Naftex Energy Corporation - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- issuer deemed to have ceased to be a reporting issuer.
Ontario Statutes
Securities Act, R.S.O. 1990, c. S.5, as am., s. 83.
July 18, 2006
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
(the "Jurisdictions")
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
NAFTEX ENERGY CORPORATION
("Naftex" or "the Applicant")
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 Naftex for a decision under the securities legislation of the Jurisdictions (the "Legislation") that the Applicant is deemed to have ceased to be a reporting issuer (the "Requested Relief").
Under the Mutual Reliance Review System for Exemptive Relief Applications:
(i) the Ontario Securities Commission (the "Commission") is the principal regulator for this application, and
(ii) 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 defined herein.
Representations
This decision is based on the following facts represented by the Applicant:
1. Naftex is a public oil and gas exploration and development company incorporated under the laws of the Yukon Territory.
2. Naftex is authorized to issue an unlimited number of common shares without par or nominal value of which 94,289,963 shares (the "Old Shares") were issued and outstanding prior to the Consolidation (defined below).
3. The Old Shares were initially listed on the TSX Venture Exchange (the "Exchange"). Trading in the Old Shares was suspended on the Exchange effective May 31, 2002 as a result of cease trade orders.
4. The Old Shares were later transferred to the NEX Board of the Exchange (the "NEX") on December 1, 2003 for failure by Naftex to maintain the requirements of the Exchange. The Old Shares were officially delisted from the NEX on June 9, 2006.
5. A cease trade order dated June 10, 2002 was issued against Naftex by the Director pursuant to subsections 127(1) and 127(5) of the Act (the "Order").
6. The Order was issued against Naftex for failure to file financial statements for the year ended December 31, 2001 and for the three-month period ended March 31, 2002. Naftex subsequently failed to file annual financial statements for 2002, 2003 and 2004. Naftex was originally in non-compliance with the filing of its financial statements due to a lack of financial information regarding its activities in Egypt and Naftex was unable to timely file its financial statements beginning with the financial statements for the year ended December 31, 2001.
7. Naftex has now filed its annual financial statements and MD&A for the fiscal years ended December 31, 2001, 2002, 2003 and 2004, including the required annual chief executive officer and chief financial officer certifications, where applicable, and its interim financial statements and MD&A for the three, six, and nine month periods ended March 31, June 30 and September 30, 2005, respectively, including the required interim chief executive officer and chief financial officer certifications, where applicable.
8. Given Naftex's financial situation and outlook before the Consolidation, it was unlikely to pay any dividends to holders of Old Shares ("Shareholders") in the foreseeable future. As a result, Shareholders had limited liquidity for their shareholdings and were not deriving any income therefrom.
9. Management of Naftex mailed a management information circular (the "Circular") to request that the Shareholders vote for a special resolution (the "Consolidation Resolution") to amend Naftex's articles of incorporation to consolidate all of the Old Shares (the "Consolidation") and issue new shares (the "New Shares").
10. Norse Energy Corp ASA ("Norse Energy") was the controlling shareholder of Naftex, holding 96.39% of the Old Shares prior to the Consolidation.
11. On April 26, 2006, the Shareholders approved the Consolidation Resolution.
12. The Consolidation Resolution authorized management to proceed with the Consolidation of the Old Shares on the basis of every 3,366,222 Old Share being consolidated into one New Share. Fractional shares were not issued under the Consolidation; however, Shareholders are entitled to be paid for their fractional shares based on a price of $0.66 per Old Share.
13. Naftex has now completed the Consolidation and the sole shareholder of Naftex is Norse Energy. As the only shareholder that now holds New Shares is Norse Energy, the Consolidation has resulted in Naftex becoming a wholly-owned subsidiary of Norse Energy.
14. On June 23, 2006, the Commission granted a full revocation of the Order.
15. Naftex has no intention to seek public financing by way of a public offering of its securities.
16. The outstanding securities of Naftex, including debt securities, are beneficially owned, directly or indirectly, by less than 15 security holders in each of the jurisdictions in Canada and less than 51 security holders in total in Canada.
17. No securities of Naftex are traded on a marketplace as defined in National Instrument 21-101 Marketplace Operation.
18. Naftex is not in default of any of its obligations as a reporting issuer under the securities legislation of the Jurisdictions, other than the filing of:
a) Audited annual financial statements, annual CEO and CFO certifications, and annual MD&A for the year ended December 31, 2005 ("Annual Filings"); and
b) Interim financial statements, interim CEO and CFO certifications, and interim MD&A for the three-month period ended March 31, 2006 ("Interim Filings")
19. As Norse Energy is the sole beneficial holder of all of the issued and outstanding New Shares, and the Circular contained financial statement disclosure sufficient to ensure that Shareholders could make an informed investment decision relating to the Consolidation, there is no policy reason to require Naftex to make the Annual and Interim Filings after the Consolidation.
20. Naftex has filed a voluntary surrender of reporting issuer status document with the British Columbia Securities Commission pursuant to B.C. Instrument 11-502 Voluntary Surrender of Reporting Issuer Status, and is no longer a reporting issuer in British Columbia as of the date hereof.
21. Upon the grant of the relief requested herein, Naftex will not be a reporting issuer or the equivalent in any jurisdiction of Canada.
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.