Securities Law & Instruments

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids, s. 4.3 and s. 6.1 and the corresponding provisions in the Securities Act (Ontario) -- Relief from the requirement that in order to qualify for the Non-reporting Issuer Exemption the offeree must not have more than 50 securityholders who are not employees or former employees of the offeree -- Non-reporting Issuer Exemption -- An issuer wants to complete a take-over bid that meets some, but not all, of the conditions of the private issuer exemption -- The target company has more than 50 shareholders; the bid will satisfy all other conditions required for an exempt take-over bid under the non-reporting issuer exemption; all of the target's shareholders will receive the same consideration under the offer.

May 1, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF OTTERBURN RESOURCES CORP. (the Filer)

DECISION

Background

1 The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption that the requirements of Part 2 of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids (the Instrument) and the corresponding provisions in the Securities Act (Ontario) do not apply in connection with the proposed acquisition of all the issued and outstanding shares of K92 Holdings International Limited (K92 Holdings) by the Filer (the Exemption Sought).

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

(a) the British Columbia Securities Commission is the principal regulator for this 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 Alberta and Quebec, and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

2 Terms defined in National Instrument 14-101 Definitions, the Instrument and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

3 This decision is based on the following facts represented by the Filer:

1. the Filer is a company incorporated under the laws of British Columbia and is a reporting issuer in British Columbia and Alberta;

2. the Filer's head office is in Vancouver, British Columbia;

3. the Filer's common shares are listed and posted for trading on the TSX Venture Exchange (the TSXV);

4. K92 Holdings is incorporated under the laws of the British Virgin Islands with its principal office located in Hong Kong;

5. K92 Holdings is not, and has never been, a reporting issuer for the purposes of securities legislation in any jurisdiction in Canada and there is no published market in respect of the common shares of K92 Holdings (Shares);

6. K92 Holdings' principal asset is located in Papua New Guinea, and it has no material assets in Canada;

7. K92 Holdings has a total of 49,126,666 Shares outstanding;

8. K92 Holdings has 88 registered shareholders (Shareholders), excluding employees and former employees of K92 Holdings and its affiliates;

9. Seventy-three of the Shareholders are Canadian residents; 62 of the Shareholders reside in British Columbia and hold 62.46% of the total Shares; six of the Shareholders reside in Ontario and hold 3.66% of the total Shares; three of the Shareholders reside in Alberta and hold 1.67% of the total Shares; and two of the Shareholders reside in Quebec and hold 2.34% of the total Shares;

10. all of the Canadian Shareholders who have acquired Shares are either accredited investors or close friends, relatives or close business associates of current directors or officers of K92 Holdings and accordingly acquired such Shares pursuant to available prospectus and registration exemptions;

11. five of the Shareholders are directors or officers of K92 Holdings, and as a group they hold approximately 27.01% of the total outstanding Shares;

12. the Filer and K92 Holdings are not in default of securities legislation in any jurisdiction;

13. the Filer proposes to acquire all of the issued and outstanding Shares under the terms of a share exchange agreement dated August 21, 2014 whereby the Shareholders will receive common shares of the Filer in exchange for Shares (the Acquisition), which proposed Acquisition would constitute a "take-over bid" as that term is defined in the Instrument;

14. the Acquisition constitutes a "reverse take-over" or "RTO" as defined in the policies of the TSXV;

15. under the policies of the TSXV, the Filer must prepare a detailed disclosure document about the Acquisition, in the form of a Filing Statement as prescribed as Form 3D2 by the TSXV, which will contain prospectus-level disclosure about the Acquisition, K92 Holdings, and the resulting issuer, assuming completion of the Acquisition (including a summary of a compliant technical report prepared in connection with the Acquisition under National Instrument 43-101 Standards of Disclosure for Mineral Projects, audited financial statements of the Filer and K92 Holdings (on a consolidated basis), and pro-forma financial statements), and will substantially comply with the disclosure requirements applicable to take-over bid circulars as prescribed under the Instrument;

16. the Acquisition, as a reverse take-over under TSXV policies, will be subject to regulatory oversight of the TSXV and will be subject to the TSXV's sponsorship requirements;

17. The Filer will seek a "consent resolution" of its shareholders holding at least 51% of the Filer's outstanding shares pursuant to the policies of the TSXV;

18. pursuant to the share exchange agreement entered into on August 21, 2014, all Shareholders have agreed to the terms of the Acquisition;

19. all Shareholders will receive identical information and documentation, including a copy of the Filing Statement prepared by the Filer in accordance with policies of the TSXV;

20. the Filer will treat all of the Shareholders equally under the Acquisition and all Shareholders will receive identical consideration for their Shares, on a per-share basis;

21. none of the Shareholders has received, or will receive any "collateral benefit" (as such term is defined in the Legislation) in connection with the Acquisition;

22. the Acquisition will comply with the requirements of the laws of BVI, which exempt the proposed transaction from the requirements of the BVI Business Companies Act;

23. section 4.3 of the Instrument (Non-Reporting Issuer Exemption), which exempts certain transactions from the formal take-over bid requirements, is available if:

(a) the offeree issuer is not a reporting issuer;

(b) there is no published market for the securities of the offeree issuer; and

(c) the number of security holders of the offeree issuer is less than 50, excluding employees and former employees of the target issuer and its "affiliates" (as that term is defined in the Instrument);

24. the Filer cannot rely on the Non-Reporting Issuer Exemption because the number of Shareholders exceeds the 50 security holder limit; and

25. The Acquisition is not a related party transaction as defined in the TSXV policies nor an insider bid within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions.

Decision

4 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 Exemption Sought is granted.

"Peter J. Brady"
Director, Corporate Finance
British Columbia Securities Commission