Application for relief from prospectus and registration requirements and for revocation of a previous ruling granting relief from prospectus and registration requirements - corporation owns lands and premises from which business of medical partnership is conducted - new corporation incorporated to control existing corporation - both corporations are non-reporting issuers having more than 50 shareholders - shareholders all parties to shareholders' agreement and have a common business interest in the medical partnership - prospectus and reporting issuer continuous disclosure not necessary - relief for specified trades and/or distributions by corporation and new corporation in connection with reorganization and on a going forward basis and by shareholders - relief granted subject to conditions, including first trade restrictions - order revoking previous ruling since new ruling provides requested relief in context of current circumstances.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1), 144.
IN THE MATTER OF
THE SECURITIES ACT, R.S.O. 1990,
CHAPTER S.5, AS AMENDED (the "Act")
IN THE MATTER OF
CLINIC BUILDINGS ACQUISITION CORP.
AND CLINIC BUILDINGS (1979) LTD.
The Ontario Securities Commission (the Commission) has received an application (the Application) from Clinic Buildings Acquisition Corp. (Acquirecorp) and Clinic Buildings (1979) Ltd. (Clinic Buildings) for a ruling pursuant to subsection 74(1) of the Act that section 25 and section 53 of the Act do not apply in respect of the following proposed trades and/or proposed distributions in securities of Acquirecorp and Clinic Buildings:
a. the issuance by Clinic Buildings of Class A Special Shares (Class A Special Shares) and Special Participating Shares (Special Participating Shares) to a Permitted Shareholder (as defined below);
b. the issuance by Acquirecorp of Common Shares (Common Shares) to a Permitted Shareholder;
c. the issuance by Acquirecorp of promissory notes to a Departing Shareholder as consideration for the sale by such Departing Shareholder to Acquirecorp of the Class A Special Shares and Special Participating Shares held by such Departing Shareholder; and
d. trades of Shares (as defined below) by a Related Corporation (as defined below) to the Related Doctor (as defined below) of that Related Corporation,
collectively, the Requested Relief.
Furthermore, the Commission made a ruling dated March 14, 1983 pursuant to section 73 of the Securities Act, R.S.O. 1980, Chapter 466 (the 1983 Clinic Buildings Ruling) to the effect that the dealer registration requirement and the prospectus requirement do not apply to Clinic Buildings in respect of certain proposed trades in shares and promissory notes of Clinic Buildings, subject to certain terms and conditions. The Application requests an order of the Commission pursuant to section 144 of the Act revoking the 1983 Clinic Buildings Ruling.
In this ruling and order,
"Related Corporation" means a corporation that (i) as at the date of this ruling and order owns Class A Special Shares and Special Participating Shares, and upon the issuance of Common Shares by Acquirecorp pursuant to the Reorganization (as defined below) will own one (1) Common Share; and (ii) as at the date of this order is controlled by a partner in the Oshawa Clinic (as defined below) or by the spouse or family of such a partner;
"Related Doctor" means a party to the Shareholders' Agreement (as defined below) who is a partner in the Oshawa Clinic and whose Related Corporation is a shareholder of Clinic Buildings and will be a shareholder of Acquirecorp upon the issuance of Common Shares by Acquirecorp pursuant to the Reorganization; and
"Shares" means the shares in the capital of Clinic Buildings and/or Acquirecorp, as the context requires.
This ruling and order is based on the following facts represented by Clinic Buildings and Acquirecorp:
1. Clinic Buildings was incorporated on May 1, 1979, pursuant to the Business Corporations Act (Ontario).
2. Following amendments to the articles of Clinic Buildings that were effective on October 26, 2006 (the Articles of Amendment), the authorized capital of Clinic Buildings consists of:
(a) an unlimited number of Class A Special Shares;
(b) an unlimited number of Special Voting Shares; and
(c) an unlimited number of Special Participating Shares.
3. As at January 3, 2007, Clinic Building has 6,075,000 issued and outstanding Class A Special Shares, 77,000 issued and outstanding Special Participating Shares and no issued and outstanding Special Voting Shares. As at January 3, 2007, Clinic Buildings has 77 shareholders, consisting of 61 persons who are medical doctors and partners of the Oshawa Clinic, 14 corporations that are controlled by partners of the Oshawa Clinic or their spouses, 1 family trust whose trustee is a partner of the Oshawa Clinic, and the Chief Executive Officer of the Oshawa Clinic. Pursuant to the Reorganization, 100 Special Voting Shares will be issued to Acquirecorp.
4. The articles of Clinic Buildings provide that no shares of Clinic Buildings shall be transferred without the express consent of a majority of the directors, to be signified by a resolution passed by the board of directors.
5. Clinic Buildings is not, and has no intention of becoming, a reporting issuer in any jurisdiction. There is no market for the Shares of Clinic Buildings and such Shares are not traded on any marketplace as defined in National Instrument 21-101 Marketplace Operation.
6. Acquirecorp was incorporated on April 18, 2006, pursuant to the Business Corporations Act (Ontario).
7. The authorized capital of Acquirecorp consists of an unlimited number of Common Shares. As at January 3, 2007, no Common Shares have been issued.
8. The articles of Acquirecorp provide that no shares of Acquirecorp shall be transferred without the express consent of a majority of the directors, to be signified by a resolution passed by the board of directors.
9. Acquirecorp is not, and has no intention of becoming, a reporting issuer in any jurisdiction.
10. The Oshawa Clinic is a medical general partnership located within the City of Oshawa, Ontario (the Oshawa Clinic). Each of the partners of the Oshawa Clinic is either (i) a medical doctor who practises medicine as part of the Oshawa Clinic or (ii) a Related Corporation.
11. The business purpose of Clinic Buildings is, and will continue to be, the ownership of lands and premises from which the business of the Oshawa Clinic is conducted.
12. The business purpose of Acquirecorp is, and will continue to be, to purchase Class A Special Shares and Special Participating Shares from the holders of such Shares upon the retirement of partners of the Oshawa Clinic. Acquirecorp will at all times own all of the Special Voting Shares issued by Clinic Buildings.
13. The manner in which each of the shareholders of Clinic Buildings became a shareholder was in compliance with the 1983 Clinic Buildings Ruling or in accordance with statutory exemptions from the prospectus and registration requirements.
14. Pursuant to a resolution approved on August 7, 2006, the shareholders of Clinic Buildings unanimously agreed to a reorganization of the share capital of Clinic Buildings (the Reorganization), which Reorganization resulted in the filing of the Articles of Amendment, the incorporation of Acquirecorp and will result in the issuance of 100 Special Voting Shares to Acquirecorp. Pursuant to the terms of the Reorganization, each shareholder of Clinic Buildings, except Acquirecorp, will acquire one (1) Common Share in the capital of Acquirecorp for a subscription price of $1.00. Following the issuance of such Common Shares, Acquirecorp will have more than fifty (50) shareholders.
15. In connection with the Reorganization, a unanimous shareholders' agreement dated May 15, 2006 was entered into between all of the shareholders of Clinic Buildings, each of the Related Doctors, Clinic Buildings and Acquirecorp (the Shareholders' Agreement).
16. The Shareholders' Agreement governs and is binding upon the shareholders of Clinic Buildings and Acquirecorp and contains the following restrictions on the ownership of Shares:
(a) Shares of Clinic Buildings and Acquirecorp may only be issued to (i) a person who is a partner of the Oshawa Clinic; or (ii) a Related Corporation; or (iii) an officer of Clinic Buildings whose purchase of Shares has been approved by a special resolution of Clinic Buildings in accordance with the manner set forth in the Shareholders' Agreement, each of (i), (ii) and (iii) being a Permitted Shareholder;
(b) A Related Corporation may transfer Shares to the Related Doctor of that Related Corporation;
(c) Upon the withdrawal of a Permitted Shareholder from the Oshawa Clinic or upon the Permitted Shareholder ceasing to hold the office in Clinic Buildings set out in the special resolution by which such Shares were issued to such Permitted Shareholder, the Permitted Shareholder (a Departing Shareholder) must sell all of its Shares of Clinic Buildings to Acquirecorp. Alternatively, Clinic Buildings has the option to redeem the Class A Special Shares and purchase for cancellation the Special Participating Shares held by a Departing Shareholder. Further, a Departing Shareholder must sell its one (1) Common Share of Acquirecorp to Acquirecorp and Acquirecorp must purchase such Common Share for cancellation;
(d) Except as described in this paragraph 16, all transfers of Shares of Clinic Buildings or Acquirecorp are prohibited pursuant to the Shareholders' Agreement.
17. The shareholders of Acquirecorp and Clinic Buildings shall be the same except that Acquirecorp may hold shares of Clinic Buildings. All new shareholders of Clinic Buildings and Acquirecorp must become parties to the Shareholders' Agreement. Any person who becomes a shareholder of Clinic Buildings and Acquirecorp subsequent to completion of the Reorganization must be a natural person who is a partner of the Oshawa Clinic.
18. Each holder of Shares of Clinic Buildings and Acquirecorp will be provided with a copy of the audited financial statements of Clinic Buildings and Acquirecorp on an annual basis.
19. When a Departing Shareholder sells Class A Special Shares and Special Participating Shares to Acquirecorp, Acquirecorp will issue a promissory note to such Departing Shareholder in respect of the purchase price.
The Commission is satisfied that the test contained in the Act that provides the Commission with the jurisdiction to make this ruling has been met.
The ruling of the Commission pursuant to section 74(1) of the Act is that the Requested Relief is granted provided that:
(a) each holder of Shares of Clinic Buildings and Acquirecorp and each Related Doctor is a party to the Shareholders' Agreement;
(b) prior to the issuance of Shares of Clinic Buildings or Acquirecorp as permitted by this ruling, Acquirecorp delivers to the person or corporation to whom such Shares will be issued a copy of:
(i) the articles and by-laws of Clinic Buildings and Acquirecorp, and all amendments thereto;
(ii) the Shareholders' Agreement, and all amendments thereto;
(iii) the most recent audited annual financial statements of Clinic Buildings and Acquirecorp;
(iv) this ruling;
(v) a statement to the effect that, as a consequence of this ruling, certain protections, rights and remedies provided by Ontario securities law (as such term is defined in the Act), including statutory rights of rescission or damages, will not be available to purchasers of Shares of Clinic Buildings and Acquirecorp pursuant to this ruling and that certain restrictions are imposed on the subsequent disposition of Shares;
(c) all share certificates representing the Shares of Clinic Buildings and Acquirecorp shall contain a legend stating that the right to transfer such Shares is subject to restrictions contained in the Shareholders' Agreement;
(d) the exemptions contained in this ruling cease to be effective if any of the provisions of the articles or by-laws of Clinic Buildings or Acquirecorp or the Shareholders' Agreement relevant to the exemptions granted herein are amended in any material respect without written notice to, and consent by, the Commission; and
(e) the first trade in Shares of Clinic Buildings or Acquirecorp acquired pursuant to this ruling shall be deemed to be a distribution to the public.
The Commission is satisfied that the test contained in the Act that provides the Commission with the jurisdiction to make this order has been met.
It is ordered pursuant to section 144 of the Act that the 1983 Clinic Buildings Ruling is revoked.
DATED this 9th day of January, 2007