• Minority Approval of Related Party Transactions by Written Consent: In the Matter of Samco Gold Limited and In the Matter of TerraVest Capital Inc.
  • February 18, 2014 | Author: Gregory Hogan
  • Law Firm: Cassels Brock & Blackwell LLP - Toronto Office
  • In a related party transaction, minority approval under Multilateral Instrument 61-101 ("MI 61 -101") by way of written consent from a majority of disinterested shareholders may be available on application to the securities regulators, leading to reduced costs and delays.

    Each of these decisions was reported in the same week.  Each involved related party transactions that were required to be approved by “minority” shareholders, being all of the shareholders that were not interested in the transaction in question, at a meeting of shareholders.

    Samco had agreed to acquire, from a director of Samco, the right to participate in the benefits arising from the enforcement of an Argentinean court decision relating to a contract breach. Samco provided each shareholder from whom written consent for the transaction was sought a disclosure document, including copies of the press release and the relevant agreement, the contents of which complied with the disclosure requirements set out in Section 5.3(3) of MI 61-101, along with a form of written consent. Samco received signed consents from shareholders representing approximately 68.4% of the Samco common shares held by disinterested shareholders.

    TerraVest was making an acquisition of another issuer from two shareholders of TerraVest. TerraVest provided the single shareholder from whom written consent for the transaction was sought a disclosure document, including a copy of a formal valuation, the contents of which complied with the disclosure requirements set out in Section 5.3(3) of MI 61-101, along with a form of written consent. This shareholder beneficially owned, or exercised direction or control over, 3,933,872 common shares of TerraVest, which represented approximately 31.68% of the issued and outstanding common shares and 61.03% of the common shares held by all disinterested minority shareholders.

    In each case, the issuers were permitted to satisfy the minority approval requirement by way of written consent on the basis that (i) the majority of the minority approval was a foregone conclusion, so sending the circular and holding the meeting would be an unreasonable expense and a source of unnecessary delay, and (ii) the disclosure that shareholders would have obtained in a circular was posted on SEDAR at least 14 days prior to the completion of the transaction.