Chariot Resources Limited - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- venture issuers exempt from audit committee independence requirements -- upon completion of offering, issuer to cease to be a venture issuer -- issuer granted 90 day exemption from audit committee independence requirements to permit issuer to recruit additional independent directors -- relief conditional upon one member of audit committee being independent -- relief also conditional upon disclosure in prospectus
Applicable Ontario Rules
Multilateral Instrument 52-110 Audit Committees (2004) 27 O.S.C.B. 3252, ss. 3.1, 9.1.
December 9, 2004
IN THE MATTER OF
THE SECURITIES LEGISLATION
OF ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO,
NEW BRUNSWICK, NOVA SCOTIA, NEWFOUNDLAND
AND LABRADOR AND YUKON TERRITORY
(THE JURISDICTIONS)
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
CHARIOT RESOURCES LIMITED
(THE FILER)
MRRS DECISION DOCUMENT
Background
The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that, for a period of 90 days commencing on the date the receipt for the Prospectus (defined below), the Filer be exempt from the requirement in the Legislation that every audit committee member must be independent (the Requested Relief).
Under the Mutual Reliance Review System for Exemptive Relief Applications:
(a) the Ontario Securities Commission is the principal regulator for the application; and
(b) this MRRS decision document evidences the decision of each Decision Maker.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation existing under the Business Corporations Act (British Columbia). The head office of the Filer is located in Lima, Peru.
2. The Filer is currently a reporting issuer in the provinces of British Columbia and Alberta and the Yukon Territory and its common shares are listed on the TSX Venture Exchange. As at November 4, 2004, the Filer had a market capitalization of approximately C$10.9 million. The Filer is currently a "venture issuer" within the meaning of Multilateral Instrument 52-110 Audit Committees (MI 52-110).
3. The Filer has a financial year-end of April 30 and held its last annual shareholders meeting on October 21, 2004.
4. The Filer has filed a preliminary prospectus dated November 5, 2004 in each of the provinces of Canada offering units of the Filer (the Offering) and has selected Ontario as the principal jurisdiction. The Filer has also applied to list its common shares on the Toronto Stock Exchange effective upon completion of the Offering.
5. The board of directors of the Filer is currently comprised of four directors. The Filer's audit committee is currently comprised of Bob Baxter, John Hannaford and Ulrich Rath. Mr. Hannaford is independent and financially literate within the meaning of MI 52-110. Messrs. Baxter and Rath are financially literate within the meaning of MI 52-110.
6. The Filer currently intends to add three new directors as follows:
(a) on or before the date that the Filer's (final) prospectus in connection with the Offering (the Prospectus) is filed, the Filer will add a new director (the Filer is permitted under the Corporations Act (British Columbia) and its constating documents to add one new director between shareholders meetings without shareholder approval); and
(b) following the completion of the Offering, the Filer intends to seek shareholder approval to increase the size of its board of directors to seven and add two new directors.
7. The three new directors will be elected at the shareholders meeting referred to in paragraph 6 above to serve until the Filer's next annual shareholders meeting.
8. Each of the three new directors will be independent and financially literate within the meaning of MI 52-110. The director referred to in paragraph 6(a) above will be added to the audit committee on or before the date that the Prospectus is filed. The other two directors referred to in paragraph 6(b) above will be added to the audit committee following the shareholders meeting.
9. Following the completion of the Offering, the Filer will no longer qualify as a "venture issuer" and will be required under MI 52-110 to have an audit committee comprised of at least three directors each of whom is independent within the meaning of MI 52-110.
10. Under the Business Corporations Act (British Columbia), the Filer cannot increase the size of its board by more than one-third without shareholder approval.
11. Following the completion of the Offering two of the three members of the audit committee will be independent within the meaning of MI 52-110.
Decision
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.
The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:
(a) one member of the audit committee is independent within the meaning of MI 52-110; and
(b) the Filer discloses in its Prospectus the existence, nature and conditions of this decision.