Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for an order that the issuer is not a reporting issuer under applicable securities laws.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(b).

[Translation]

April 21, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

(the "Jurisdictions")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

SHERMAG INC.

(the "Applicant")

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the "Decision Makers") has received an application from the Applicant for a decision under the securities legislation of the Jurisdictions (the "Legislation") that the Applicant is not a reporting issuer (the "Exemptive Relief Sought").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a coordinated review application):

(a) the Autorité des marchés financiers is the principal regulator for this application, and

(b) the decision is the decision of the principal regulator and evidences the decision of each other Decision Maker.

Interpretation

Terms defined in National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Applicant:

1. The Applicant was incorporated under the Companies Act (Québec) on January 28, 1977 and continued under Part 1A of the Companies Act (Québec) on January 30, 1981. Its head office is located in Sherbrooke, Québec

2. The Applicant is a reporting issuer in the Jurisdictions.

3. On May 5, 2008 (the "Filing Date"), the Applicant and its subsidiaries, Jaymar Furniture Corp., Scierie Montauban Inc., Megabois (1989) Inc., Shermag Corporation and Jaymar Sales Corporation applied for and obtained an order of the Québec Superior Court (the "Court") under the Companies' Creditors Arrangement Act.

4. The common shares of the Applicant were listed and traded on the TSX until trading was halted on May 1st 2009 and the common shares were de-listed on July 31, 2009.

5. On August 20, 2009, the Applicant filed a restructuring plan (the "Plan") before the Court which provided, among other things, that Groupe Bermex Inc. would subscribe for 41,666,667 common shares of the Applicant for an aggregate consideration of $1,250,000, or $0.03 per common share. On September 10, 2009, the creditors of the Applicant approved the Applicant's Plan and the Court sanctioned the Plan on September 15, 2009. The transactions comprising the Plan closed on October 9, 2009 and on October 14, 2009, all the conditions precedent to the closing of the transactions comprising the Plan were met.

6. The Applicant held an annual and special shareholders meeting (the "Meeting") on March 25, 2010 at which its shareholders approved a corporate reorganization of the Applicant (the "Reorganization") comprised of the following transactions:

(a) the adoption of by-law 2010-1 abrogating the authorised share capital of the Applicant, replacing it with a share capital comprising three classes of shares, namely common shares, class A preferred shares and class B preferred shares (the "Recapitalization");

(b) the conversion of the presently issued and outstanding Common Shares into class B preferred shares and the presently issued and outstanding Preferred Shares into class A preferred shares (the "Conversion");

(c) concurrent with the Recapitalization and Conversion, the subscription by way of private placement of Groupe Bermex Inc. of 100 new common shares of the Applicant for a total subscription price of $100 (the "Private Placement"); and

(d) immediately following the Recapitalization, the Conversion and the Private Placement, the repurchase by the Applicant of all the issued and outstanding class B preferred shares at a price of $0.03 per share.

7. The Applicant is currently subject to Cease Trade Orders in Québec and Ontario. A partial revocation of the Cease Trade Orders was granted in Québec and Ontario on March 25, 2010 for the purposes of the Reorganization.

8. Immediately following the Meeting, the Applicant completed the Reorganization.

9. Following the Reorganization, the outstanding securities of the Applicant are held by three holders: (i) 100 new common shares are held by Groupe Bermex Inc.; (ii) 700,000 class A preferred shares are held by Investissement Québec; and (iii) two convertible debentures of the Applicant in the aggregate principal amount of $1,000,000 and $3,000,000, each being convertible into new common shares and preferred shares of the Applicant are held by Fonds de solidarité des travailleurs du Québec (F.T.Q.).

10. The Applicant has no intention currently to seek financing by way of a public or private placement in a jurisdiction of Canada

11. The Applicant seeks a decision that it is not a reporting issuer in the Jurisdictions in which it is currently a reporting issuer.

12. The Applicant is not in default of any requirements applicable to a reporting issuer under the Legislation, except for failure to file: (i) its annual information form for the years ended April 4, 2008 and April 3, 2009; (ii) its interim financial statements and related interim management's discussion and analysis for the interim periods ended June 30, September 30 and December 31, 2008 as required by National Instrument 51-102 Continuous Disclosure Obligations; and (iii) the certificates as required by National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings.

13. The outstanding securities of the Applicant, including debt securities, are beneficially owned by fewer than 15 security holders in each of the jurisdictions in Canada and fewer than 51 security holders in total in Canada.

14. No securities of the Applicant are traded on a marketplace as defined in National Instrument 21-101 Marketplace Operation.

15. Upon the grant of the Exemptive Relief Sought, the Applicant will not be a reporting issuer in any jurisdiction of Canada. The Applicant has requested that the Cease Trade Orders be revoked concurrently with the granting of the Exemptive Relief Sought.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemptive Relief Sought is granted.

Alida Gualtieri
Manager, Continuous Disclosure
Autorité des marchés financiers