Serica Energy Corporation - s. 83

le 27 juillet 2005

MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- The Filer, a British Virgin Islands corporation, is a reporting issuer in British Columbia, Alberta, Ontario and New Brunswick and has its shares listed on the TSX Venture Exchange -- As required by a TSX Venture Exchange listing condition, the Filer to continue its corporate existence in a jurisdiction acceptable to the TSX Venture Exchange, the United Kingdom -- Section 83.1(1) -- Deeming order required because the Filer cannot rely on paragraph (e) of the definition of "reporting issuer" under the Securities Act (Ontario) -- Contemplated reorganization to effect corporate continuance as United Kingdom corporation is not a statutory arrangement or statutory procedure for the Filer -- Section 83 -- Filer deemed to have ceased to be a reporting issuer -- Filer to become a wholly-owned subsidiary of United Kingdom corporation -- United Kingdom corporation is the proper entity to be reporting issuer.

Applicable Ontario Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 83, 83.1(1).

July 27, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF ALBERTA, NEW BRUNSWICK AND ONTARIO (the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

SERICA ENERGY CORPORATION (the "Filer")

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

(i) the Filer be deemed to have ceased to be a reporting issuer (the "Cease Reporting Issuer Relief") in the Jurisdictions, and

(ii) that Serica-UK be deemed to be a reporting issuer (the "Deemed Reporting Issuer Relief") in Alberta and Ontario

in each case as of the date that Serica-UK and the Filer complete the Share Exchange (as defined below).

Under the Mutual Reliance Review System for Exemptive Relief Applications ("MRRS"):

(a) the Ontario Securities Commission (the "OSC") is the principal regulator for this 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 was formed by a consolidation of two British Virgin Islands ("BVI") companies, Kyrgoil Holding Corporation ("Kyrgoil") and Petroleum Development Associates (Oil & Gas) Limited on January 29, 2004 (the "Amalgamation"). At the time of the Amalgamation, Kyrgoil was a reporting issuer in the provinces of British Columbia, Alberta and Ontario and its shares were listed on the Toronto Stock Exchange.

2. Upon the Amalgamation, the Filer became a reporting issuer in the provinces of British Columbia, Alberta and Ontario.

3. The authorized capital of the Filer consists of 500,000,000 common shares of one series of no par value ("Common Shares") and 600,000,000 Class A Preferred Shares of no par value made up of three series each ("Preferred Shares"), of which 73,806,409 Common Shares, 3,087,500 options to subscribe for Common Shares and no Preferred Shares are currently issued and outstanding. Shortly after the Amalgamation, the Filer's Common Shares were listed on the TSX Venture Exchange (the "TSXV").

4. Upon its Common Shares being listed on the TSXV, the Filer became a reporting issuer in the province of New Brunswick.

5. As a condition to the listing of its Common Shares on the TSXV, the Filer undertook to the TSXV to continue, by June 30, 2005, its corporate existence out of the BVI to a jurisdiction acceptable to the TSXV. The TSXV has granted an extension to complete such continuance by July 31, 2005.

6. Although a continuance under the Canada Business Corporations Act or a similar provincial corporate statute would comply with the Filer's undertaking to the TSXV, such a continuance would not be desirable in these circumstances because it would have adverse tax consequences to the Filer and holders of its Common Shares (the "Shareholders").

7. The Filer is proposing to continue its corporate existence into the United Kingdom (the "UK"), a jurisdiction which the TSXV has confirmed is acceptable. However, the Filer has been advised that the corporate laws of the UK do not permit a non-UK company to continue as, or to amalgamate with, a UK company.

8. In order to comply with the requirements of UK corporate law and having regard to tax implications for the Filer and the Shareholders, the Filer is proposing the following transactions (collectively, the "Migration") that, in effect, constitute a continuance of its corporate existence to the UK:

(a) the Filer caused the incorporation of Serica-UK as Serica Energy PLC, a public limited company under the laws of the UK, on May 12, 2005. The directors and officers of Serica-UK are, or will be, the same as the directors and officers of the Filer;

(b) the authorized capital of Serica-UK consists of US$20,000,000 and £50,000, divided into 200,000,000 ordinary shares of US$0.10 each (the "Ordinary Shares") and one "A" share of £50,000 (the "A Share"), respectively. The two classes of shares of Serica-UK are necessitated under UK corporate legislation which requires a public limited company incorporated thereunder to have an issued share capital of at least £50,000 denominated in pounds sterling;

(c) two Ordinary Shares of Serica-UK have been issued to Breams Registrars and Nominees Limited and Breams Corporate Services Limited (collectively, "Breams") as corporate nominee shareholders. These two Ordinary Shares will be exchanged for Common Shares of the Filer pursuant to the share exchange transaction described below (the "Share Exchange"). Breams are owned by the partners of the Filer's legal counsel in the UK;

(d) subject to the receipt of approval from the Shareholders, the Filer will amend its constating documents to provide for the Share Exchange and, in particular, that upon receipt of all requisite regulatory approvals, the existing rights of the Common Shares of the Filer will be exchanged on a one-for-one basis for Ordinary Shares of Serica-UK. The two Ordinary Shares held by Breams will be included in the shares delivered by Serica-UK in the Share Exchange. In particular, it is proposed that Serica-UK use the two Ordinary Shares held by Breams to acquire two Common Shares held by a non-Canadian director of the Filer (for clarity, the two Common Shares from such director will be delivered and registered to Serica-UK). The director to whom the two Ordinary Shares will be exchanged has not yet been determined. Holders of outstanding warrants and options of the Filer will also receive Ordinary Shares of Serica-UK upon the due and timely exercise of such warrants or options in accordance with the terms of such warrants and options;

(e) Serica-UK and the Shareholders will complete the Share Exchange; and

(f) after completion of the Share Exchange, the Filer will subscribe for the A Share for £50,000 as trustee for and on behalf of all of the shareholders of Serica-UK from time to time. The A Share is entitled to one vote at any meeting of shareholders of Serica-UK and is not entitled to receive any dividends, but is entitled to receive a return of capital of £50,000, which will be distributed pro rata to the then shareholders of Serica-UK upon dissolution or winding up of Serica-UK.

9. Serica-UK was incorporated for the purposes of effecting the Migration and, other than the capital described in paragraph 8 above, does not hold any assets or carry on any business.

10. After completion of the Migration, (i) Serica-UK will be the sole shareholder of the Filer and (ii) the nature and extent of the voting and financial participating interests of the Shareholders in Serica-UK will be the same as, and the value of their financial participating interest will not be less than, that of their interest in the Filer before the Migration.

11. The Filer held an annual and special meeting of the Shareholders on June 15, 2005 to consider and vote on a resolution to amend the constating documents of the Filer and effect the Share Exchange as contemplated under the Migration. At this meeting, the resolution to effect the Share Exchange was approved by the requisite majority of votes cast by the Shareholders.

12. The Filer has received conditional approval from the TSXV for the Migration, including the substitutional listing of the Ordinary Shares of Serica-UK in place of the Common Shares of the Filer on the TSXV.

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

(i) is that the Cease Reporting Issuer Relief is granted in the Jurisdictions; and

(ii) the Deemed Reporting Issuer Relief is granted in Alberta and Ontario.

"Paul M. Moore"

"Harold P. Hands"