The last few months have seen a number of regulatory developments in Canadian capital markets that may specifically affect companies in the oil and gas industry. Below, we’ve compiled a list of key legal developments since July 1, 2014 that may be of particular interest, along with corresponding links to our securities blog.

Capital Markets

  • TSXV approves the completion of three oil and gas team-led recapitalizations of shells by written consent of a majority of shareholders (five in total since December 2013).  
  • TSX circuit-breaker rules are expanded to all actively traded stocks (more than 500 trades a day and average $1.2M in value per day).

Continuous Disclosure

  • Canadian regulators adopt rules for the disclosure of gender diversity and other board composition issues by non-venture issuers. These requirements apply in the 2015 disclosure cycle.  
  • Canadian regulators announce the outcome of the joint continuous disclosure review of more than two hundred issuers — key issues included revenue recognition in financial statements and non-GAAP measures in MD&A.  
  • TSX publishes Electronic Communications Disclosure Guidelines and provides guidance on using social media — confirms the importance of factual statements that avoid selection disclosure.   
  • Amendments to the rules governing auditor oversight provide for disclosure of CPAB remedial orders, certain changes to rules involving foreign audit firms and other procedural matters.  
  • The ASC decision in Haggerty confirms that an “impression, speculation or abstract possibility” does not constitute material information.

Activism & Litigation

  • Canadian regulators confirm that they will not require reporting of ownership of 5% of shares — the reporting threshold will stay at 10%.  
  • Activist attempts in Partners REIT to secure proxy votes in contested board election by making tender offer for 10% of shares and demanding proxies on all tendered shares.  
  • SCC confirms that the settlement of regulatory proceedings does not bar class action suits for the same conduct.  
  • Delaware Court of Chancery offers support to board discretion to adopt a rights plan in the face of activism in Third Point.

M&A

  • Canadian regulators propose adopting rules that allow targets the option to require bidders to leave bids open for 120 days and imposing minimum 50% tender before take-up — rulemaking to follow.  
  • BCSC’s reasons in Hud Bay confirm that the right of a shareholder to tender bid remains paramount in M&A regulation — supporting the decision to leave a rights plan in place for 155 days.  
  • TSX approves rules that allow buyers to increase headroom under security compensation plans for employees of the target without shareholder approval.  
  • Delaware Court of Chancery offers cautions on the management of conflicts in M&A transactions involving directors and financial advisors in Rural Metro.

Regulatory

  • OSC can now examine all records of a market participant as part of an enforcement action (not just records which must be retained under law).  
  • Canada, Ontario, BC, Saskatchewan, New Brunswick and PEI continue to advance a co-ordinated Canadian securities regulatory authority, which could be operating next year.

Notable Transactions

  • Kufpec’s purchase of 30% of Chevron’s Duvernay assets for US$1.5 billion  
  • Encana’s purchase of Athlon Energy for US$5.9 billion  
  • Pembina’s purchase of the Vantage pipeline and midstream assets from Riverstone for US$650 million  
  • Enbridge Income Fund’s purchase of assets from Enbridge for $1.8 billion  
  • Apollo’s formation of Jupiter Resources and completion of the purchase of Encana’s Bighorn assets for US$1.9 billion  
  • Ember Resources’ purchase of assets from Encana for $605 million

Key Stikeman Elliott Publications