Loyalist Insurance Group Limited - s. 144

Headnote

Application by an issuer for a revocation of a cease trade order issued by the Commission -- cease trade order issued because the issuer had failed to file certain continuous disclosure materials in the form and with the content required by Ontario securities law -- defaults subsequently remedied -- cease trade order revoked.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., s. 144.

IN THE MATTER OF

THE SECURITIES ACT

R.S.0. 1990, c. S.5, AS AMENDED

(the "Act")

AND

IN THE MATTER OF

THE LOYALIST INSURANCE GROUP LIMITED

ORDER

(Section 144)

WHEREAS the securities of The Loyalist Insurance Group Limited (the "Applicant") are subject to an issuer cease trade order issued by the Ontario Securities Commission (the "Commission") on May 16, 2005 under paragraph 127(1)2 of the Act (the "Cease Trade Order") which replaced a temporary cease trade order of the Commission dated May 4, 2005;

AND WHEREAS the Applicant has applied to the Commission for an Order pursuant to section 144 of the Act to revoke the Cease Trade Order;

AND WHEREAS it was represented by the Applicant to the Commission that:

1. The Applicant is a corporation incorporated under the laws of the Province of Alberta pursuant to Articles of Incorporation dated September 20, 1996.

2. The Applicant is a financial services holding company. The Applicant's sole subsidiary is a wholly-owned retail property, casualty, life and group benefits insurance brokerage company. The Applicant carries on business primarily in Ontario and its head office is located in Ancaster, Ontario.

3. The authorized share capital of the Applicant consists of (a) an unlimited number of common shares, (b) an unlimited number of First Preferred shares, issuable in series, and (c) an unlimited number of Second Preferred shares, issuable in series, of which (d) 19,063,763 common shares, (e) 1,115,747 Series "A" non-voting, 4.5% cumulative dividend, Second Preferred shares, and (f) 350,000 Series "B" non-voting, 5% cumulative dividend, Second Preferred shares are issued and outstanding as of the date hereof. The Applicant has no other securities, including debt securities, outstanding.

4. The Applicant is a reporting issuer in the Provinces of Ontario, Alberta and British Columbia. The Applicant is not a reporting issuer in any other jurisdiction in Canada.

5. The common shares of the Applicant are listed on the TSX Venture Exchange but have been suspended from trading since May 5, 2005.

6. The Cease Trade Order was issued due to the failure by the Applicant to file with the Commission audited financial statements for the year ended December 31, 2004 as required by the Act.

7. The Applicant is also subject to cease trade orders issued by the British Columbia Securities Commission and the Alberta Securities Commission and has concurrently applied for revocation of these cease trade orders.

8. Subsequent to the issuance of the Cease Trade Order, the Applicant defaulted in filing subsequent financial statements and related management discussions and analyses and chief executive officer's and chief financial officer's certificates on a timely basis.

9. The Applicant failed to file its financial statements on a timely basis due to insufficient human resources, a matter which has since been rectified, and due to a difficult 2004 - 2005 restructuring which gave rise to issues which had to be resolved prior to completion of the preparation and audit of its financial statements, compounded by a period of downsizing and financial losses.

10. In accordance with the provisions of section 132(2) of the Business Corporations Act (Alberta), the Applicant obtained an order of the Court of Queen's Bench of Alberta permitting it to hold an annual meeting of shareholders on June 23, 2006 or any other date prior to July 31, 2006.

11. The Applicant held an annual and special meeting of its shareholders on June 23, 2006, and filed with the Commission and on SEDAR and disseminated to its shareholders, directors and auditors, the proxy meeting materials (the "Meeting Materials") in this regard and all matters proposed by management in the Meeting Materials were approved at the Meeting.

12. Immediately prior to August 31, 2004, there were 3,000,000 Series "A" Second Preferred shares in the capital of the Applicant outstanding held by a single shareholder. The holder thereof had the right to require the Applicant to exchange Series "A" Second Preferred shares for common shares of a subsidiary of the Applicant, The Loyalist Group Limited. Accordingly, effective August 31, 2004, the holder of the Series "A" Second Preferred shares exercised such right and the Applicant transferred a number of common shares held by the Applicant in the capital of The Loyalist Group Limited in exchange for 1,000,000 Series "A" Second Preferred shares which were cancelled by the Applicant. One year later, effective August 31, 2005, the holder of the Series "A" Second Preferred shares again exercised his exchange right and the Applicant transferred the balance of the common shares held by the Applicant in The Loyalist Group Limited in exchange for 884,253 Series "A" Second Preferred shares. The Series "A" Second Preferred shares were cancelled and the holdings of the Applicant in The Loyalist Group Limited were reduced to nil. It appears that neither party to the August 31, 2005 share exchange recognized that it may have been a breach of the Cease Trade Order and the cease trade orders of the other jurisdictions.

13. The Applicant has filed with the Commission and on SEDAR and disseminated to its shareholders, directors and auditors, the interim unaudited financial statements for the periods ended March 30, 2005, June 30, 2005 and September 30, 2005 and for the periods ended March 30, 2006, June 30, 2006 and September 30, 2006 and the audited annual financial statements for the years ended December 31, 2004, 2005 and 2006, together, in each case, with the related management and discussion and analyses, all as required under the Act.

14. On April 5, 2007, at the request of the Commission, the Applicant refiled with the Commission and on SEDAR revised management discussion and analyses for the year ended December 31, 2005 and for the interim periods ended March 31, 2006 and June 30, 2006. The Applicant also refiled unaudited interim financial statements for the periods ended March 31, 2006, June 30, 2006 and September 30, 2006, which were the same in all respects as the ones originally filed except for two additional notes thereto. A press release announcing the refilings and the reasons therefor was issued and filed on SEDAR the same day.

15. The Applicant does not have a history of cease trade orders issued against it.

16. The Applicant has applied to the TSXV for reinstatement and all conditions thereto have been satisfied with the exception of the submission of orders revoking the Cease Trade Order and the cease trade orders issued by the British Columbia Securities Commission and the Alberta Securities Commission.

17. The Applicant is up to date in its continuous disclosure obligations, has paid all outstanding filing fees associated therewith, including late filing fees, and, to the best of its knowledge, is no longer in default of the requirements of the Act or any of the rules and regulations made thereunder.

AND WHEREAS the undersigned is satisfied that the Applicant has remedied its defaults in respect of its continuous disclosure obligations and that there is sufficient information in the marketplace on which investors can make informed decisions as to the purchase or sale of the securities of the Applicant;

AND WHEREAS the undersigned is of the opinion that to grant this Order would not be prejudicial to the public interest and is satisfied in the circumstances of this particular case that there is adequate justification for so doing;

THEREFORE IT IS ORDERED pursuant to section 144 of the Act that the Cease Trade Order is hereby fully revoked;

DATED this 25th day of May, 2007