members of the entity with primary responsibility for the governance of the entity.”</p> <h4>Attestation</h4> <p>The approval of the governing body or bodies must be attested by a <strong>statement</strong> that sets out whether the report is a single-entity or a joint report. The <strong>signature</strong> of at least one member of the governing body – or of each governing body, in the case of a joint report – is also required.</p> <h3>Distribution to shareholders (CBCA corporations)</h3> <p>Any federally incorporated entity, including <em>Canada Business Corporations Act</em> (“CBCA”) corporations, must provide its Annual Report, and any Revised Report, to each of its shareholders along with its annual financial statements.</p> <h3>Public access to the reports</h3> <p>The Annual Report or any Revised Report must be made available to the public, including by publishing it in a prominent place on the entity’s website. As noted under “Administration of the New Act”, below, all reports will also be available on the website of the Department of Public Safety and Emergency Preparedness.</p> <h2>Administration of the New Act</h2> <p>The New Act will be administered by the Minister of Public Safety and Emergency Preparedness, who will be required to maintain an electronic registry, available to the public, that includes copies of all submitted reports. The Minister is required, on an annual basis (generally on or before September 30), to table a report in Parliament that sets out the particulars of any charge laid under the New Act. This report will be posted on the Minister’s website.</p> <h2>Compliance Orders</h2> <p>The New Act provides for warrantless searches (and searches with warrants of dwelling places) for the verification of compliance with the Report requirements. As a consequence of such a search, the Minister may issue an order requiring the entity to take any measures required to bring its report into compliance, including with respect to its public availability.</p> <h2>Offences</h2> <p>Offences under the New Act fall into two categories:</p> <ul> <li>Offences directly related to the Annual and Revised Reports; and</li> <li>Offences related to a search of premises in verification of compliance with the New Act.</li> </ul> <h3>Directly related to the reports</h3> <p>A person or entity that fails to comply with certain provisions relating to Annual and Revised Reports, including the requirement to make them publicly available, is liable to a fine on summary conviction of up to $250,000.</p> <h3>Related to conduct during a search</h3> <p>A fine of up to $250,000 also applies to persons or entities that obstruct or fail to cooperate with a search conducted to verify compliance.</p> <h3>Attribution of offences to other persons or entities</h3> <p>Two provisions of the New Act attribute offences to persons or entities other than those that actively committed them:</p> <ul> <li>An entity’s directors, officers, agents and mandataries are parties to and guilty of an offence, and subject to a fine of up to $250,000, to the extent that they directed, authorized, assented to, acquiesced in or participated in its commission; and</li> <li>If an offence is committed by an agent, mandatary or employee of the “accused” (presumably the entity), it will also be considered an offence by the accused regardless of whether the employee, agent or mandatory has been identified or prosecuted, unless the accused establishes a due diligence defence.</li> </ul> <h2>Application to Government Institutions</h2> <p>In contrast with previous versions of this legislation, the New Act will apply to any government institution that produces, purchases or distributes goods in Canada or elsewhere. The reporting requirements for government institutions are similar to those that apply to business entities, although the “Offences and Punishment” section does not apply to them.</p> <h2>Customs Tariff Amendment</h2> <p>Bill S-211 makes minor amendments to the <a rel="noopener noreferrer" target="_blank" href="https://laws-lois.justice.gc.ca/eng/acts/c-54.011/FullText.html"><em>Customs Tariff</em></a> and to tariff item 9897.00.00 to ensure that the provisions that currently concern the importation of goods produced by “forced labour” are updated to conform to the broader definitions and concepts in the New Act.</p> <h2>Next Steps</h2> <p>The New Act must still go through Committee stage and Third Reading in the House of Commons.<strong> If it receives Royal Assent in 2022, it will come into force on January 1, 2023.</strong> Otherwise, it will come into force on January 1 of the year following Royal Assent.</p> <p>Because this legislation could potentially be in force as early as January 2023, businesses that qualify as “entities” should anticipate the possibility of having to file their first report by May 2023, while bearing in mind that the current version of Bill S-211 may differ from the finalized version and that the passage of the New Act in any form is not a certainty.</p>31-Aug-2022 03:29:00{41175006-CE8C-4EE5-9785-60DE1FA9084D}https://www.stikeman.com/en-ca/kh/competitor/competition-act-amendments-a-data-driven-perspectiveMichael Kilbyhttps://www.stikeman.com/en-ca/people/k/michael-kilbyThe CompetitorCanadian M&A LawCompetition Act Amendments: A Data-Driven Perspective<p><strong>There has been significant and growing debate in recent times about the adequacy of Canadian competition laws. A </strong><a rel="noopener noreferrer" target="_blank" href="https://www.stikeman.com/en-ca/kh/competitor/canada-pushes-through-competition-act-amendments"><strong>package of amendments</strong></a><strong> was passed in June 2022, and it is widely anticipated that the Canadian government will in the very near future push for even further changes to the <em>Competition Act</em>. We assess below the current state of Canadian competition laws, with reference to the three major categories of conduct addressed in competition laws globally. This is followed by a more granular survey of the state of merger law in Canada. The author’s perspective is that many influential commentators, and the government itself, may be tempted to prescribe a course of radical treatment without having first engaged in a careful diagnosis of the patient, which we seek to do here.</strong></p> <h2>Price Fixing</h2> <ul> <li>Price fixing, bid rigging and related offences are <em>per se</em> criminal offences in Canada. They carry unlimited fines, imprisonment up to 14 years and class action liability. They cover all sell-side agreements and, as of June 2023, will cover buy-side agreements relating to employees.</li> <li>In short, price fixing laws in Canada could be said to be in a virtual “end state”. It is not clear that the penalties could be any more severe.</li> <li>There has been discussion about amending the “civil competitor collaboration” provision to allow for different forms of relief in respect of such collaborations – which necessarily fall short of criminal cartels – so as to enable the Competition Tribunal (the “Tribunal”) to issue orders that are more tailored and targeted to the specific collaboration in question than is currently the case. This discussion seems sensible. But the existing strength of criminal cartel laws in Canada should be kept in mind as the background to any such discussion. Canada does not lack for extraordinarily powerful cartel laws.</li> </ul> <h2>Dominance</h2> <ul> <li>The Commissioner of Competition (the “Commissioner”), or a private party with leave, may bring an abuse of dominance action.</li> <li>Penalties now include fines of up to three times the value of the benefit derived from the conduct in question, or, where that cannot be quantified, 3% of global revenues. These amounts are payable to the federal government. They could potentially amount to tens of millions or hundreds of millions of dollars for large companies.</li> <li>Factors that the Tribunal may consider in dominance cases include new tech-sector or digital economy-focused factors.</li> <li>The <em>Competition Act</em> also now codifies a broad definition of “anti-competitive acts” that had emerged in recent case law.</li> <li>Several of the key features of dominance law in Canada described above are new. It would be smart to allow the impact of the June 2022 amendments on dominance law to be assessed as new cases arise, or do not arise, before seeking to amend it again.</li> </ul> <h2>Mergers</h2> <ul> <li>Canada’s merger law was significantly amended in 2009 to introduce a U.S.-style “second request” process. At the time, leading law firms in Canada characterized the 2009 amendments variously as “the most significant in 25 years”, “massive”, “sweeping” and in similar terms. The scope of the 2009 amendments has been largely forgotten in the current clamour. Indeed, the then Commissioner said in relation to the 2009 amendments that: “<em>The result is an updated Competition Act that facilitates more effective enforcement, aligns us with our international counterparts, and ensures that both businesses and consumers benefit from a competitive marketplace. It is our job to ensure we take that opportunity and make the most of it</em>.”</li> <li>Nonetheless, there has emerged a view, strongly held in some quarters, that the current merger rules are overly permissive and that it is not practical for the Commissioner to win a case. Below, we assess this claim with reference to the cases that have arisen in the 13-year period following the (last) modernization of the <em>Competition Act</em>.</li> </ul> <h2>Surveying the Merger Provisions in the <em>Competition Act</em>, 2009 to the present</h2> <h3>How many transactions has the Competition Bureau reviewed since 2009?</h3> <p>Approximately 3,000.</p> <h3>How many of those transactions resulted in a remedy via a “consent agreement” or merger challenge?</h3> <p>There have been approximately 53 consent agreements on merger matters since 2009, where no merger challenge occurred. There have also been 9 merger challenges since 2009, of which 4 then settled into a consent agreement, taking the total to 57 consent agreements on merger matters. (The <a rel="noopener noreferrer" href="https://emarketing.stikeman.com/reaction/emsdocuments/Consent agreement or merger challenge transactions.pdf" target="_blank">attached table lists these matters in reverse chronological order</a>, with additional information).</p> <p>Notably, the above figures do not account for transactions that were simply abandoned due to competition concerns in Canada or globally, or in respect of which a remedy was obtained outside a consent agreement. There is no good way to account systematically for these cases, but they certainly exist and are further evidence of active enforcement activity.</p> <p>The relative proportion of consent agreements to merger challenges is worth reflecting on. Consent agreements are far more common than merger challenges precisely because the reality is that few companies are prepared to litigate with the Government of Canada. Most companies prefer to settle, a preference that gives the Bureau leverage in settlement negotiations and leads to consent agreements.</p> <p>It should also be noted that the total of approximately 3,000 transactions reviewed is misleading in a sense, as it includes huge numbers of real estate and upstream oil and gas transactions, which, due to the asset thresholds in the <em>Competition Act</em>, are frequently required to be reviewed by the Bureau even though since 2009 they have not resulted in a single merger challenge or consent agreement.</p> <h3>What happened with the 9 merger challenges?</h3> <p>The 9 merger challenges are Tervita, Air Canada, Parkland, Staples, Aucerna, Parrish & Heimbecker, Secure, GFL, and Rogers.</p> <ul> <li>4 settled into a consent agreement (<em>Air Canada, Parkland, Aucerna, GFL</em>)</li> <li>2 are awaiting a Tribunal decision following trial (<em>Parrish & Heimbecker, Secure</em>)</li> <li>1 is awaiting trial (<em>Rogers</em>)</li> <li>1 was abandoned due to U.S. competition issues (<em>Staples</em>)</li> <li>1 was decided on the merits (<em>Tervita</em>)</li> </ul> <h3>How can the Bureau formally block the closing of a transaction under the <em>Competition Act</em> if the merging parties are otherwise prepared to close?</h3> <p>Where the relevant thresholds are exceeded, merging parties must make filings with the Bureau, stand ready to provide large volumes of internal data and documents to the Bureau if requested, and observe a waiting period. Following the expiry of this waiting period, parties may seek to close their transaction or continue to advocate for substantive comfort if it has not already been obtained. Section 104 of the <em>Competition Act</em> is the section pursuant to which the Bureau can apply to block the closing of a transaction where that waiting period has expired or is about to expire, where the Bureau has concluded the transaction is anti-competitive, and where the parties are pushing to close. The applicable legal test under section 104 requires that the Bureau establish for the Tribunal that: (a) there is a serious issue to be tried; (b) irreparable harm will result if the transaction is not blocked; and (c) the balance of convenience favours blocking the transaction.</p> <h3>Of the approximately 3,000 mergers reviewed since 2009, how many times has the Bureau attempted to block a transaction under section 104?</h3> <p>Three times.</p> <h3>What happened in those three cases?</h3> <p>The Competition Bureau tied the first, lost the second (but won an important legal point on appeal), and in substance won the third. These cases are:</p> <ul> <li><strong><em>Parkland</em></strong> (2015) <ul> <li>Notably, the Bureau did not seek to prevent closing in this case, but rather sought to have certain gas stations “held separate”. The Bureau partially won (for some gas stations) and partially lost (for other gas stations) the relief it had sought. Call it a tie. In another sense, though, this case was an important win as the Tribunal seemed to establish that interim price effects could amount to irreparable harm. Remarkably, this had not been apparent from the introduction of the <em>Competition Act</em> in 1986 until 2015.</li> </ul> </li> <li><strong><em>Secure</em></strong> (2021) <ul> <li>The Bureau lost, but with the Tribunal finding that had it been provided with a rough, “ballpark” quantification of the economic harm arising from the transaction, the Bureau may instead have won.In another sense, though, this case was a win as it confirmed what the Tribunal found in Parkland, i.e., that interim price effects amount to irreparable harm.This was somewhat debatable between 2015 and 2021, as Parkland had not been appealed.</li> <li>The finding regarding interim price effects, originating in Parkland and then being confirmed in Secure, was not necessarily expected. Indeed, it remains difficult to reconcile with the Federal Court of Appeal’s decision in an older case, Superior Propane, where the Court found that unwinding a merger is not like “unscrambling eggs”, which most observers had taken to mean that harm to competition can often be remedied via a divestiture, i.e., that the harm will often not be irreparable.</li> <li>While much has been written on the Tribunal’s consideration of efficiencies in this case, its approach to interim efficiencies may be seen as the logical corollary of it taking into account interim price effects, which arguably should not be done either, but was the key victory the Bureau had won in Parkland. Six years passed between Parkland and Secure, but Parkland, a quirky case that was never appealed, was implicitly laden with this possibility.</li> <li>Note also that in Secure the Federal Court of Appeal separately confirmed on appeal that the Tribunal can an issue a short-term injunction pending the disposition of the 104 application, something that the Tribunal itself had not thought possible, representing a meaningful procedural win.</li> <li>So while this case is clearly a loss for the Bureau, it did have some silver linings. The Bureau may yet win on the substantive merits, too.</li> </ul> </li> <li><strong><em>Rogers</em></strong> (2022) <ul> <li>The Bureau won in substance. Rogers gave the Bureau the relief it sought by agreeing not to close until the merger challenge is decided. It is exactly as if the Bureau won the section 104 on the merits. (As an aside, this was a curious outcome in some sense given the “hell-or-high-water” obligation contained in the Rogers / Shaw transaction agreement).</li> </ul> </li> </ul> <h3>Setting aside the procedural issue of blocking the closing of a transaction, what is the Bureau’s track record at the Tribunal on merger challenges on the merits since 2009?</h3> <p>Many commentators do not appreciate that only one merger challenge has resulted in a decision on the merits since the 2009 amendments (<em>Tervita</em>). This is completely lost in the debate about amendments, which seems to presume a litany of lost merger cases necessitating amendments. The Bureau won the <em>Tervita</em> case.The decision was, however, overturned years later by the Supreme Court on a technicality arising from extremely minor efficiencies.</p> <p>We are waiting on the <em>Parrish & Heimbecker</em> and <em>Secure</em> merger challenge decisions.</p> <h3>What is going on with the Parrish & Heimbecker and Secure merger challenge decisions?</h3> <p>In <em>Parrish & Heimbecker</em>, the Bureau filed its merger challenge application in December 2019. The trial concluded in January 2021. As at August 2022, the Tribunal decision has not yet been issued, some 19 months after the hearing concluded, and more than 30 months after the application was filed. The question at issue in the application is whether Parrish & Heimbecker should or should not be required to divest a single grain elevator in the middle of the Prairies. This timing is seen by many in the Canadian competition bar and we believe the Bureau to be very unfortunate.</p> <p>In <em>Secure</em>, the Bureau filed its merger challenge in June 2021. The trial concluded in June 2022.</p> <h3>Since 2009, at what point during a transaction has merger litigation typically taken place in Canada?</h3> <ul> <li>4 post-closing (GFL, Aucerna, Parrish & Heimbecker, Tervita)</li> <li>3 pre-closing (Air Canada, Staples, Rogers)</li> <li>2 hybrid (Secure, Parkland)</li> </ul> <h3>What has been the role of the efficiencies defence in Canada since 2009? How many anti-competitive transactions has it saved since 2009?</h3> <p>Tervita was saved at the Supreme Court on a technicality related to the efficiencies defense, as noted above.</p> <p>In addition, the Bureau will from time-to-time issue press releases or position statements regarding its merger reviews. Since 2009, the Bureau has explicitly cited the efficiencies defence as a reason for not challenging a merger in a very small number of cases. These are <em>Chemtrade / Canexus, </em><em>Superior Plus / Canexus</em> (abandoned), <em>Superior Plus / Gibson Energy</em> and <em>CN / H&R</em>. These roughly four transactions are to be seen in the context of approximately 3,000 merger reviews since 2009.It is therefore far from clear that the efficiencies defense has played a decisive role in merger review in Canada, at least since the last amendments in 2009, notwithstanding the intense attention it has attracted.</p> <p>This fact may be deployed in the service of both proponents and opponents of the efficiencies defence.</p> <p>Proponents of the efficiencies defence can credibly say that while academic commentators in particular have levelled heavy and indeed escalating criticism at the efficiencies defence, such criticism ignores the fact that the efficiencies defence almost never carries the day when seen in the context of merger review as a whole, such that its role in saving anti-competitive transactions is greatly overstated. Based on public information, much of which is summarized herein, the efficiencies defence can be said to have saved perhaps five or so presumptively anti-competitive transactions since 2009, versus roughly 60 presumptively anti-competitive transactions that resulted in remedies that it evidently did not or could not save, keeping in mind throughout that only one transaction (<em>Tervita</em>) has resulted in a substantive decision at the Tribunal on the merits since 2009. There simply has been no high-profile transaction saved on the basis of the efficiencies defence since the last amendments, or at least not one that has been disclosed by the Bureau. Instead, there is a small collection of oddities of debatable import as a public policy matter. If there are in fact additional transactions that have been saved by the efficiencies defence, then this should by all means be disclosed – it would further inform this important debate and may shift opinion.</p> <p>Opponents of the efficiencies defence can by the same token credibly point out the rather obscure nature of the transactions that it has saved, which in many respects do not even seem to engage the underlying purpose of the efficiencies defence, combined with the significant evidentiary burden placed on the Bureau to assess and be prepared to overcome the efficiencies defence in all other cases where it is (unsuccessfully) raised, as factors that weigh against its retention as a standalone defence, together of course with its uniqueness in the international context.</p> <p>Let the efficiencies debate rage on. The author’s point here is that the notion, put forward by some academic commentators, that the efficiencies defence results in totally ineffective merger enforcement in Canada, is simply not borne out by experience. Similarly, any claim that the loss of a standalone efficiencies defence would have a massive impact on merger activity in Canada seems to defy logic.</p> <p><a rel="noopener noreferrer" href="https://emarketing.stikeman.com/reaction/emsdocuments/Consent agreement or merger challenge transactions.pdf" target="_blank"><img src="/-/media/files/kh-general/consent-agreement-or-merger-challenge.ashx?la=en-ca&hash=7398822407A761123168AECB9CA94C43" style="height:230px; width:305px;" alt="consent agreement or merger challenge" /></a></p> <p>Please <a href="/-/media/files/kh-general/competition-act-amendments---a-data-driven-perspective.ashx">click here for a PDF version of this article </a>that includes the table of consent agreements and merger challenges since 2009.</p> <p> </p>Wed, 14 Sep 2022 16:17:00 Z23-Aug-2022 06:40:00{381370C3-9ECB-418E-B089-25A92CBFC1F7}https://www.stikeman.com/en-ca/kh/canadian-ma-law/VIDEO-Hybrid-Private-MA-TransactionsMaxime Turcottehttps://www.stikeman.com/en-ca/people/t/maxime-turcotteCanadian M&A LawVIDEO: Hybrid Private M&A Transactions<p>In this webinar, Maxime Turcotte, a partner in our Corporate Group, discusses the key aspects and steps of hybrid M&A transactions from both seller and buyer perspectives. He describes the structuring, stakeholder management, deal term and closing issues that arise in these relatively uncommon transactions (50 minutes, 49 seconds).</p> <div style="position:relative;height:0;padding-bottom:59.56%;"><iframe title="VIDEO: Hybrid Private M&A Transactions" style="position:absolute;width=;" 100%;height="100%;left:0'" width="100%" height="100%" src="https://www.youtube.com/embed/puMhQpF0xTo" frameborder="0" allow="encrypted-media"></iframe></div> <p> </p> <a href="https://www.stikeman.com/en-ca/kh/guides/videos-podcasts">> See all Stikeman Elliott multimedia content</a> <p> </p>08-Jul-2022 09:03:00{7C4132FE-A323-486F-96A8-BBED7DD652ED}https://www.stikeman.com/en-ca/kh/canadian-ma-law/british-columbia-court-of-appeal-says-shotgun-offer-cant-be-revokedJonathan Buysenhttps://www.stikeman.com/en-ca/people/b/jonathan-buysenBrendan Kennedyhttps://www.stikeman.com/en-ca/people/k/brendan-kennedyCanadian M&A LawCorporations & Commercial Law UpdateLitigation UpdateBritish Columbia Court of Appeal Says Shotgun Offer Can’t Be Revoked<p><strong>Be careful before you pull the trigger – this is the main takeaway from the recent decision of <em><a rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/bc/bcca/doc/2022/2022bcca117/2022bcca117.html?autocompleteStr=2022%20BCCA%20117%20&autocompletePos=1">Blackmore Management Inc. v. Carmanah Management Corporation</a></em>, in which the British Columbia Court of Appeal (BCCA) concluded that an “offer” made pursuant to a standard shotgun clause in a shareholders’ agreement could not be unilaterally revoked.</strong></p> <h2>Background</h2> <p>The respondent shareholders (Carmanah and Amphitrite; together, the Respondents) elected to invoke the shotgun clause in their shareholders’ agreement. Pursuant to the clause, the Respondents delivered a “compulsory offer” to the other shareholder (Blackmore), who then had sixty days to elect whether to sell its shares to the Respondents or purchase the Respondents’ shares at a valuation stipulated in the shotgun offer.</p> <p>Blackmore filed a petition to freeze the election period until certain financial information was disclosed. The parties ultimately agreed to freeze the election period until the petition was heard, the hearing of which was then delayed due to the COVID-19 pandemic.</p> <p>During this period, the company’s value increased. As a result, some four months after the shotgun offer had been delivered, the Respondents wrote to Blackmore purporting to revoke their shotgun offer. A month later, Blackmore delivered a notice advising that it elected to buy-out the Respondents’ shares.</p> <h2>The B.C. Supreme Court Decision</h2> <p>The petition judge held that the shotgun offer was revocable. The judge relied on the general principle of contract law that “an offer to contract can be revoked prior to acceptance unless the parties have specifically agreed otherwise”.</p> <h2>The B.C. Court of Appeal Decision</h2> <p>The BCCA overturned the lower court’s decision, finding that the shotgun offer could not be revoked.</p> <p>The Court noted that a shotgun offer was not an offer to enter into a new contract, but rather the exercise of an existing contractual buy-out process. Thus, the general principles of offer and acceptance did not apply. Rather, the shotgun process was governed by the terms of the shotgun clause in the shareholders agreement. It found that the plain meaning of the shotgun clause (i.e., the fact that a recipient could elect to buy or sell within sixty days) reflected that such a process, once triggered, could not be revoked.</p> <p>The Court also put great emphasis on the commercial purpose of a shotgun clause. In particular, the Court noted that:</p> <ol> <li>A shotgun clause is intended to be a mechanism to “terminate the shareholder relationship by forcing a sale” and that “an interpretation that would allow the shotgun process to be unilaterally stopped once triggered is inconsistent with this objective.”</li> <li>The fairness of a shotgun clause, in which the instigator choses the sale price, depends on the possibility that the instigator will be forced to sell their shares at the offered price. To conclude that such an offer was revocable would “weaken the incentive for shareholders to make a fair offer”. It would allow a shareholder to make an offer “at a below-market rate and revoke the offer if it became apparent that the recipient shareholder intended to elect to buy”.</li> </ol> <h2>Conclusions</h2> <p>While each shotgun clause must be considered based on its specific terms, this decision suggests that, absent clear language to the contrary, a shotgun offer will likely not be revokable. Therefore, parties should take care in considering both whether to trigger the shotgun clause and what valuation to select.</p> <p>In addition, if drafting a shotgun clause that will not be revocable, parties should also consider the length of notice period, knowing that a longer period brings increased risks that the market will fluctuate while the offer is outstanding.</p> <p>Finally, the issue at hand could potentially have been solved through contractual drafting. Consider, when agreeing to a delay to the shotgun period, whether the parties should consider adding conditions to such agreement, such as a re-evaluation of the purchase price if the delay is significant or if material changes to the business occur during such delay period.</p>13-Apr-2022 06:15:00{D9C6616D-6C51-4DC8-B11D-B37FD5C073B7}https://www.stikeman.com/en-ca/kh/litigation/commercially-reasonable-best-efforts-bc-court-provides-guidance-in-context-of-purchase-and-saleAlexandra Urbanskihttps://www.stikeman.com/en-ca/people/u/alexandra-urbanskiLitigation UpdateCanadian M&A Law"Commercially Reasonable Best Efforts": B.C. Court Provides Guidance in Context of Purchase and Sale Contract<p><strong>In </strong><strong><em><a rel="noopener noreferrer" href="https://canlii.ca/t/jlqd8" target="_blank">Sutter Hill Management Corporation v. Mpire Capital Corporation</a></em></strong><strong> (<em>Sutter</em>)</strong><strong><em>, </em>the British Columbia Court of Appeal found that the acquiror of an Abbotsford, B.C. care home had breached the purchase and sale agreement by failing to use “commercially reasonable best efforts” to obtain required regulatory approvals from a healthcare authority “as soon as possible”. Because the delay resulted in part from a failure to engage a B.C. lawyer to handle a key regulatory matter until very late in the process, the ruling also has implications for the management of multi-jurisdictional transactions.</strong></p> <h2>Summary</h2> <ul> <li>Per <a rel="noopener noreferrer" target="_blank" href="https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/14302/index.do"><em>Sattva Capital Corp. v. Creston Moly Corp</em></a><em>. (Sattva), </em>the words in a contract must be read:<br /> "as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of the formation of the contract."<br /> Accordingly, phrases like "commercially reasonable", "best efforts" and "as soon as possible" must be considered in their context.</li> <li>To avoid running into disputes about the parties’ true intentions, where possible, counsel ought to be careful in the language they use and consider avoiding phrases like "commercially reasonable best efforts" and "as soon as possible<em>."</em> Rather, counsel should strive for precision when drafting and consider clearly specifying what timelines are reasonable.</li> <li>Parties may be held responsible for delays in excess of what such "best efforts" language permits, even where such delays are arguably due to their counsel’s inaction.</li> </ul> <h2>Background</h2> <p>In January 2016, Mpire Capital Corporation (the Purchaser) agreed to purchase a care home in Abbotsford, B.C. and related assets from Sutter Hill Management Corporation and Sweet Investments Ltd. (the Vendors). The parties agreed that to close the transaction, the Purchaser would need to obtain required approvals and licenses from the Fraser Health Authority (FHA).</p> <p>In July 2017, the parties amended their purchase and sale agreement to include a condition precedent that the Purchaser "shall use commercially reasonable best efforts" to obtain the necessary approvals from the FHA "as soon as possible".</p> <p>The Purchaser moved to obtain the necessary approvals from the FHA, and on November 8, 2017, the FHA forwarded to the Purchaser, for review, three agreements (the Agreements) to be executed as part of the final approval process. On November 20, 2017, the Purchaser’s Toronto counsel advised that he lacked the expertise to advise on the Agreements, so the Purchaser retained Vancouver counsel to do so. By November 27 the Agreement had yet to be commented on or returned to the FHA. That same day the Vendors delivered a notice of default to the Purchaser claiming that the Purchaser was in breach of the condition precedent. The Purchaser was given until December 12 to “cure its default”. When the Agreements had still not been returned to the FHA by December 14, the Vendors took the position that the contract was at an end and demanded payment of the $300,000 deposit paid by the Purchaser. The Vendors commenced an action and applied for judgment against the Purchaser for the deposit. The Purchaser opposed the application and sought dismissal of the action and an order that the deposit be returned to it.</p> <h2>The B.C. Supreme Court Decision</h2> <p>In its <a rel="noopener noreferrer" href="https://canlii.ca/t/j5g2n" target="_blank">ruling</a>, the B.C. Supreme Court interpreted "commercially reasonable best efforts" to mean the same as "commercially reasonable efforts" and held that the Purchaser had used both commercially reasonable efforts and its best efforts to obtain the FHA approvals.</p> <p>The Court ruled that the Purchaser was not responsible for the delays resulting from its lawyer’s inability to review the Agreements, and the Vendors were ordered to return the deposit to the Purchaser.</p> <p>The Vendors appealed to the BCCA, claiming that the Supreme Court had erred in determining that the Purchaser was not responsible for the delays. The Vendors alleged, among other things, that the Court had:</p> <ul> <li>incorrectly interpreted "commercially reasonable best efforts" and, consequently, had misconstrued the Purchaser’s obligations; and</li> <li>erred in finding that the Purchaser had exercised both commercially reasonable efforts and best efforts.</li> </ul> <h2>The B.C. Court of Appeal Decision</h2> <p>The Vendors were successful on appeal. The <a rel="noopener noreferrer" href="https://canlii.ca/t/jlqd8" target="_blank">BCCA held</a> that the Vendors were entitled to terminate the agreement and were entitled to the deposit.</p> <h3><strong>Interpretation of "Commercially Reasonable Best Efforts"</strong></h3> <p>The Court held that the lower court judge erred in his approach in interpreting what obligation "commercially reasonable best efforts" imposed on the Purchaser.</p> <p>The Court ruled that the lower court judge deviated from the established guidance from <em>Sattva,</em> which requires that a contract must be read:</p> <p style="padding-left: 30px;">"as a whole, giving the words their ordinary and grammatically meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract."</p> <p>The words "commercially reasonable best efforts" and "as soon as possible", therefore, had to be examined in the context of the entire agreement and surrounding circumstances, and not piecemeal as had been done.</p> <p>According to the surrounding circumstances and evidence before it, the Court held that the parties were concerned that the FHA approval be obtained <strong>as soon as possible.</strong> The Court held that, in finding that "best" does not add anything significant to the phrase, the lower court missed what the parties intended; the condition to use "commercially reasonable best efforts" meant that the Purchaser would "do everything it reasonably could to obtain the necessary approvals as soon as possible, excepting only steps as would be commercially unreasonable." This was always bearing in mind that neither party could control how fast the FHA acted, but could control how fast <strong>they</strong> acted.</p> <h3>Purchaser had not exercised commercially reasonable best efforts</h3> <p>The Court found that the Purchaser failed to take any action after its lawyer said that it could not review the Agreements, which caused further delay. Moreover, the delay continued even after the Vendors’ notice of default gave the Purchaser more than two weeks to rectify the situation, so that matters were no further advanced by December 14, when the Vendors gave notice that they considered the contract to be at an end.</p> <p>The Court held that this delay "is in law attributable to the Purchaser" and must be taken into account in assessing whether the Purchaser met its obligation to "do everything it reasonably could to obtain the necessary approvals as soon as possible, excepting only such steps as would be commercially unreasonable," The Court held that it was not consistent with this obligation for the Agreements "to sit on a desk for nearly two weeks without any action being taken, leading to the need to retain additional counsel very late in the progress of the transaction." The Court also noted that the Purchaser offered no evidence to explain the delay or support a characterization of it as "reasonably necessary", other than attributing the delay to its counsel and arguing that it was not responsible. </p> <h2>Conclusion</h2> <p>One take-away from <em>Sutter</em> is a cautionary reminder to counsel to be careful about the language used in drafting contracts. While expressions like "commercially reasonable best efforts" may sometimes be difficult to avoid, parties ought to consider specifically setting out the timelines that they regard as reasonable. Doing so may help to avoid uncertainty and potential future disputes.</p> <p>Secondly, the Court of Appeal ruling shows that counsel involved in multi-jurisdictional purchase and sale transactions may be well advised to turn their minds at an early stage to the advisability of approaching local counsel to deal with extra-provincial issues.</p> <p><em>Update: <a rel="noopener noreferrer" href="https://canlii.ca/t/jrq6k" target="_blank">Leave to appeal this decision was denied</a> by the Supreme Court of Canada on September 1, 2022.</em></p>11-Feb-2022 08:42:00{45585FF2-9F05-4282-B08C-8B0BFC5AF605}https://www.stikeman.com/en-ca/kh/corporations-commercial-law/ontario-court-approves-of-use-of-reverse-vesting-transactions-and-provides-guidanceGuy P. Martelhttps://www.stikeman.com/en-ca/people/m/guy-p-martelDanny Duy Vuhttps://www.stikeman.com/en-ca/people/v/danny-duy-vuLee Nicholsonhttps://www.stikeman.com/en-ca/people/n/lee-nicholsonWilliam Rodier-Dumaishttps://www.stikeman.com/en-ca/people/r/william-rodier-dumaisCorporations & Commercial Law UpdateLitigation UpdateCanadian M&A LawOntario Court Approves of Use of Reverse Vesting Transactions and Provides Guidance for Future Transactions<p><strong>The Ontario Superior Court of Justice (Commercial List) (the “Court”) in <em>Re Harte Gold Corp.,</em></strong><a href="#_ftn1" name="_ftnref1"><strong><sup>[1]</sup></strong></a><strong> issued its first published decision on the use of reverse vesting orders (“RVOs”) finding that the </strong><a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-36/latest/rsc-1985-c-c-36.html"><strong><em>Companies’ Creditors Arrangement Act</em></strong></a> <strong>(“CCAA”) provides courts with clear jurisdiction to issue RVOs and further detailing criteria by which courts should consider the appropriateness of RVOs in future transactions</strong><a href="#_ftn2" name="_ftnref2"><sup>[2]</sup></a></p> <ul> <li>Over the course of the past 2 years, RVOs have become increasingly popular in the context of insolvency proceedings, as they allow for the completion of going concern sale transactions in a timely and efficient manner by effectively allowing the transfer or issuance to a buyer of all of the shares of a debtor company, while vesting out unwanted assets, contracts and liabilities to an entity formed for the purpose of the transaction.</li> <li>In early 2022, after having completed a competitive sale and investment solicitation process (the “SISP”), Harte Gold Corp. (“Harte Gold” or the “Company”) proposed to complete a going concern sale transaction (the “Sale Transaction”) pursuant to a reverse vesting structure, whereby its first ranking secured creditor would subscribe for new shares in the Company (while the existing shares would be cancelled), and certain assets, contracts and liabilities would be vested out of the Company to newly formed entities (the “ResidualCos”).</li> <li>After having considered appropriateness of the Sale Transaction (including its proposed structure), the Court issued a RVO and provided detailed reasons on the court’s jurisdiction to grant RVOs and the criteria by which courts should evaluate RVOs in the future, noting, however, that practitioners should not regard the employment of RVO structures as the “norm” in future transactions.</li> </ul> <h2>Background</h2> <p>Last year, we provided a report on the increasing use of RVOs to effect restructuring transactions across Canada (<a href="https://www.stikeman.com/en-ca/kh/litigation/reverse-vesting-orders-will-they-replace-ccaa-plans">Read More</a>). At the time, while RVOs had been used in numerous transactions in provinces across the country, mostly in uncontested matters, only courts in British Columbia<a href="#_ftn3" name="_ftnref3"><sup>[3]</sup></a> and Quebec<a href="#_ftn4" name="_ftnref4"><sup>[4]</sup></a> had published reasons on the court’s jurisdiction to grant RVOs. In the matter of <em>Re Harte Gold Corp.</em>, the Ontario Superior Court of Justice (Commercial List) was the latest court to endorse the use of RVOs to complete restructuring transactions in CCAA proceedings and provided further guidance for other courts to rely upon in future transactions.</p> <h2>The Harte Gold Transaction</h2> <p>Harte Gold, a public company which operated a gold mining operation located in northern Ontario, filed for creditor protection under the CCAA on December 7, 2021. At the time of its CCAA filing, the Company had conducted a strategic process for the past several months which resulted in the Company entering into a subscription agreement with its senior secured creditor that was proposed to be used as the staking horse bid in the context of a court supervised SISP. The subscription agreement contemplated a reverse vesting structure whereby the purchaser would acquire the Company’s business and operations, “free and clear” of certain designated assets, contracts and liabilities. Following the submission of a competing bid prior to the SISP and intensive negotiations between the parties, the Company ultimately entered into a first amended and restated stalking horse subscription agreement with its senior secured creditor, the execution of which was ultimately approved by the Court for the purpose of allowing the Company to conduct a SISP, with the assistance of the Court-appointed monitor.</p> <p>As part of the SISP, the Company received a qualified bid from its junior secured creditor leading the Company to again enter intensive negotiations with both interested parties which ultimately led to the resolution of certain disputes between the Company’s secured creditors and the execution by the Company of a second amended and restated subscription agreement with its senior secured creditor which provided for additional consideration in favour of the Company and its stakeholders.</p> <p>The Company subsequently applied for the approval of the second amended and restated subscription agreement which was to be completed pursuant to a reverse vesting structure whereby: (a) the Company would issue new shares in favour of the purchaser and cancel of all of its outstanding shares, and (b) certain designated assets, contracts and liabilities would be “vested out” to the ResidualCos, all in consideration of the payment or satisfaction by the purchaser of all secured debt and priority payables (either in cash or by way of credit-bid), the payment of substantially all pre-filing and post-filing trade amounts, the assumption of several contracts (including various royalty and offtake agreements) and the retention of substantially all of the Company’s employees. Ultimately, the value of the consideration payable by the purchaser under the Sale Transaction was contemplated to be excess of $160 million.</p> <h2>The Ontario Court’s Decision</h2> <p>On January 28, 2022, the Court approved the above sale transaction proposed by the Company and later published detailed reasons on the use of RVOs as a restructuring tool. In its decision the Court found that section 11 of the CCAA “clearly provide[d] the court with jurisdiction to issue” a RVO, noting, however, that “the discretion available under s. 11 [of the CCAA] [should be] exercised in accordance with the objects and purposes of the CCAA”. Like the British Columbia Supreme Court’s decision in <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/bc/bcsc/doc/2020/2020bcsc1883/2020bcsc1883.html?resultIndex=1"><em>Re Quest University Canada</em></a><a href="#_ftn5" name="_ftnref5"><em><strong><sup>[5]</sup></strong></em></a>, the Court stated “that the analytical framework of s. 36(3) [of the CCAA] for considering an asset sale transaction… should be applied, with necessary modifications, to an RVO transaction” even though “s. 36 may not support a standalone basis for jurisdiction in an RVO situation.”</p> <p>Recognizing that the exercise of its discretion under section 11 of the CCAA has limits and must accord with the objective of the CCAA and other insolvency legislation across Canada<a href="#_ftn6" name="_ftnref6"><sup>[6]</sup></a>, the Court cautioned that the use of RVOs should involve close scrutiny and not become the “norm or something that is routine or ordinary course” simply because it may be more convenient or beneficial to the purchaser. The Court stated that courts and monitors should be diligent in ensuring that the restructuring is fair and reasonable to all parties having regard to the objectives and statutory constraints of the CCAA. In addition to evaluating the criteria for approval of a sale under section 36 of the CCAA, the debtor, the purchaser and especially the monitor, must be prepared to answer questions such as:</p> <ol style="list-style-type: lower-alpha;"> <li>Why is the RVO necessary in this case?</li> <li>Does the RVO structure produce an economic result at least as favourable as any other viable alternative?</li> <li>Is any stakeholder worse off under the RVO structure than they would have been under any other viable alternative? and</li> <li>Does the consideration being paid for the debtor’s business reflect the importance and value of the licences and permits (or other intangible assets) being preserved under the RVO structure?</li> </ol> <p>In the matter at hand, the Company and the monitor had demonstrated that the use of an RVO was appropriate in the circumstances as it allowed for the preservation of the Company’s many permits and licenses necessary to conduct its gold mining operations. Conversely, under a traditional asset sale and approval and vesting order structure, the purchaser would have to apply to the various agencies and regulatory authorities for transfer of existing licenses and permits or, if transfers are not possible, for new licenses and permits, which would necessarily involve risk, delays and additional costs.</p> <p>The Court also commented on its jurisdiction to cancel all outstanding shares and the issuance of new shares to the purchaser as part of the RVO, finding it had jurisdiction under subsections 186(1) and 186(2) of Ontario <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/on/laws/stat/rso-1990-c-b16/latest/rso-1990-c-b16.html"><em>Business Corporations Act</em></a> (the “OBCA”) which provides that if a corporation is subject to a “reorganization”, its articles may be amended by a court order to effect any change that might lawfully be made by an amendment under section 168 of the OBCA including to change the designation of all or any of its shares, and add, change or remove any rights, privileges, restrictions and conditions in respect of all or any of its shares. We note that the Canada <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-44/latest/"><em>Business Corporations Act</em></a> has similar provisions and courts presumably have jurisdiction to grant similar relief under that statute and other provincial corporate statutes with similar provisions.</p> <p>Finally, the Court also granted, as part of the RVO, broad releases in favour of the Company’s present and former directors, officers, employees, and advisors, as well as the monitor and the purchaser and their respective present and former directors, officers, employees and advisors on the basis of the criteria set out in <em>Re Lydian International Limited</em><a href="#_ftn7" name="_ftnref7"><sup>[7]</sup></a>, which are:</p> <ol style="list-style-type: lower-alpha;"> <li>whether the claims to be released are rationally connected to the purpose of the restructuring;</li> <li>whether the releasees contributed to the restructuring;</li> <li>whether the release sought is fair, reasonable and not overly broad;</li> <li>whether the restructuring could succeed without the release sought;</li> <li>whether the release sought benefits the Company as well as its creditors generally; and</li> <li>the creditors’ knowledge of the nature and effect of the release sought.</li> </ol> <h2>Key Take-Aways</h2> <p>The decision in <em>Re Harte Gold Corp. </em>will likely become a leading authority for courts when evaluating RVOs. It suggests a debtor company will be subject to a two-step test that will involve: first, evaluating whether the contemplated sale should be approved taking into consideration the applicable statutory criteria, and second, evaluating whether it is appropriate in the circumstances for the sale to be implemented through a reverse vesting structure given the specific facts of the case. This will likely lead to additional scrutiny on the use of RVOs going forward. Parties will need to be prepared to justify why a RVO structure is necessary or appropriate for completing a value-maximizing transaction (in comparison to a traditional approval and vesting order). Despite such additional scrutiny from the Court, we expect that RVOs will remain nonetheless a powerful tool in complex restructurings which will allow for the completion of going concern sale transactions in industries where assets and licenses may be difficult to transfer such as the cannabis and mining industries.</p> <hr /> <p><a href="#_ftnref1" name="_ftn1">[1]</a> <em>Re Harte Gold Corp., </em>2022 ONSC 653.</p> <p><a href="#_ftnref2" name="_ftn2">[2]</a> Stikeman Elliott LLP acted for Harte Gold Corp. in connection with its proceedings under the CCAA.</p> <p><a href="#_ftnref3" name="_ftn3">[3]</a> <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/bc/bcsc/doc/2020/2020bcsc1883/2020bcsc1883.html?resultIndex=1"><em>Re Quest University Canada</em>, 2020 BCSC 1883</a> [<em>Quest</em>] (leave for appeal dismissed, <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/bc/bcca/doc/2020/2020bcca364/2020bcca364.html?resultIndex=1"><em>Southern Star Developments Ltd. v. Quest University Canada</em>, 2020 BCCA 364</a>).</p> <p><a href="#_ftnref4" name="_ftn4">[4]</a> <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/fr/qc/qccs/doc/2020/2020qccs3218/2020qccs3218.html?resultIndex=1"><em>Arrangement relatif à Nemaska Lithium Inc</em>, 2020 QCCS 3218</a> (leave to appeal refused, <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/qc/qcca/doc/2020/2020qcca1488/2020qcca1488.html"><em>Arrangement relatif à Nemaska Lithium Inc,</em> 2020 QCCA 1488</a>; leave to appeal to SCC refused, <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/ca/scc-l/doc/2021/2021canlii34999/2021canlii34999.html"><em>Arrangement relatif à Nemaska Lithium Inc,</em> 2021 CanLII 34999</a>).</p> <p><a href="#_ftnref5" name="_ftn5">[5]</a> <em>Quest, </em>supra note 3.</p> <p><a href="#_ftnref6" name="_ftn6">[6]</a> As stated in the Supreme Court of Canada’s decision in <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/ca/scc/doc/2020/2020scc10/2020scc10.html?resultIndex=1"><em>9354-9186 Québec inc. v. Callidus Capital Corp</em>. 2020 SCC 10,</a> the Court’s discretion under section 11 of the CCAA must be exercised in furtherance of 3 baseline considerations: (a) the order sought must be appropriate in the circumstances, (b) the applicant must have acted in good faith and (c) with due diligence.</p> <p><a href="#_ftnref7" name="_ftn7">[7]</a> <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/on/onsc/doc/2020/2020onsc4006/2020onsc4006.html?resultIndex=1"><em>Re Lydian International Limited</em>, 2020 ONSC 4006</a><em>.</em></p>11-Feb-2022 08:25:00{28963061-BD4D-4874-82AC-69ADD2AC74EF}https://www.stikeman.com/en-ca/kh/canadian-ma-law/private-equity-in-2022-key-canadian-investment-issuesSophie Lamondehttps://www.stikeman.com/en-ca/people/l/sophie-lamondeWarren Silversmithhttps://www.stikeman.com/en-ca/people/s/warren-silversmithCanadian M&A LawPrivate Equity in 2022: Key Canadian Investment Issues<p><a href="/en-ca/people/l/sophie-lamonde">Sophie Lamonde </a>and <a href="/en-ca/people/s/warren-silversmith">Warren Silversmith</a>, M&A lawyers with extensive experience in private equity transactions, have published an article on the <a href="/-/media/files/kh-general/private-equity-2022.ashx">latest developments in private equity investment in Canada</a>. Private equity activity in this country reached record-setting levels in 2021.</p> <p>Published in the 2022 edition of the <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://digital.lexpert.ca/i/1436034-2022-lexpert-alm-500-guide/151?"><em>Lexpert/American Lawyer Guide to the Leading 500 Lawyers in Canada</em></a>, the article focuses on the regulatory and tax issues that typically arise when such investments are being considered, notably those related to foreign investment, competition regulation and tax structuring.</p> <p>We are pleased to be able to make <a href="/-/media/files/kh-general/private-equity-2022.ashx">this article</a> available for downloading.</p>12-Jan-2022 07:14:00{BE1D5D09-80DE-43CA-B51B-993C7E404221}https://www.stikeman.com/en-ca/kh/canadian-energy-law/cop26-key-takeaways-and-action-items-on-climate-change-part-IISpencer Abrahamhttps://www.stikeman.com/en-ca/people/a/spencer-abrahamCanadian Energy LawCanadian M&A LawCanadian Securities LawCOP26: Key Takeaways and Action Items on Climate Change (Part II)<p><strong>In our </strong><strong><a href="https://www.stikeman.com/en-ca/kh/canadian-energy-law/key-takeaways-and-action-items-on-climate-change-part-I">previous post</a></strong><strong>, we highlighted a number of global goals and campaigns aimed at addressing climate change. In this post, we examine climate change-oriented policies and initiatives that are being adopted by many institutional investors and banks. As banks and investors increase their emphasis on climate change as a part of their business strategies, it is important for businesses to adapt their own operations and policies accordingly. By not doing so, businesses risk reduced access to the capital needed to operate, grow, and conduct transactions. </strong></p> <p><strong>The following initiatives are being considered, adopted and accepted by many investors, banks and other key financial actors in Canada and elsewhere.</strong></p> <h2>Global: The UN Principles of Responsible Investing (PRI) and Climate Action 100+ (CA 100+)</h2> <h3>UN PRI</h3> <p> The <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.unpri.org/pri/about-the-pri">PRI</a> is a United Nations-supported international conglomerate of investors working together to implement a set of principles that will help investors invest in a way that promotes a more sustainable global financial system. They do this by implementing an investment strategy in accordance with the following principles (the “Principles”):</p> <ol> <li>Incorporate environmental, social, and governance (ESG) issues into investment analysis and decision-making processes.</li> <li>Be active owners and incorporate ESG issues into ownership policies and practices.</li> <li>Seek appropriate disclosure on ESG issues by portfolio entities.</li> <li>Promote acceptance and implementation of the Principles within the investment industry.</li> <li>Work collaboratively to enhance our effectiveness in implementing the Principles.</li> <li>Report on activities and progress towards implementing the Principles.</li> </ol> <p>Climate change is the highest priority ESG issue for PRI investors. Signatories are required to report to the PRI on several indicators regarding their management of risks and opportunities related to climate change. These indicators are modeled on the disclosure framework of the Financial Stability Board’s <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.fsb-tcfd.org/">Task Force on Climate-Related Financial Disclosures</a> (TCFD), which sets best practices for effective climate-related disclosures that could promote more informed investment, credit, and insurance underwriting decisions. Additionally, signatories must disclose strategies used by the signatory to mitigate climate change risks, such as reducing holdings in fossil fuels and using emissions data to inform investment-making decisions.</p> <p>As of 2021, the PRI had over 3,500 signatories, representing over $120 trillion in total assets under management.</p> <h3> CA 100+</h3> <p><a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.climateaction100.org/">CA 100+</a> is an investor-led initiative working to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. More than 615 investors across the entire investment value chain, responsible for over $60 trillion in assets under management, are signed on to the CA 100+ initiative. CA 100+ participants are currently engaging with 167 companies across the globe which account for approximately 80% of global emissions.</p> <p>CA 100+ has established a common high‑level agenda for company engagement to achieve clear commitments to cut emissions, improve governance and strengthen climate-related financial disclosures. They have three (3) primary asks of companies<em>:</em> (1) Governance which articulates accountability and oversight of climate related matters; (2) Actions to reduce emissions consistent with the <em>Paris Agreement</em> trajectory; and (3) Climate disclosure aligned with the TCFD requirements and the <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.parisalignedinvestment.org/">Global Investor Coalition on Climate Change (GIC) Investor Expectations on Climate Change guidelines</a> (where applicable), to enable investors to assess the robustness of companies’ business plans against a range of climate scenarios and improve investment decision-making.</p> <h2>Europe: IIGCC Investor Expectations of Companies on Physical Climate Risks and Opportunities</h2> <p><a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.iigcc.org/about-us/">The Institutional Investors Group on Climate Change</a> (IIGCC) is a European membership body which provides investors with a platform to encourage public policies, investment practices, and corporate behavior to address long-term risks and opportunities associated with climate change. The IIGCC’s mission is to enable the investment community to be a major player in achieving “net zero”. Capital allocation decisions and investment practices by IIGCC’s members are important elements of reaching this goal.</p> <p>IIGCC’s Investor Practices Program was developed around the recommendations of the TCFD. Its activities include developing guidance on how to incorporate climate-related issues into board level processes, assisting investors in assessing and managing climate risks and opportunities, and providing guidance on how to report key climate related outcomes in accordance with the TCFD recommendations. </p> <p>As of 2021, the IIGCC had 360 members, representing over €50 trillion in total assets under management.</p> <h2>Canada: OSFI and the International Network for Greening the Financial System</h2> <p>On November 30, 2021 the Office of the Superintendent of Financial Institutions (OSFI) announced its membership in the international Network for Greening the Financial System (NGFS). The purpose of the NGFS is to help strengthen the global response required to meet the goals of the <em>Paris Agreement</em> and to enhance the role of the financial system to manage risks and to mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development. To this end, the NGFS defines and promotes best practices to be implemented within and outside of the Membership of the NGFS and conducts or commissions analytical work on green finance.</p> <p>OSFI’s membership in the NGFS signifies the Canadian financial sector’s increased commitment to climate change management. In January 2021, the OSFI produced, and welcomed comments on, a <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.osfi-bsif.gc.ca/Eng/Docs/clmt-rsk.pdf">discussion paper</a> addressing strategies for building resilience to climate change, which we discussed in a <a href="https://www.stikeman.com/en-ca/kh/canadian-energy-law/preparing-for-climate-change--building-resilience-to-climate-related-risk">previous post</a>. Shortly thereafter, the OSFI committed to developing best practices in climate risk evaluation which will be informed by the Bank of Canada and OSFI <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.osfi-bsif.gc.ca/Eng/osfi-bsif/med/Pages/20201116-nr.aspx">pilot project</a>, which uses climate-change scenarios to better understand the risks to the financial system related to a transition to a low-carbon economy.</p> <p>OSFI has made numerous other climate related commitments in recent months including, but not limited to, participation in the Basel Committee on Banking Supervision’s Task Force on Climate-related Financial Risks, which addresses best practices around climate change.</p> <h2>Conclusion</h2> <p>Both locally and abroad, there is a developing consensus among certain institutional investors and financial institutions that businesses’ climate change posture is relevant to their investment decisions. In light of this evolving environment, businesses will need to be mindful of investors’ climate-related expectations and the potential impact on their business strategies.</p> <h2>Key Takeaways and Action Items on Climate Change (Part III)</h2> <p>In the next post we will examine the development of accounting standards and frameworks around climate change including new and enhanced performance metrics.</p> <p><em><span style="color: black;">The author would like to acknowledge the support and assistance of <a href="https://www.stikeman.com/en-ca/people/b/ben-buckler">Ben Buckler</a> , articling student at law.</span></em></p>05-Jan-2022 03:13:00{40488FC2-16FF-4582-9FCD-89F2095886B9}https://www.stikeman.com/en-ca/kh/competitor/merger-control-laws-and-regulations-a-canadian-law-q-aMichael Laskeyhttps://www.stikeman.com/en-ca/people/l/michael-laskeyPeter Flynnhttps://www.stikeman.com/en-ca/people/f/peter-flynnThe CompetitorCanadian M&A LawMerger Control Laws and Regulations: A Canadian Law Q&A<p>Three members of our <a href="/en-ca/expertise/competition-foreign-investment">Competition & Foreign Investment Group</a> recently authored the Canada chapter of <em><a href="/-/media/files/kh-general/iclg-merger-control-2022_final.ashx">Merger Control</a></em>, part of the International Comparative Legal Guides series published by Global Legal Group. This publication provides an excellent overview of the key regulatory issues affecting M&A in Canada, notably with respect to:</p> <ul> <li>Relevant authorities and legislation;</li> <li>Transactions caught by the legislation;</li> <li>Notification requirements and their impact on transaction timelines;</li> <li>The substantive assessment process;</li> <li>Outcomes of merger review processes;</li> <li>Remedies, appeals and enforcement; and</li> <li>Digital services and products.</li> </ul> <p>We are pleased to be able to make this <a href="/-/media/files/kh-general/iclg-merger-control-2022_final.ashx">14-page publication</a> available for downloading.</p>13-Dec-2021 03:13:00{18790EDA-831C-46A6-A639-B303D94124FF}https://www.stikeman.com/en-ca/kh/canadian-energy-law/key-takeaways-and-action-items-on-climate-change-part-ISpencer Abrahamhttps://www.stikeman.com/en-ca/people/a/spencer-abrahamCanadian Energy LawCanadian Securities LawCanadian M&A LawCOP26: Key Takeaways and Action Items on Climate Change (Part I)<p><strong>In recent weeks, there has been a lot written about the COP26 United Nations Annual Climate Change Conference, which was held in Glasgow, Scotland between October 31 and November 13, 2021. The central goal of the COP26 climate summit was to enable and encourage the parties (193 parties, including Canada, the U.S., China, and the European Union) to align on actionable steps that will put the world on a pathway towards global net zero emissions by mid-century and keep the goal of 1.5 degrees Celsius of warming within reach. There were many promises made at the COP26 climate summit, from countries and private-sector actors alike, but upon conclusion of the conference it remains clear that fundamentally keeping that target (1.5 degrees Celsius of warming) alive remains an uphill battle and doing so requires countries and private-sector actors to urgently put forth ambitious new climate programs and policies, including technological advances. </strong></p> <p>In light of the foregoing, our expectation is that it will be critical for many players - including investors, those seeking capital, and those seeking to consummate transactions - to have strong climate change initiatives in place to seek to ensure long term sustainable growth and to seek to achieve the ambitious climate change goals set out at the COP26 climate summit. It will become increasingly imperative that business in particular take the climate change challenge to heart. As such, we will highlight, over the next series of posts, some of the key takeaways from the COP26 climate summit, including some of the significant global and multi-participant action items and frameworks that have been developing as part of the push for global alignment on climate change.<strong> </strong></p> <h2>Global Goals</h2> <p>The <em>Paris Agreement</em> is an international treaty on climate change. It was adopted at the COP 21 climate summit in Paris on December 12, 2015 and entered into force on November 4, 2016. Currently, there are 193 parties to the <em>Paris Agreement</em> (including Canada, which ratified the <em>Paris Agreement</em> on October 5, 2016). Its goal is to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels (the “Global Goal”).</p> <h2>Global Targets</h2> <p>To achieve the Global Goal, the consensus is that global emissions must fall by 50% by 2030 compared to 2010 levels and we must reach net-zero emissions by 2050 (the “Global Targets”). Businesses from all sectors are encouraged to commit to aligning their business plans with the Global Targets. Initiatives such as the Science Based Targets initiative (“SBTi”) help drive ambitious climate action in the private sector by enabling companies to set and achieve science-based emissions reduction targets in line with the Global Targets.</p> <p><span style="text-decoration: underline;"><a rel="noopener noreferrer" rel="noopener noreferrer" href="https://sciencebasedtargets.org/" target="_blank"><span style="text-decoration: underline;">Science Based Targets initiative </span></a></span></p> <p>The SBTi provides companies with a blueprint on how to bring their climate plans in line with the Global Targets.</p> <p>More than 2,000 businesses and financial institutions are working with the SBTi to reduce their emissions in line with climate science.</p> <h2>Global Campaigns</h2> <p>There are several global campaigns attempting to align company, city, and investor climate strategies and operations in an attempt to meet the Global Targets. Two such campaigns are the UN-backed Race to Net Zero Campaign and the UN Global Compact, both of which have received substantial support from public and private-sector actors alike.</p> <p><a rel="noopener noreferrer" rel="noopener noreferrer" href="https://racetozero.unfccc.int/join-the-race/" target="_blank"><span style="text-decoration: underline;">UN-backed Race to Zero Campaign</span></a></p> <p>Race to Zero is the UN-backed global campaign rallying non-state actors – including companies, cities, regions, financial and educational institutions – to take rigorous and immediate action to halve global emissions by 2030 and deliver a healthier, fairer zero carbon world in time.</p> <p>There are currently 5230 companies, 67 sub-national regions, 1049 cities, and 1039, educational, 441 financial, and 52 healthcare institutions in the Race to Net Zero.</p> <p><a rel="noopener noreferrer" rel="noopener noreferrer" href="https://www.unglobalcompact.org/" target="_blank"><span style="text-decoration: underline;">UNGC Business Ambition for 1.5 Degrees Celsius</span></a></p> <p>The United Nations Global Compact (“UNGC”) is a voluntary initiative based on CEO commitments to align company strategies and operations with <a rel="noopener noreferrer" rel="noopener noreferrer" href="https://www.unglobalcompact.org/what-is-gc/mission/principles" target="_blank">10 universal principles</a> on human rights, labour, environment and anti-corruption, and take actions that advance societal goals.</p> <p>There are currently 164 UNGC participants in Canada.</p> <h2>Key Takeaways and Action Items on Climate Change (Part II)</h2> <p>In the next post we will examine the frameworks and blueprints that have been agreed to by business at and following the COP26 climate summit.</p>25-Nov-2021 06:06:00{BA69800D-FFCB-4DB9-9F10-37ECEA7B4F63}https://www.stikeman.com/en-ca/kh/competitor/regulation-of-foreign-investment-in-canada-an-updated-q-a-for-2022Michael Laskeyhttps://www.stikeman.com/en-ca/people/l/michael-laskeyPeter Flynnhttps://www.stikeman.com/en-ca/people/f/peter-flynnThe CompetitorCanadian M&A LawRegulation of Foreign Investment in Canada: An Updated Q&A for 2022<p><a href="/en-ca/people/l/michael-laskey">Michael Laskey</a> and <a href="/en-ca/people/f/peter-flynn">Peter Flynn</a>, two members of our <a href="/en-ca/expertise/competition-foreign-investment">Competition & Foreign Investment Group</a>, recently updated the <a href="/-/media/files/kh-general/foreign-direct-investment-regimes-2022.ashx">Canada chapter</a> of <em>Foreign Direct Investment Regimes</em>, published by Global Legal Group as part of their International Comparative Legal Guide series. This chapter provides an up-to-date overview of Canada’s foreign investment regulations, focusing on the following topics:</p> <ul> <li>Foreign investment policy and review;</li> <li>The law and its scope of application;</li> <li>Jurisdiction and procedure;</li> <li>The substantive assessment process; and</li> <li>Developments and emerging trends.</li> </ul> <p>We are pleased to be able to make this <a href="/-/media/files/kh-general/foreign-direct-investment-regimes-2022.ashx">12-page publication</a> available for downloading.</p>10-Nov-2021 04:13:00{1805E00B-A3B6-460B-8B04-88D3DDD428F7}https://www.stikeman.com/en-ca/kh/canadian-ma-law/private-equity-in-canada-market-and-regulatory-overviewSophie Lamondehttps://www.stikeman.com/en-ca/people/l/sophie-lamondeKim Lehttps://www.stikeman.com/en-ca/people/l/kim-leMario Nigrohttps://www.stikeman.com/en-ca/people/n/mario-nigroWarren Silversmithhttps://www.stikeman.com/en-ca/people/s/warren-silversmithTrevor Rowleshttps://www.stikeman.com/en-ca/people/r/trevor-rowlesCanadian M&A LawPrivate Equity in Canada: Market and Regulatory Overview<p>Five members of our private equity practice have co-authored a guide to legal aspects of <a href="/-/media/files/kh-general/private-equity-in-canada-market-and-regulatory-overview-2021.ashx">private equity in Canada</a> for Thomson Reuters’ “Practical Law” series. Written in an accessible Q&A format, this publication provides an overview of key practical issues, including the following:</p> <ul> <li>Recent market trends and activity levels;</li> <li>Funding sources for institutional and private investors;</li> <li>Investment incentives;</li> <li>Mechanics involved in establishing a PE fund;</li> <li>Equity and debt finance in a PE transaction;</li> <li>Buyouts and relationships;</li> <li>Management incentives; and</li> <li>Exit strategies.</li> </ul> <p>We are pleased to be able to make this <a href="/-/media/files/kh-general/private-equity-in-canada-market-and-regulatory-overview-2021.ashx">28-page publication</a> available for downloading.</p>04-Nov-2021 02:06:00{CD8938E9-8CD6-465E-9AD7-4E22F27E5943}https://www.stikeman.com/en-ca/kh/canadian-ma-law/representation-and-warranty-insurance-in-canadian-technology-ma-transactions-part-iiiAlethea Auhttps://www.stikeman.com/en-ca/people/a/alethea-auNathaniel Lacassehttps://www.stikeman.com/en-ca/people/l/nathaniel-lacasseCanadian M&A LawRepresentation and Warranty Insurance in Canadian Technology M&A Transactions: What Risks Are Insurers Looking For? Part III: Tax Risks<p><strong>Representation and Warranty Insurance (RWI) is an increasingly important tool for managing transactional risk in technology-sector M&A. In the concluding instalment of our three-part series, we look at tax-related risks that have emerged as areas of heightened scrutiny by insurers in their assessment of risks in M&A within the technology sector.</strong></p> <p><em>This post was prepared in collaboration with Cathy Qi of AIG Canada.</em></p> <h2>Misclassification of Employees</h2> <p>Use of contractors is common in the technology sector. Depending on the nature of these arrangements, there may be a risk that these workers have been misclassified as contractors instead of as employees. This could result in a withholding and payroll tax liability for the target.</p> <h2>Applicability of Sales Tax</h2> <p>Depending on the nature of the product or service provided and the fee structure (e.g. subscription fees for a service, royalties, license fees etc.), sales tax may be applicable on fees charged by a target. An additional complexity is that sales tax can also be levied at the provincial level in Canada (and in the U.S., at the state level) and may vary across jurisdictions.</p> <p>In late 2020, the Canadian government announced that starting July 1, 2021, Netflix, Spotify, Airbnb and other similar digital goods and services suppliers will have an obligation to register and collect the sales tax (GST/HST) from their Canadian customers (including individual Canadian consumers) that are not GST/HST registered. Companies with no physical or significant presence in Canada but which supply Canadian consumers directly, would generally be <a rel="noopener noreferrer" target="_blank" href="https://stikeman.com/en-ca/kh/tax-law/canada-imposes-gst-hst-registration-requirements-on-certain-non-resident-suppliers">required to register for and collect GST/HST</a>.</p> <h2>Investment Tax Credits (“ITCs”)</h2> <p>For Canadian technology companies, applicable federal and provincial Scientific Research & Experimental Development (“SR&ED”) Tax Incentive Programs may provide investment tax credits to claimants. Targets that qualify may receive benefits in the form of a refundable investment tax credit (i.e. a cash payment even if there is no tax to reduce), a reduction in taxes payable, or both. In addition to the federal SR&ED program, all provinces except Prince Edward Island have parallel programs.</p> <p>These ITCs translate to real dollars and may have an impact on the valuation of the target. As a result, where ITCs materially impact the valuation of a target (and correspondingly could impact the quantum of losses claimed), insurers tend to review closely a purchaser’s diligence efforts to verify and validate these ITCs in the M&A process.</p> <h2>Impact on Coverage</h2> <p>To the extent that any tax diligence reports identify any specific tax issues, including any of those mentioned above, an insurer would typically:</p> <ul> <li>assess the extent and scope of the diligence conducted, including during the underwriting session; and</li> <li>take into account the quantum of the risk relative to the retention.</li> </ul> <p>The result of this exercise may be that the insurer proposes to limit and/or exclude coverage.</p> <p><em>Previous posts in this series looked at </em><em><a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/representation-and-warranty-insurance-in-canadian-technology-m-a-transactions-part-one">cybersecurity and privacy</a></em><em> and </em><em><a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/representation-and-warranty-insurance-in-canadian-technology-ma-transactions-part-two">trade and sanctions law</a></em><em> in the context of technology-related M&A.</em></p>15-Sep-2021 01:49:00{8C781392-F921-41C7-9B55-C8BD016FA473}https://www.stikeman.com/en-ca/kh/canadian-ma-law/obca-amendments-removing-canadian-director-requirement-and-lowering-approval-thresholdStikeman ElliottCanadian M&A LawOBCA Amendments Removing Canadian Director Requirement and Lowering Approval Threshold for Certain Resolutions in Effect as of July 5, 2021<p><strong>Significant amendments to Ontario’s <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/on/laws/stat/rso-1990-c-b16/latest/rso-1990-c-b16.html"><em>Business Corporations Act</em></a> (OBCA) are in effect as of July 5, 2021. The amendments eliminate the current requirement that 25% of directors be resident Canadians while, in the case of non-offering corporations only, they reduce the approval threshold for a written ordinary resolution to a simple majority. </strong></p> <p><em>This post updates our post of <a href="https://www.stikeman.com/en-ca/kh/corporations-commercial-law/obca-amendments-eliminate-canadian-director-requirement">November 30, 2020</a> with respect to the proclamation date only. Because there are no substantive changes to report, the following information about the key elements of the legislation is the same as in the earlier post.</em></p> <h2>Canadian Director Requirement Eliminated</h2> <p>Section 118(3) of the OBCA previously required that 25% of the directors of an Ontario corporation be “resident Canadians” (with a minimum of one such person on a board with fewer than four members). As of July 5, 2021, Ontario will become the sixth Canadian jurisdiction without a resident director requirement. Notably, the <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://laws-lois.justice.gc.ca/eng/acts/C-44/page-17.html#h-109681"><em>Canada Business Corporations Act</em></a> (CBCA) still has a 25% resident director requirement.</p> <p>Eliminating the resident director requirement makes Ontario more attractive as an incorporation jurisdiction. As of July 5, 2021, it is no longer necessary for foreign investors who wish to incorporate in Ontario to find Canadians to serve on their boards (or, alternatively, to choose to incorporate in a province without a director residency requirement). Each of these options can add cost, complication and delay to business transactions.</p> <h2>Simple Majority for Certain Written Resolutions</h2> <p>Section 104 of the OBCA, which allows written resolutions, previously required all such resolutions to be signed by all shareholders. In the case of private companies, this was a burdensome requirement that sometimes left boards with little choice but to convene a shareholder meeting in order to pass resolutions dealing with minor matters.</p> <p>The changes have brought Ontario more closely into line with many other jurisdictions by reducing the approval threshold for written ordinary resolutions in non-offering OBCA corporations (essentially private companies) to a simple majority, provided that written notice is then provided, within 10 business days, to non-signing shareholders who were entitled to vote on the resolution. This allows OBCA corporations to avoid the time and expense involved in obtaining the consent of small shareholders, or (alternatively) the delay in providing notice and holding a meeting, for minor housekeeping matters.</p> <p>It is important to note, however, that the OBCA will continue to require either a two-thirds vote at a shareholder meeting or a unanimous written resolution for any proposal that, under the Act, must be approved by a special resolution. Such proposals include – among others – adoption of an amalgamation agreement (s. 176(4)), continuances to other jurisdictions (s. 181(3)), additions or reductions to stated capital (ss. 24(6); 34(1)), alteration of the number of directors (s. 125(3)) and other situations that often arise in transactional contexts.</p> <h2>Going Forward</h2> <p>The articles, bylaws and shareholder agreements of some non-distributing OBCA corporations may contain provisions on the topics discussed above that are more restrictive than is required as a result of the amendments. In such cases, these corporations may wish to review those documents and consider amendments that would allow the new OBCA standards to apply to them, while also ensuring that their processes and record-keeping practices align with the new written-resolution thresholds and timeframes.</p> <p>Finally, a non-distributing OBCA corporation may wish to reconsider the composition of its slate of directors going forward. As of July 5, 2021, such corporations will be better able to ensure that their boards have the best possible range of business oversight and corporate governance expertise.</p>30-Jun-2021 03:36:00{2B1823F1-9081-4F95-BD38-8A793F4A091E}https://www.stikeman.com/en-ca/kh/canadian-ma-law/representation-and-warranty-insurance-in-canadian-technology-ma-transactions-part-twoAlethea Auhttps://www.stikeman.com/en-ca/people/a/alethea-auShawn C.D. Neylanhttps://www.stikeman.com/en-ca/people/n/shawn-c-d-neylanCanadian M&A LawCanadian Technology & IP LawRepresentation and Warranty Insurance in Canadian Technology M&A Transactions: What Risks Are Insurers Looking For? Part II: Trade and Sanctions Law<p><strong>Representation and Warranty Insurance (RWI) is an increasingly important tool for managing transactional risk in technology-sector M&A. In the second of a three-part series, we look at trade law and international sanctions. Two risks in this area of law, which can involve criminal penalties, have been highlighted in recent transactions involving technology companies.</strong></p> <h2>Elevated risks for cryptology products</h2> <p>The target company’s risk profile in trade law/sanctions compliance is higher where:</p> <ul> <li>its product offerings include cryptology, and</li> <li>such technology or goods have been transferred outside the target’s home jurisdiction.</li> </ul> <p>The nature of the workforce for technology companies tends to be mobile and not necessarily dependent on the location of the target’s head office. As a result, development teams may be physically located in another jurisdiction altogether or be composed of team members located in various jurisdictions. Customers also tend to be located in many jurisdictions.</p> <p>A policy that demonstrates an acknowledgement of compliance issues related to accessing and transferring such cryptology goods or technology (and other controlled goods or technology) outside the target’s home jurisdiction and any process implemented to address this type of risk may (depending on effectiveness) go a long way to providing comfort to both the purchaser and the RWI insurer in a M&A transaction. Inadvertent disclosures without consideration of such compliance issues, or even an evident failure to consider these issues when asked in the diligence process, may result in exclusions or limitations from RWI coverage and lead to negotiations between the seller and purchaser to allocate such risk, by way of a creation of a separate indemnity to be provided by the seller.</p> <h2>Economic Sanctions Violation Risks</h2> <p>Sales to (and investments by) foreign entities and nationals is another potentially problematic area on which technology companies may not always be focused. This tends to be especially true in the startup phase when companies are initially focused on raising capital and growth. As they approach the exit stage, targets should be prepared for the fact that the purchaser’s diligence may include investigating compliance with Canadian economic sanctions laws, including under the:</p> <ul> <li><a rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/ca/laws/stat/sc-1992-c-17/132065/sc-1992-c-17.html"><em>Special Economic Measures Act</em></a><em>; </em></li> <li><a rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-u-2/32108/rsc-1985-c-u-2.html"><em>United Nations Act</em></a><em>; </em></li> <li><a rel="noopener noreferrer" target="_blank" href="https://canlii.ca/t/l1n1"><em>Freezing Assets of Corrupt Foreign Officials Act</em></a><em>;</em></li> <li><a rel="noopener noreferrer" target="_blank" href="https://canlii.ca/t/90rw"><em>Sergei Magnitsky Law</em></a><em>; </em>and</li> <li><em>Criminal Code</em> (<a rel="noopener noreferrer" target="_blank" href="https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-46/latest/rsc-1985-c-c-46.html#PART_II_1_Terrorism_292468">anti-terrorism provisions</a>)<em>. </em></li> </ul> <p>Purchasers will be seeking to ensure that sales by the target business and investments in the business do not involve entities sanctioned under such legislation.</p> <p>As is the case with violations of export compliance laws in respect of cryptology, it is difficult in a typical transaction timeline to accurately quantify the damages that may arise in addition to potential imposition of fines for violating the laws listed above. Internal investigation and reporting costs can be very high. As a result, RWI insurers are often unwilling to assume these risks.</p> <h2>Next Up</h2> <p>The third and final post in this series will look at risks related to tax liabilities. To see the previous post in the series, which concerned technology-related risks, click <a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/representation-and-warranty-insurance-in-canadian-technology-m-a-transactions-part-one">here</a>.</p>10-Jun-2021 07:21:00{999D2C3A-5304-47CD-AC7D-40F483550A46}https://www.stikeman.com/en-ca/kh/canadian-ma-law/savs-apercu-de-la-derniere-tendance-en-matiere-d-investissementVanessa Coiteuxhttps://www.stikeman.com/en-ca/people/c/vanessa-coiteuxSimon A. Romanohttps://www.stikeman.com/en-ca/people/r/simon-a-romanoMichael Deciccohttps://www.stikeman.com/en-ca/people/d/michael-deciccoCanadian M&A LawCorporations & Commercial Law UpdateSPACs: An Overview on the Latest Investment Trend<p><strong>In recent years, Special Purpose Acquisition Corporations (SPACs) have become a favourite of the corporate finance and M&A industry.  SPACs are publicly-traded shell companies that raise capital in an initial public offering (IPO), usually via a combination of shares and warrants.  The proceeds raised in the IPO are held in escrow and the SPAC then seeks to acquire an operating business or assets, referred to as the SPAC’s qualifying acquisition (or its de-SPAC transaction).  In connection with the IPO, a SPAC’s sponsor typically receives a “promote” in the form of “founder” shares issued for nominal value and which result in the sponsor retaining a substantial amount of equity in the SPAC following the IPO in exchange for the sponsor funding the SPAC’s expenses.</strong></p> <h2><strong>Why Invest in SPACs?</strong></h2> <p>SPACs are attractive investments because they provide an opportunity for retail investors to co-invest with financial sponsors.  They provide investors with three possible investment outcomes.  First, if a SPAC executes a definitive agreement for the acquisition of a business, investors will be provided with prospectus-level disclosure regarding the business and presented with an opportunity to redeem their shares in the SPAC.  If an investor elects to redeem its shares, it will receive in return the amount it paid to purchase its shares plus a T-bill yield on its invested amount.  In addition, the investor would keep the warrants to purchase shares of the resulting public company that it received in connection with its initial investment.  Second, if an investor elects not to redeem its shares after receipt of information about the to-be-acquired business, the investor will continue to own its shares following completion of the qualifying acquisition as well as its warrants.  Third, when a SPAC does not enter into an acquisition agreement within the SPAC’s permitted timeline (which is typically 18-24 months), the investor will receive the amount it paid to purchase its shares plus a T-bill yield on its invested amount.</p> <p> </p> <p><iframe title="vimeo-player" src="https://player.vimeo.com/video/537374032" width="640" height="360" frameborder="0"></iframe> </p> <p> <a href="https://stikeman.com/en-ca/people/simon-a-romano">Simon Romano</a> speaks to <em>Lexpert TV </em>on SPAC trends and developments.</p> <p> </p> <p>Recently, SPACs have been active in pursuing acquisitions of cannabis, technology and ESG businesses.  Examples include Sustainable Opportunities Acquisition Corp.’s qualifying acquisition with DeepGreen Metals Inc., Peridot Acquisition Corp.’s qualifying acquisition  with Li-Cycle Corp., Ceres Acquisition Corporation’s qualifying acquisition of Parallel, Cannabis Strategies Acquisitions Corp.’s (now Ayr Wellness Inc.) qualifying acquisition of five US cannabis businesses, Northern Genesis Acquisition Corp.’s proposed qualifying acquisition with Lion Electric Company and Canaccord Genuity Growth II Corp.’s proposed qualifying acquisition with Taiga Motors Inc.</p> <p>SPAC qualifying acquisitions are very flexible.  SPACs can acquire shares or assets, merge or amalgamate with a target business, or be acquired by a target business.  Canadian SPACs have acquired businesses in Canada, the US and abroad, and US SPACs have acquired Canadian businesses.  Often the qualifying acquisition is accompanied by the continuation or re-domiciliation of the SPAC to another jurisdiction and on occasion Canadian SPACs have become US reporting companies.</p> <h2><strong>Recent Novel Features: Repurposing of Warrants</strong></h2> <p>The Bill Ackman-backed Pershing Square Tontine Holdings Ltd., the largest SPAC IPO ever completed at US$4 billion, utilized SPAC warrants to adjust traditional economics and incentives.  In order to reduce dilution caused by the sponsor’s promote, the sponsor agreed to forego its promote and instead purchased warrants in the SPAC.  The warrants were purchased at their fair market value and are non-transferable or exercisable until three years after the closing of the qualifying acquisition.  These warrants represent only a small percentage of the post-qualifying acquisition company’s outstanding shares and are only exercisable at a 20% premium, which is significantly less dilutive than the typical promote.</p> <p>In addition, in the Pershing Square SPAC, an investor that elects to redeem its shares in connection with a proposed qualifying acquisition must also forfeit two-thirds of the warrants it received at the time of the IPO.  This structure aims to reduce the arbitrage opportunities for hedge fund investors who could redeem their shares in order to recover their initial investment and continue to hold their warrants.  In addition, the Pershing Square SPAC provided investors an additional incentive not to redeem their shares – all warrants received by the SPAC from redeeming shareholders will be put into a pool to be distributed pro rata to all non-redeeming shareholders.</p> <p>In its Canadian SPACs, Canaccord Genuity has also required warrants to be redeemed concurrently with the redemption of the SPAC’s shares.</p> <p>Stikeman Elliott LLP has acted on numerous Canadian SPAC IPOs and qualifying acquisitions, including the first ever Canadian SPAC IPO and proposed qualifying acquisition in Canada, and continues to advise issuers, underwriters and sellers on Canadian and US SPAC transactions.</p> <p>This article, <a rel="noopener noreferrer" rel="noopener noreferrer" target="_blank" href="https://www.lexpert.ca/article/spacs-an-overview-on-the-latest-investment-trend/?p=29%7C110&sitecode=SE-FINANCE">“SPACs: An overview on the latest investment trend,”</a> was first published in <em>Lexpert Special Edition: Finance and M&A</em> magazine, April 2021.</p>15-Apr-2021 03:22:00{E2039272-3EA5-4DCC-BF0C-5AAEB4DF3D04}https://www.stikeman.com/en-ca/kh/canadian-ma-law/representation-and-warranty-insurance-in-canadian-technology-m-a-transactions-part-oneAlethea Auhttps://www.stikeman.com/en-ca/people/a/alethea-auCanadian M&A LawCanadian Technology & IP LawRepresentation and Warranty Insurance in Canadian Technology M&A Transactions: What Risks Are Insurers Looking For? Part I: Cybersecurity and Privacy<p><strong>Representation and Warranty Insurance (RWI) is an increasingly important tool for managing transactional risk in technology-sector M&A. In the first of a three-part series, we look at the types of cybersecurity and privacy risk that RWI insurers typically consider in the context of a technology transaction. Follow-up posts will look at risks related to (i) trade law and sanctions compliance and (ii) taxation. </strong></p> <p><em>This post was prepared in collaboration with Cathy Qi of AIG Canada.</em></p> <p>By way of background, it will help to begin with a synopsis of current M&A market conditions in Canada. As the pandemic continues, a new reality has emerged that often feels like a live version of Groundhog Day. But there is a silver lining for practitioners in the area of technology M&A: after some choppiness in the initial period of on-and-off lockdowns, the deal market soon stabilized and moved ahead at a steady pace through the remainder of 2020. This trend seems likely to continue in 2021, driven by factors such as:</p> <ul> <li>Large amounts of private equity dry powder;</li> <li>Growing activity from family offices;</li> <li>Renewed M&A interest among corporate buyers; and</li> <li>Ongoing uncertainty spurring additional exits, contributing to M&A activity.<a href="#_ftn1" name="_ftnref1"><strong><sup>[1]</sup></strong></a></li> </ul> <h2>Representation and Warranty Insurance</h2> <p>Representation and warranty insurance (RWI) is now widely accepted as a useful tool for transactional risk management. Technology M&A is no exception. In our experience, insurers underwriting RWI in technology transactions tend to focus on a few key areas of risk, one of which is cybersecurity and privacy.</p> <p>Correspondingly, a purchaser – typically the insured in a RWI policy – may also wish to focus on these same areas to help (i) avoid exclusions and limitations from RWI coverage arising from a lack of adequate diligence in these areas and (ii) determine the appropriate risk allocation between the purchaser and seller where such risks are likely to result in exclusions and limitations from RWI coverage.</p> <h3>Cybersecurity and privacy</h3> <p>It should be no surprise that cybersecurity and privacy top the list. RWI insurers expect robust due diligence on cyber and privacy matters for targets in all industries. For targets in the technology space, this area is almost always listed as an area of heightened scrutiny for RWI insurers – particularly if the target collects, stores, handles and otherwise processes confidential information (including personal information) and/or has material reliance on providers of Infrastructure-as-a-Service (IaaS) and/or Software-as-a-Service (SaaS).</p> <p>When considering coverage in the technology sector, some of the factors that RWI insurers typically tend to focus on include the following:</p> <ul> <li>Cybersecurity protections against cyber and ransomware attacks;</li> <li>The nature of the business the target is engaged in (e.g. B2B or B2C);</li> <li>The jurisdiction in which the target operates and the applicable regulatory environment (risk factors may be amplified for targets whose operations are subject to the laws and regulations of multiple jurisdictions);</li> <li>The type of data that the target collects, stores and handles, including whether the data constitutes sensitive or personal information (including personal health information, financial information, etc.);</li> <li>The availability and testing of business continuity/disaster recovery plans;</li> <li>Any history of unauthorized access to the target’s data (including privacy breaches and cyber incidents and notifications made to privacy and other relevant authorities) as well as its responses to such incidents;</li> <li>Material privacy complaints or settlements;</li> <li>Regulatory cyber or privacy investigations or orders; and</li> <li>Underlying insurance coverage (e.g. cyber and E&O).</li> </ul> <h4>Ongoing services</h4> <p>For technology companies that provide an ongoing service (whether it is SaaS or IaaS, etc.), the integrity and availability of such service is of critical importance. As a result, RWI insurers focus on:</p> <ul> <li>The security of the environment where such service is provided; and</li> <li>The policies and practices deployed by the business to protect such environment designed to ensure the security, integrity and continued availability of such service.</li> </ul> <h4>Scope of coverage</h4> <p>RWI insurers rely on target companies having obtained adequate coverage (in terms of the amount and the scope of cybersecurity insurance) for their business operations and will often only provide coverage for covered losses on breaches of privacy and cybersecurity related representations that is no broader than and in excess of such existing insurance. If such coverage is considered good enough for the target’s operational requirements to permit a seller to make the privacy and cybersecurity representations to the buyer to sell the business, then the RWI insurer’s assumption of a breach of such representations may follow the same scope.  In the event that the coverage limit for existing cybersecurity insurance is not deemed adequate (the level that is deemed adequate will depend on the target’s business and varies deal to deal), RWI insurers may elect to provide coverage, if at all, only after a threshold amount of covered losses (in excess of the coverage limit of the existing cybersecurity insurance policy) have been incurred by the insured or limit the coverage to a certain amount for covered cybersecurity matters.</p> <h4>Personal information</h4> <p>As noted above, the types of data processed by the target are critically important to RWI insurers, and RWI insurers typically ask purchasers detailed questions on the sensitivity of the personal information processed by the target. RWI insurers would likely exclude personal health information from coverage on the basis that cybersecurity breaches involving such information may impose significant or difficult to quantify risks.</p> <h2>Next Up</h2> <p>In the<a href="https://www.stikeman.com/en-ca/kh/canadian-ma-law/representation-and-warranty-insurance-in-canadian-technology-ma-transactions-part-two"> second post</a> in the series, we will look at risks in the areas of trade law and sanctions compliance.</p> <hr /> <p><a href="#_ftnref1" name="_ftn1">[1]</a> <em>Crosbie & Company Canadian M&A Special Report—M&A Outlook for 2021, January 8, 2021.</em></p>07-Apr-2021 07:56:00{181D9E35-F782-41CE-B17B-A762772C75A3}https://www.stikeman.com/en-ca/kh/litigation/contractual-discretion-must-be-exercised-reasonably-supreme-court-of-canadaMichael E. Mestinsekhttps://www.stikeman.com/en-ca/people/m/michael-e-mestinsekSakshi SharmaLitigation UpdateCanadian M&A LawContractual Discretion Must Be Exercised Reasonably: Supreme Court of Canada<p><strong>The Supreme Court of Canada (“SCC”) in two recent decisions has continued to clarify and explain the scope of the principle of good faith, which was recognized by the SCC in 2014 as an organizing principle of contract law. The first of these decisions, <em>Callow v. Zollinger</em>, 2020 SCC 45 (“<em>Callow”</em>) (discussed in a </strong><strong><a href="https://www.stikeman.com/en-ca/kh/litigation/scc-affirms-honesty-Is-the-best-policy-In-exercising-contractual-rights">previous post</a></strong><strong>), dealt with one aspect of good faith in contracts: the duty to perform contracts <em>honestly </em>(commonly referred to as the duty of honest contractual performance). More recently, the Court released its ruling in the companion case of <em>Wastech Services Ltd v. Greater Vancouver Sewerage and Drainage District</em>, </strong><strong><a rel="noopener noreferrer" rel="noopener noreferrer" href="https://canlii.ca/t/jd1d6" target="_blank">2021 SCC 7</a> </strong><strong>(“<em>Wastech</em>”), which clarifies a second aspect of good faith in contracting: the duty to exercise contractual discretion <em>reasonably. </em></strong></p> <h2>What Happened in <em>Wastech?</em></h2> <p>The parties in this case were Wastech Services Ltd. (“Wastech”), a waste transportation and disposal company, and the Greater Vancouver Sewerage and Drainage District (“Metro”), a statutory body responsible for the administration of waste disposal from the Greater Vancouver region (together, the “Parties”).</p> <p>The Parties had a long-standing contract which governed the removal and transportation of waste by Wastech to three disposal facilities: one in Vancouver, one in Burnaby, and one in Cache Creek (the “Contract”). Wastech was to be paid a differing rate depending on which disposal facility the waste was directed to and how far away the facility was located (i.e. Metro paid Wastech a different rate for waste disposed at the Cache Creek facility relative to the other two, mainly because Cache Creek is farther away). Pursuant to the Contract, Metro had absolute discretion to allocate waste to each facility.</p> <p>Wastech had a target operating profit of 11% under the Contract. If in a given year Wastech’s actual operating profit varied significantly from this target, the Contract had mechanisms that would bring the numbers closer together. For example, if Wastech’s operating costs exceeded the target operating costs by a certain amount, Metro had to pay Wastech half the difference. If Wastech’s operating costs were less than the target operating costs, then Wastech would similarly compensate Metro. While these mechanisms were designed to bring Wastech’s actual profit closer to its target profit, the Contract did <em>not</em> guarantee that Wastech would achieve the target profit in any given year.</p> <p>In late 2010, facing budget constraints, and seeking to maximize the remaining life of the Cache Creek facility, Metro exercised its contractual discretion and changed the allocation of waste so that less waste went to  Cache Creek and more went to the Vancouver and Burnaby landfills. The decrease of the Cache Creek allocation – roughly 31% in 2011 relative to 2010 – caused Wastech’s operating profit for the 2011 year to sink to 4%, 7 points below target, even after the adjustment payment described above was taken into account.</p> <p>Wastech launched an action against Metro, claiming damages of roughly $2.9M –the additional amount it says it would have made in 2011 but for Metro’s reallocation. Wastech alleged that Metro breached the Contract by preventing it from hitting its target profit. </p> <p>First, the dispute proceeded to arbitration. The arbitrator found for Wastech, holding that Metro breached its duty of good faith by using its discretion in a way that prevented Wastech from achieving its target profits, and accordingly, awarded Wastech compensation. Metro appealed the arbitrator’s decision. The judge overturned the arbitrator’s award, holding that the arbitrator erred by characterizing Metro’s duty of good faith in a way that contradicted the words of the contract itself. In turn, Wastech appealed the judge’s decision. The Court of Appeal upheld the judge’s decision on the grounds that, among other things, the arbitrator had over-extended the duty of good faith. Wastech again appealed, this time to the SCC.</p> <h2>What Did the Supreme Court of Canada Decide?</h2> <p>While in <em>Callow</em>, the SCC had dealt with the duty of honest contractual performance, the question in <em>Wastech </em>was different because it turned on whether Metro had breached its duty under another branch of good faith, namely, the duty to act reasonably in the exercise of contractual discretionary powers.</p> <p>The Court unanimously dismissed Wastech’s appeal and clarified the duty on contracting parties to exercise discretionary powers under a contract “reasonably”. The Court found that the question of whether a party has exercised its powers or discretion under a contract reasonably is measured by reference to the purpose of the contract, and in particular the purpose for which that party was granted the discretionary power at issue.</p> <p>An exercise of a right or power that is consistent with the purpose for which it was granted is reasonable. On the other hand, an exercise of a right or power that is unconnected to its purpose under the contract is unreasonable or arbitrary, and thus in breach of the duty of good faith.</p> <p>The Court emphasized that the question of reasonableness is not about whether the court considers the party’s actions fair. Rather, courts must measure reasonableness against the parties’ own expectations as embodied in the contract. If the exercise of discretionary power is unconnected to the underlying <strong>purpose </strong>of the agreement, it is unreasonable and thus contrary to the requirements of good faith.</p> <p>Determining the “underlying purpose” of the contract is a matter of contractual interpretation that may depend on the particular clause or provision in question, or may involve reading the contract as a whole, including any recitals, and considering the circumstances surrounding the formation of the contract.</p> <p>The Court also pointed out that reasonableness in this context does not require contracting parties to place their counterparty’s interests ahead of their own. The Court acknowledged that it is not necessarily unreasonable for parties to perform their contracts in a way that furthers their own interests – even if that comes at the expense of the interests of a counterparty.  So long as the exercise of the contractual discretion in question aligns with the underlying purpose of the contract for which the relevant discretionary power was granted, self-interested performance can be reasonable in a post-<em>Wastech </em>world.</p> <p>In <em>Wastech</em>, the SCC held that Metro’s decision to allocate waste in a way that hurt Wastech’s financial interests was reasonable. Reading the contract as a whole, the Court found that the purposes for which Metro was given the discretion to allocate waste included maximizing the waste capacity of the Cache Creek facility, maximizing efficiency, and minimizing costs.</p> <p>The Court found that Metro’s exercise of its discretion to allocate waste aligned with these purposes; it made the decision in furtherance of its own business objectives, by maximizing the efficiency of the landfills and operating the overall system in a cost-effective manner. Its exercise of discretion in this manner was not contrary to the purposes for which the discretion was granted because guaranteeing Wastech a certain percentage of profit was not one of the purposes of the Contract.</p> <p>For these reasons, the Court was unwilling to conclude that Metro’s decision was a breach of good faith, and therefore a breach of contract, even though it made it impossible for Wastech to achieve its target profit for 2011.</p> <h2>Key Take-Aways: Wastech Not, Want Not?</h2> <ul> <li><strong>Pre-contract</strong>: When drafting and negotiating a contract, parties may want to carefully consider whether to include statements about the overall purpose of the agreement, and the specific purposes of any discretionary powers or rights granted to one or more of the parties under the agreement, especially when that discretion is absolute. Recitals can help this to be achieved.</li> <li><strong>Post-contract</strong>: When deciding how to exercise rights or discretions granted to them under a contract, parties should think about whether their proposed course of action aligns with purposes for which they were given that discretion and the underlying purpose of the contract as a whole.</li> </ul>12-Mar-2021 06:38:00