Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- issuer granted relief from requirements of National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency to permit the auditor's report on the financial statements of a reverse take-over acquiror to contain a reservation with respect to opening inventory.
Applicable Legislative Provisions
National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency, s. 9.1.
December 1, 2009
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
SYMAX LIFT (HOLDING) CO. LTD.
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption (the Exemption Sought) from the requirement that financial statements that are required by securities legislation to be audited must be accompanied by an auditor's report that does not contain a reservation does not apply in respect of the annual financial statements of Symax Lift (Group) Limited for the years ended December 31, 2007 and 2006.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for the Application;
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Québec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador; and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation amalgamated and validly existing under the laws of the Province of Alberta. The Filer's head office is located in Edmonton, Alberta.
2. On October 5, 2009, the Filer entered into an agreement (the Share Exchange Agreement) with China Elevator (Group) Ltd. (China Elevator) wherein the Filer would acquire all of the issued and outstanding shares of China Elevator in exchange for the issuance of shares of the Filer to shareholders of China Elevator in a transaction that will be accounted for as a reverse take-over (RTO) where the Filer would be accounted for as the acquiree and China Elevator as the acquiror.
3. The common shares of the Filer were halted for trading on the Canadian National Stock Exchange on November 12, 2009, pending approval of the RTO by the Filer's shareholders and applicable regulatory authorities, as described in the press release dated November 13, 2009. The Filer has applied to the TSX Venture Exchange (the Exchange) for the listing of its common shares upon completion of the RTO in accordance with and subject to the policies of the Exchange applicable to a "Reverse Take-Over".
4. Pursuant to the Share Exchange Agreement, the Filer has changed its name to "Symax Lift (Holding) Co. Ltd.", as disclosed in the press release and material change report each dated November 16, 2009.
5. On October 15, 2009 (the Default Date), the Filer filed its information circular dated October 24, 2009 (the Information Circular) in connection with the RTO, which included audited consolidated financial statements of China Elevator's wholly-owned subsidiary, Symax Lift (Group) Limited (Symax Hong Kong), for the years ended December 31, 2008, 2007 and 2006 (the Audited Financial Statements). The auditors of the Audited Financial Statements, Chang Lee LLP (the Auditor), provided an audit report dated September 30, 2009 with respect to the Audited Financial Statements, which does not contain a reservation for the most recently completed financial year as at December 31, 2008, but contained the following reservation (the Inventory Reservation) for the previous two financial years ended December 31, 2007 and 2006:
"Because we were appointed auditors of the Company [Symax Lift (Group) Limited] after January 1, 2007, we were not able to observe the counting of physical inventories as at December 31, 2006 and 2005 or satisfy ourselves concerning the inventory quantities by alternative means. Since opening and closing inventories enter into the determination of the results of operations and cash flows, we were unable to determine whether adjustments to cost of sales, income taxes, net income for the years, cash provided from operating activities and opening deficit for the years ended December 31, 2007 and 2006 might be necessary."
6. From the period since its incorporation on September 24, 2007 to June 24, 2009, China Elevator was inactive and had no assets or liabilities. On June 24, 2009, the initial subscribing shareholder of China Elevator, who was the then sole shareholder of Symax Hong Kong, transferred all of the issued and outstanding shares of Symax Hong Kong to China Elevator. Upon the transfer and exchange, Symax Hong Kong became the wholly owned subsidiary of China Elevator. As Symax Hong Kong carries on the primary business to be acquired by the Filer pursuant to the Share Exchange Agreement, the Audited Financial Statements of Symax Hong Kong were included in the Information Circular.
7. The Filer is currently, and has been since the Default Date, in default of securities legislation due to the Inventory Reservation on the December 31, 2007 and 2006 audited financial statements of Symax Hong Kong, which are included in the Information Circular.
8. The Filer acknowledges that any right of action, remedy, penalty or sanction available to any person or company or to a securities regulatory authority against the Filer from the Default Date until the date of this decision document are not terminated or altered as a result of such decision.
9. China Elevator is engaged, through Symax Hong Kong and its other subsidiaries, in the business of the manufacture, sales and service of elevators, and the business is not seasonal in nature.
10. Except for the default noted above, the Filer is not in default of securities legislation in any jurisdiction.
11. The Auditor is a registered member of the Canadian Public Accountability Board and the Audited Financial Statements were prepared in accordance with Canadian generally accepted accounting principals and standards.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make that decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted and is effective from the date of this decision.