Last week we talked about Nova Scotia reporting issuers. A reader noticed that recently two Nova Scotia reporting issuers applied for and were granted permission to cease being reporting issuers. They wanted to know what happens in this instance.
The process for ceasing to be a reporting issuer can be found in National Policy 11-206. An issuer must cease being a reporting issuer in all jurisdictions it is currently listed as a reporting issuer. Under the policy the issuer applying must prove that:
they are not an OTC reporting issuer;
any outstanding securities are beneficially owned, directly or indirectly, by fewer than 15 security holders in each of the jurisdictions in Canada and fewer than 51 security holders worldwide;
no securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace or any other facility for bringing together buyers and sellers of securities
where trading data is publicly reported;
the Filer is not in default of securities legislation in any jurisdiction.
If the issuer meets these requirements and satisfies all other tests setout in legislation the regulator may allow their application to cease becoming a reporting issuer.
Companies apply to cease being a reporting issuer for many reasons. Some companies have been taken over or merged with another company with the successor company becoming the new reporting issuer or the acquiring company is a private company, or the reporting issuer decides to become a private company. Some companies wind up, stop operating or in the case of some mutual funds terminate. Because of the multiple circumstances, a reporting issuer no longer has securities outstanding or trading. As such, they may not have any ongoing operations which require continuous disclosure requirements such as filing financial statements, Management Discussion and Analysis reports or Material Change Reports.
For example, Clearwater Seafoods Inc. was a Nova Scotia based reporting issuer. On January 25, 2021, all of the outstanding shares were acquired by another company and the debentures were redeemed. The acquiring company was owned in part by a coalition of First Nations and another reporting issuer based in British Columbia. With the completion of the transaction, Clearwater satisfied the legal requirements to cease to be a reporting issuer in Nova Scotia.