Greg Ryan Smith
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for relief from the prospectus requirement for trades by a control person of an issuer under automatic securities disposition plans -- Applicant intends to annually establish an automatic securities disposition plan (ASDP) in accordance with the guidance provided under OSC Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plan or any successor notice relating to ASDPs in effective at the time of establishing an ASDP and make orderly sales of securities of the issuer under the ASDP -- Trades by the applicant as a control person under the ASDP deemed to be a distribution attracting the prospectus requirement -- Applicant cannot rely on the prospectus exemption for a trade by a control person in s. 2.8 of NI 45-102 because the seven-day waiting period requirement in paragraph 2.8(3)(b) and the 30-day expiry provision in paragraph 2.8(4)(a) of NI 45-102 would prevent continued or successive dispositions under the ASDP by requiring the applicant to refile a Form 45-102F1 every 30 days and wait at least seven days before making the first trade after each filing of a Form 45-102F1 -- Compliance with all conditions of s. 2.8 of NI 45-102 would impede applicant's ability to establish, and effect orderly trades under, an ASDP -- Relief granted from the prospectus requirement for trades effected by the control person under the ASDP subject to conditions consistent with the policy rationale underlying section 2.8 of NI 45-102 -- Relief granted to maintain confidentiality of application and decision for a period of up to 90 days -- Relief expires 12 months after the effective date of the ASDP.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53(1), 74(1) and 147.
National Instrument 45-102 Resale of Securities, s. 2.8.
June 8, 2023
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF GREG RYAN SMITH (the Filer)
DECISION
Background
¶ 1 The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the prospectus requirement under the Legislation in connection with the sale of Subordinate Voting Shares (as defined below) of Thinkific Labs Inc. (the Issuer) by the Filer under the Filer ASDP (as defined below) (the Exemption Sought).
Furthermore, the Decision Makers have also received a request from the Filer for a decision that the Application, this decision and all supporting materials or other information submitted in connection with the Application remain confidential until the earlier of (i) the public disclosure by the Filer of the establishment of the Filer ASDP by way of news release and (ii) 90 days from the date of this decision (the Confidentiality Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the British Columbia Securities Commission is the principal regulator for this Application,
(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut, and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
¶ 2 Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
¶ 3 This decision is based on the following facts represented by the Filer:
The Issuer
1. the Issuer is a corporation governed by the Business Corporations Act (British Columbia);
2. the Issuer's head office is located in British Columbia;
3. the Issuer's authorized share capital consists of: (i) an unlimited number of subordinate voting shares (Subordinate Voting Shares), (ii) an unlimited number of multiple voting shares (Multiple Voting Shares and together with the Subordinate Voting Shares, the Shares), and (iii) an unlimited number of preferred shares, issuable in series (Preferred Shares);
4. holders of Subordinate Voting Shares have one vote for each Subordinate Voting Share. Holders of Multiple Voting Shares have 10 votes for each Multiple Voting Share; the Multiple Voting Shares are convertible into Subordinate Voting Shares on a one-for-one basis at any time at the option of the holders and automatically in certain other circumstances;
5. as of May 17, 2023, 23,595,010 Subordinate Voting Shares, 56,963,752 Multiple Voting Shares and no Preferred Shares were issued and outstanding; the Subordinate Voting Shares represented 3.98% of the aggregate voting rights attached to all of the Issuer's outstanding Shares and the Multiple Voting Shares represented 96.02% of the aggregate voting rights attached to all of the Issuer's outstanding Shares;
6. the Subordinate Voting Shares are listed on the Toronto Stock Exchange under the symbol THNC;
7. the Issuer is a reporting issuer in each of the provinces and territories in Canada and is not in default of the securities legislation in any jurisdictions in Canada;
The Filer
8. the Filer is the Chief Executive Officer and a director of the Issuer;
9. the Filer resides in British Columbia;
10. as of May 17, 2023, the Filer directly or indirectly owned, in the aggregate, 25,970,000 Multiple Voting Shares (the Filer Multiple Voting Shares) and 6,100 Subordinate Voting Shares (the Filer Subordinate Voting Shares); the Filer Multiple Voting Shares represent (i) 45.59% of the outstanding Multiple Voting Shares, (ii) approximately 32.24% of the outstanding Shares, and (iii) approximately 43.78% of the votes attaching to all of the Issuer's outstanding Shares; the Filer Subordinate Voting Shares represent (i) 0.03% of the outstanding Subordinate Voting Shares, (ii) 0.01% of the outstanding Shares, and (iii) 0.001% of the votes attaching to all of the Issuer's outstanding Shares; together, the Filer Multiple Voting Shares and Filer Subordinate Voting Shares represent, in the aggregate, approximately 43.78% of the votes attaching to all of the outstanding Shares;
11. the Filer is deemed to be a control person of the Issuer under the Legislation and the securities legislation of the other jurisdictions in which the Issuer is a reporting issuer;
12. the Filer is not in default of the securities legislation;
Automatic Securities Disposition Plan
13. the Filer intends to enter into an automatic securities disposition plan (the Filer ASDP) following the date on which the Issuer files interim financial statements for the quarter ended March 31, 2023 (the date on which the Filer enters into the Filer ASDP will be referred to as the Effective Date) in order to be able to make orderly sales of Subordinate Voting Shares, all or a substantial part of which will be Subordinate Voting Shares issued to the Filer upon the conversion of Filer Multiple Voting Shares;
14. the Filer ASDP will be established in accordance with applicable securities legislation and staff guidance, including Canadian Securities Administrators Staff Notice 55-317 Automatic Securities Disposition Plans (Staff Notice 55-317), including the following:
(a) at the time the Filer enters into the Filer ASDP, the Filer will not possess any knowledge of privileged information or of a material fact or material change with respect to the Issuer that has not been generally disclosed and the Filer ASDP will be entered into in accordance with the Issuer's insider trading policy;
(b) the Filer ASDP will be entered into in good faith and not as part of a plan or scheme to evade the prohibitions of securities legislation in any jurisdiction of Canada or any other applicable securities laws;
(c) the establishment of the Filer ASDP will be disclosed by way of a news release of all relevant information on the System for Electronic Document Analysis and Retrieval (SEDAR);
(d) the Filer ASDP will include provisions prohibiting the commencement of sales under the Filer ASDP until after the filing of the Issuer's interim financial report or annual financial statements which follows the Effective Date and is currently anticipated to be on or after August 16, 2023;
(e) the Filer ASDP will include clear written trading parameters and other instructions to the securities dealer appointed in connection with the Filer ASDP; such trading parameters and other instructions will either include a formula or specify the number of securities to be sold, and set out any minimum trade price, if any, and any date or frequency of sales;
(f) the Filer ASDP will provide for a term equal to the Sales Period (as defined below);
(g) the Filer ASDP will include meaningful restrictions on the ability of the Filer to amend, suspend or terminate the Filer ASDP;
(h) the Filer ASDP will include provisions prohibiting the securities dealer under the Filer ASDP from consulting with the Filer regarding any sales under the Filer ASDP and the Filer from disclosing information to the dealer concerning the Issuer that might influence the execution of the Filer ASDP;
(i) the Issuer will oversee the establishment and use of the Filer ASDP;
(j) the Filer will file an insider report on the System for Electronic Disclosure by Insiders (SEDI) evidencing the change in control of the Subordinate Voting Shares from the Filer to the securities dealer under the Filer ASDP as well as each time a trade is made under the Filer ASDP, specifying that such trade was made under the Filer ASDP;
(k) all sales of Subordinate Voting Shares will be conducted by the securities dealer under the Filer ASDP on behalf of the Filer, with no participation by or direction or advice from the Filer;
(l) the total number of Subordinate Voting Shares sold in the Sales Period (as defined below) under the Filer ASDP in reliance on the Exemption Sought will not exceed 2% of the total number of Subordinate Voting Shares outstanding, as of the Effective Date; and
(m) all sales of Subordinate Voting Shares will be conducted over a period of 12 months (the Sales Period) as specified in the corresponding Form 45-102F1 Notice of Intention to Distribute Securities (a Form 45-102F1) under Section 2.8 of National Instrument 45-102 Resale of Securities (NI 45-102) to be filed when the Filer ASDP is entered into;
15. it is the intention of the Filer and the Issuer to rely on the exemption from the insider trading restrictions available to trades conducted under automatic plans in the Legislation and corresponding law and regulation in the Jurisdictions for all sales under the Filer ASDP;
16. it is currently the intention of the Filer to sell up to approximately 400,000 Subordinate Voting Shares under the Filer ASDP;
17. as the Filer is deemed to be a control person of the Issuer, any sale of the Filer Subordinate Voting Shares would be considered a control distribution, and the Filer would either have to comply with the prospectus requirement or satisfy the conditions of the exemption from the prospectus requirement for trades by a control person in section 2.8 of NI 45-102 (the Exemption for Trades by a Control Person);
18. the Filer's compliance with each of the conditions of the Exemption for Trades by a Control Person would impede, and ultimately prevent, the implementation and operation of the Filer ASDP because (i) the seven-day waiting period requirement in paragraph 2.8(3)(b), (ii) the 30-day expiry provision in paragraph 2.8(4)(a) of NI 45-102, and (iii) the prohibition in subsection 2.8(5) of NI 45-102 on filing a new Form 45-102F1 prior to the expiry of a previously filed Form 45-102F1 would prevent continued or successive dispositions under the Filer ASDP by requiring that the Filer refile a Form 45-102F1 respecting the proposed sales of Subordinate Voting Shares every 30 days over the course of the duration of the Filer ASDP and that the Filer wait at least seven days before making the first trade after each filing of a Form 45-102F1; compliance with these requirements would effectively limit the Filer's ability to conduct sales of Subordinate Voting Shares to intermittent 23-day windows, separated by seven-day waiting periods, which would have a material detrimental impact on the Filer's ability to implement the Filer ASDP; and
19. in absence of the Filer's compliance with each of the conditions of the Exemption for Trades by a Control Person, the Filer requests the Exemption Sought in order to relieve the Filer from the prospectus requirement in connection with each disposition of Filer Subordinate Voting Shares under the Filer ASDP and enable the establishment of the Filer ASDP in accordance with Staff Notice 55-317, while still providing timely and meaningful public disclosure of the intended and completed sales by the Filer of Subordinate Voting Shares consistent with the policy rationale underlying section 2.8 of NI 45-102.
Decision
¶ 4 Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that:
(a) the Filer ASDP is established and administered in accordance with paragraph 14 above;
(b) the total number of Subordinate Voting Shares sold under the Filer ASDP does not exceed 2% of the total number of outstanding Subordinate Voting Shares, as of the Effective Date;
(c) the Filer files a completed and signed notice in the form of Form 45-102F1 (a Notice) in accordance with NI 45-102 at least seven days prior to the first trade of Subordinate Voting Shares under the Filer ASDP that discloses the aggregate number of Subordinate Voting Shares intended to be sold under the Filer ASDP and the Sales Period for the sale of Subordinate Voting Shares under the Filer ASDP;
(d) the Filer files insider reports within three days of the completion of each sale under the Filer ASDP in accordance with the insider reporting obligation applicable to trades by a control person in paragraph 2.8(3)(c) of NI 45-102;
(e) the Sales Period under the Filer ASDP is equal to 12 months;
(f) the Notice for the Filer ASDP is signed no earlier than one business day before it is filed;
(g) the Notice filed in connection with trades under the Filer ASDP expires on the earlier of (i) the end of the Sales Period and (ii) the date that the Filer files the last of the insider reports reflecting the sale of all Subordinate Voting Shares referred to in the Notice;
(h) the Filer does not conduct further sales of Subordinate Voting Shares under the Filer ASDP following the expiry of the Notice;
(i) the Issuer is and has been a reporting issuer in a jurisdiction of Canada for the four months immediately preceding each trade under the Filer ASDP;
(j) the Filer has held any Subordinate Voting Shares, or securities or related financial instruments that were converted into or exercised or settled for such Subordinate Voting Shares, sold under the Filer ASDP for at least four months prior to the trade of such Subordinate Voting Shares;
(k) no unusual effort is made to prepare the market or to create a demand for the Subordinate Voting Shares;
(l) no extraordinary commission or consideration is paid to a person or company in respect of the trade;
(m) the Issuer is not in default of securities legislation; and
(n) the Exemption Sought shall terminate on the date that is 12 months following the Effective Date.
Furthermore, the decision of the Decision Makers under the Legislation is that the Confidentiality Relief is granted.
"John Hinze"
Director, Corporate Finance
British Columbia Securities Commission
OSC File #: 2023/0120