Petrobank Energy and Resources Ltd.
Headnote
National Policy 11-102 Process for Exemptive Relief Applications -- Insider reporting and resale of securities relief -- Filer conducting a normal course issuer bid (NCIB) and funding its NCIB by selling shares of a subsidiary, under an automatic plan, which constitute control distributions -- Filer to provide required disclosure of sales and proposed sales of subsidiary's shares on an alternative timeline.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1), 107, 121(2)(a)(ii).
National Instrument 45-102 Resale of Securities, ss. 2.8, 3.1.
Citation: Petrobank Energy and Resources Ltd., Re, 2012 ABASC 424
October 3, 2012
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
(the Jurisdictions)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
PETROBANK ENERGY AND RESOURCES LTD.
(the Filer)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) granting exemptions (together, the Requested Relief):
(a) from the requirement under section 3.3 of National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104) and the requirement under subsection 107(2) of the Securities Act (Ontario) to file an insider report disclosing certain proposed sales of common shares (PetroBakken Shares) of PetroBakken Energy Ltd. (PetroBakken) by the Filer within 5 days of the completion of each such sale;
(b) from the requirement under subsection 2.8(3)(iii) of National Instrument 45-102Resale of Securities (NI 45-102) to file a notice disclosing certain proposed sales of PetroBakken Shares by the Filer within 3 days of the completion of each such sale; and
(c) from the prospectus requirement under the Legislation respecting certain proposed sales of PetroBakken Shares by the Filer (the Prospectus Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Prince Edward Island, Nova Scotia, and Newfoundland and Labrador; and
(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
Terms defined in National Instrument 14-101 Definitions or MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated under the laws of Alberta.
2. The Filer is a reporting issuer or has equivalent status in each of the provinces and territories of Canada and is not in default of any of the requirements of securities legislation applicable to it.
3. The Filer's common shares are listed and posted for trading on the Toronto Stock Exchange (the TSX).
4. PetroBakken is a corporation incorporated under the laws of Alberta.
5. PetroBakken is a reporting issuer or has equivalent status in each of the provinces and territories of Canada.
6. The PetroBakken Shares are listed and posted for trading on the TSX.
7. PetroBakken was incorporated on 30 July 2009, becoming a wholly-owned subsidiary of the Filer.
8. On 30 September 2009, the Filer conveyed certain of its assets and liabilities to PetroBakken in exchange for 109,800,000 PetroBakken Shares.
9. The Filer currently holds 108,410,372 PetroBakken Shares, representing approximately 57% of the issued and outstanding shares of PetroBakken.
10. On 12 September 2012, the Filer announced that its board of directors had approved, and the TSX had accepted, the implementation of a normal course issuer bid by the Filer (the Filer NCIB).
11. Pursuant to the Filer NCIB, the Filer may repurchase up to 7,784,304 of its common shares (Filer Shares) during the period from 14 September 2012 to 13 September 2013 or until such earlier time as the Filer NCIB is completed or terminated at the option of the Filer.
12. On 17 September 2012, PetroBakken announced that its board of directors had approved, and the TSX had accepted, the implementation of a normal course issuer bid by PetroBakken (the PetroBakken NCIB).
13. Pursuant to the PetroBakken NCIB, PetroBakken may repurchase up to 8,672,729 PetroBakken Shares during the period from 19 September 2012 to 18 September 2013 or until such earlier time as the PetroBakken NCIB is completed or terminated at the option of PetroBakken.
14. The Filer has commenced the purchase of Filer Shares under the Filer NCIB in accordance with the rules of the TSX.
15. The Filer intends to fund purchases of Filer Shares under the Filer NCIB by selling up to 7,784,304 PetroBakken Shares.
16. The Filer and Scotia Capital Inc. (Scotia) entered into an automatic purchase and sale plan dated 12 September 2012 (the Automatic Plan), which plan governs all sales of PetroBakken Shares by the Filer and all purchases by the Filer of Filer Shares under the Filer NCIB.
17. Pursuant to the Automatic Plan:
(a) all sales of PetroBakken Shares are conducted by Scotia on behalf of the Filer;
(b) all sales of PetroBakken Shares are made through the facilities of the TSX and other marketplaces, including ALPHA, OMEGA, PURE, Chi-X and Match Now, at prevailing market prices, with Scotia routing each sell order through a "best market-server" that allocates the order to whichever market or markets provides the most favourable corresponding bids;
(c) a target number of Filer Shares to be repurchased under the Filer NCIB on each trading day has been established based on the prevailing price difference between the PetroBakken Shares and Filer Shares and one PetroBakken Share is sold for each Filer Share repurchased under the Filer NCIB;
(d) no sales of PetroBakken Shares are made where the purchaser would be PetroBakken pursuant to the PetroBakken NCIB;
(e) all sales of PetroBakken Shares will be conducted over a period commencing on 14 September 2012 and ending on 13 September 2013, subject to the earlier termination of the Automatic Plan in accordance with its terms as described in paragraphs 19 and 20 (the Sales Period);
(f) all sales of PetroBakken Shares are made by Scotia with no participation by or direction or advice from the Filer; and
(g) the number of PetroBakken Shares sold on any particular trading day shall not exceed the lesser of a specified fixed limit and a limit determined as a percentage of daily trading volume, which latter limit varies depending on the prevailing price difference between the PetroBakken Shares and Filer Shares.
18. At the time of the implementation of the Automatic Plan, the Filer did not have knowledge of any material fact or material change respecting PetroBakken that had not been generally disclosed.
19. The Automatic Plan will be deemed to terminate on the first to occur of (i) 13 September 2013; (ii) the purchase of the maximum number of Filer Shares under the Filer NCIB; (iii) receipt by Scotia of the early termination notice referenced in paragraph 20; (iv) the commencement of any voluntary or involuntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or similar law or seeking the appointment of a trustee, receiver or other similar official, or the taking of any corporate action by the Filer to authorize or commence any of the foregoing; (v) the public announcement of a take-over bid for the Filer Shares or of a merger, amalgamation, acquisition, recapitalization or other similar business combination or transaction as a result of which the Filer Shares would be exchanged for or converted into cash, securities or other property, other than a transaction the purpose of which is to directly or indirectly distribute the PetroBakken Shares held by the Filer to the shareholders of the Filer; or (vi) the public announcement of a public offering of Filer Shares by the Filer.
20. The Filer may terminate the Automatic Plan by providing Scotia with a notice of early termination certifying to Scotia that: (i) it is terminating the plan in good faith and not as part of a plan or scheme to evade the prohibitions of subsection 147(2) of theSecurities Act (Alberta), subsection 76(1) of the Securities Act (Ontario) or equivalent provisions in other jurisdictions; and (ii) it does not possess any material fact or material change about itself or its securities which has not been generally disclosed. The Filer may only deliver such notice of early termination at a time when it is not aware of any material fact or material change with respect to the Filer or PetroBakken or any of their securities that has not been generally disclosed. Promptly upon the delivery of such notice, the Filer must issue a news release advising of the early termination and confirming that, at the time of termination, the Filer was not aware of any material fact or material change with respect to the Filer or PetroBakken or any of their securities that had not been generally disclosed. Other than as provided in paragraphs 19 and 20, the Automatic Plan does not provide for any ability of the Filer to vary, suspend or terminate the Automatic Plan.
21. The Filer is a control person of PetroBakken, as that term is defined in the Legislation.
22. Any sale by the Filer of PetroBakken Shares as described above would constitute a control distribution as defined in NI 45-102.
23. On 6 September 2012, the Filer filed a Form 45-102F1 (the Initial Form 45-102F1) respecting the proposed sales of PetroBakken Shares under the Automatic Plan and has relied on the prospectus exemption provided for in section 2.8 of NI 45-102 in effecting the sales of PetroBakken Shares conducted to date.
24. On 12 September 2012, the Filer issued a news release announcing its intention to conduct the proposed sales of PetroBakken Shares and describing the material terms of the proposed sales, including the Sales Period and the maximum number of PetroBakken Shares that may be sold.
25. In the absence of the Requested Relief:
(a) the Filer would be required to complete and file an insider report for each sale of PetroBakken Shares within three days of the completion of such sale; and
(b) the Filer would be required to refile a Form 45-102F1 respecting proposed sales of PetroBakken Shares every 30 days over the course of the Sales Period and, for a period of seven days following each refiling, refrain from selling any PetroBakken Shares.
26. If the Requested Relief is granted, the Filer will file, within 10 days of the end of each month in which it has sold PetroBakken Shares, an insider report disclosing each such sale.
27. The grant of the Requested Relief would relieve the Filer of the administrative burden of repeated insider trade and Form 45-102F1 filings, while still providing timely and meaningful disclosure to market participants of the intended and completed control distributions by the Filer of PetroBakken Shares.
Decision
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.
The Decision of the Decision Makers under the Legislation is that the Requested Relief is granted to the Filer provided that:
(a) the Filer complies with the representation in paragraph 26;
(b) the Initial Form 45-102F1 shall be deemed to expire at the end of the Sales Period and the Filer shall conduct no further sales of PetroBakken Shares under the Automatic Plan following its expiry; and
(c) the Prospectus Relief with respect to each sale of PetroBakken Shares under the Automatic Plan is subject to the following conditions:
(i) PetroBakken is and has been a reporting issuer in a jurisdiction of Canada for the four months immediately preceding the trade;
(ii) the Filer has held such PetroBakken Shares for at least four months;
(iii) no unusual effort is made to prepare the market or to create a demand for the PetroBakken Shares;
(iv) no extraordinary commission or consideration is paid to a person or company in respect of the trade; and
(v) the Filer has no reasonable grounds to believe that PetroBakken is in default of securities legislation.
For the Commission: