MRRS - Relief from prospectus requirements in connection with the first trade of common shares outside Canada - Exemption from prospectus requirements for trades outside Canada not available as at the time of the distribution the conditions of the exemption were not met - Subsequent private placements to non-Canadian residents has resulted in percentage of shareholders resident in Canada and shares held by Canadian residents to be de minimis. Relief granted subject to conditions.
Applicable Legislative Provisions
Securities Act (Ontario), ss. 74(1), 53(1).
National Instrument 45-102 Resale of Securities, s. 2.14.
Citation: Foothills Resources, Inc., 2007 ABASC 727
October 3, 2007
IN THE MATTER OF
THE SECURITIES LEGISLATION
OF ALBERTA AND ONTARIO
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
FOOTHILLS RESOURCES, INC.
MRRS DECISION DOCUMENT
1. 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) for an exemption (the Requested Relief) from prospectus requirements for the first trade of common shares of the Filer issuable on conversion of convertible debt securities and units distributed to purchasers resident in the Jurisdictions under available "accredited investor" exemptions in connection with a private placement completed in April, 2006 (the Private Placement).
2. Under the Mutual Reliance Review System for Exemptive Relief Applications (the MRRS):
(a) the Alberta Securities Commission is the principal regulator for this application; and
(b) this MRRS decision document evidences the decision of each Decision Maker (the Decision).
3. Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this Decision unless they are otherwise defined in this Decision.
4. This Decision is based on the following facts represented by the Filer:
(a) The Filer is a Nevada corporation whose shares are listed on the NASD Over-the-Counter Bulletin Board (the OTC BB). The Company is based in California.
(b) The Filer is not a reporting issuer in any jurisdiction in Canada and currently has no intention of becoming a reporting issuer.
(c) In the Private Placement, $2,175,000 principal amount of convertible debt securities convertible into 3,107,138 common shares and an additional 964,407 units convertible into 964,407 common shares (the Common Shares) were sold to Canadian residents (the Canadian Private Placement Shares) out of a total offering of $3,987,500 principal amount of convertible debt securities convertible into 5,696,429 Common Shares and an additional 10,504,552 units convertible into 10,504,552 Common Shares.
(d) In the absence of an order granting relief, the first trade of the Canadian Private Placement Shares by a resident of the Jurisdictions will be deemed to be a distribution pursuant to section 2.6 of National Instrument 45-102 Resale of Securities (NI 45-102) unless, among other things, the Filer has been a reporting issuer for 4 months immediately preceding the trade in one of the jurisdictions set forth in Appendix B to NI 45-102.
(e) Section 2.14 of NI 45-102 provides an exemption from section 2.6 of NI 45-102 in respect of a distribution of securities if, at the date of a distribution, residents of Canada did not own more than 10% of the outstanding securities of the class distributed and did not represent more than 10% of the number of holders of securities of that class.
(f) Immediately following the Private Placement, after giving effect to the issue of securities and the conversion (the Conversion) of the convertible debt securities into Common Shares, Canadian residents held in the aggregate approximately 5.9% of the then-outstanding Common Shares. The Filer is unable to determine the number of beneficial holders of Common Shares at that time, but 48 of the 189 registered holders of Common Shares (approximately 25.4%) were Canadian residents. Accordingly, the exemption under section 2.14 is unavailable in respect of the Canadian Private Placement Shares.
(g) Using reasonable efforts the Filer determined that as at July 18, 2007, 295 residents of Canada (representing 9.15% of the total) were beneficial holders of Common Shares. Accordingly, if the Private Placement had occurred on July 18, 2007, the exemption provided in section 2.14 of NI 45-102 would have been available.
(h) If the Filer had chosen to effect the Private Placement as of July 18, 2007, rather than April, 2006, the exemption provided in section 2.14 of NI 45-102 would have been available to residents of the Jurisdictions with respect to the first trade of Canadian Private Placement Shares.
(i) The Filer is subject in the United States to the reporting obligations of the 1934 Act. Documents filed with the SEC will be available electronically through EDGAR.
(j) The Filer has filed a registration statement with the U.S. Securities and Exchange Commission with respect to the Common Shares issued pursuant to the Private Placement and the Filer anticipates such registration statement will be declared effective and the Common Shares issued pursuant to the Private Placement will be listed on the OTC BB. No market currently exists in Canada for the Common Shares and none is expected to develop.
5. 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.
6. The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:
(a) the trade is made through an exchange, or a market, outside of Canada; and
(b) at the date of the trade the Filer is not a reporting issuer in any jurisdiction of Canada.