Securities Law & Instruments


Headnote

Relief from the requirements otherwise applicable to the Filer as a reporting issuer who is not a venture issuer – Filer is cross listed on the TSX Venture Exchange and the NASDAQ First North – The NASDAQ First North is junior to the TSXV in terms of its requirements – Secondary listing on the NADAQ First North requires Filer to comply with TSXV requirements – Relief granted subject to conditions, including that the Filer complies with the requirements of Canadian securities legislation applicable to a venture issuer.

Applicable Legislative Provisions

National Instrument 41-101 General Prospectus Requirements, s. 19.1.
National Instrument 51-102 Continuous Disclosure Obligations, section 13.1.
National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, s. 5.1.
National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, s. 8.6.
National Instrument 52-110 Audit Committees, s. 8.1.
National Instrument 58-101 Disclosure of Corporate Governance Practices, s. 3.1.
Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, s. 9.1.

July 16, 2018

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the “Jurisdiction”)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
AFRICA ENERGY CORP. (the “Filer”)

DECISION

Background

The securities regulatory authority or regulator in the Jurisdiction (the “principal regulator”) has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the “Legislation”) for relief from:

(a)           the requirements otherwise applicable to the Filer as a reporting issuer who is not a venture issuer in each of the following instruments, including the forms thereof (collectively, the “Instruments”):

(i)            National Instrument 41-101 General Prospectus Requirements;

(ii)           National Instrument 51-102 Continuous Disclosure Obligations;

(iii)           National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;

(iv)          National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings;

(v)           National Instrument 52-110 Audit Committees; and

(vi)          National Instrument 58-101 Disclosure of Corporate Governance Practices;

(b)           the formal valuation requirements in sections 4.3 and 5.4 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”); and

(c)           the minority approval requirement in section 5.6 of MI 61-101 (the “Minority Approval Relief”);

(collectively, the “Exemption Sought”).

Securities legislation imposes obligations for all reporting issuers. There are different obligations applicable to reporting issuers who are venture issuers and to those that are non-venture issuers. The Exemption Sought, if granted, would permit the Filer to comply with the obligations applicable to venture issuers notwithstanding that the Filer does not meet the criteria in the definition of “venture issuer”.

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

(a)           the Ontario Securities Commission is the principal regulator for this application; and

(b)           the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (“MI 11-102”) is intended to be relied upon in the province of Alberta.

Interpretation

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

Representations

This decision is based on the following facts represented by the Filer.

1.             The Filer is a corporation originally incorporated under the laws of Alberta and subsequently continued under the laws of British Columbia; the head office of the Filer is located at Suite 2000, 885 West Georgia Street, Vancouver, British Columbia, V6C 3E8. The Filer is an oil and gas exploration company with its principal assets located in offshore South Africa and offshore Namibia.

2.             The Filer is a reporting issuer in British Columbia, Alberta and Ontario (collectively, the “Reporting Jurisdictions”).

3.             The Filer’s securities are listed on the TSX Venture Exchange (the “TSXV”) under the symbol “AFE”.

4.             The Filer is authorized to issue an unlimited number of common shares without par value. As of June 27, 2018, the Filer has 681,586,094 common shares issued and outstanding.

5.             On May 4, 2018, the Filer’s common shares commenced trading on the NASDAQ First North, the junior board of the NASDAQ Nordic List in Stockholm (the “First North Exchange”). The Filer sought a listing on the First North Exchange in order to increase the liquidity in the trading of its common shares.

6.             In the Instruments, the definition of a “venture issuer” excludes a reporting issuer who, at the relevant time, has any of its securities listed or quoted on any of the Toronto Stock Exchange, Aequitas NEO Exchange Inc., a U.S. marketplace or a marketplace outside of Canada and the United States of America other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc (the “Venture Issuer Definition”).

7.             As the First North Exchange is a marketplace and hence a “marketplace outside of Canada”, the Filer does not, subsequent to May 4, 2018, meet the criteria in the Venture Issuer Definition.

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 May 4, 2018 until the date of this decision are not terminated or altered as a result of this decision.

9.             The First North Exchange is a junior market and is not regulated as a national securities exchange under section 6(a) of the Securities Exchange Act of 1934. The First North Exchange is junior to the TSXV in terms of its requirements, as the minimum listing requirements, the listing maintenance requirements and the continuous disclosure requirements are much less onerous for the First North Exchange as compared to the TSXV. The First North Exchange requires the Filer to comply with applicable laws and regulations of the Filer’s home jurisdiction, including the policies of the TSXV.

10.          On June 29, 2018, the British Columbia Securities Commission (the “BCSC”) granted relief to the Filer from the requirement in the definition of “venture issuer” in section 1.1 of each of National Instrument 51-102 Continuous Disclosure Obligations, National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, National Instrument 52-110 Audit Committees and National Instrument 58-101 Disclosure of Corporate Governance Practices, that a reporting issuer not, at the relevant time, have any of its securities listed or quoted on any of the Toronto Stock Exchange, Aequitas NEO Exchange Inc., a U.S. marketplace or a marketplace outside of Canada or the United States of America other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc (the “BCSC Decision”).

11.          The principal regulator of the Filer is ordinarily the BCSC. However, for the purposes of this application, the Ontario Securities Commission is the principal regulator because not all of the Exemption Sought is needed in British Columbia.

12.          The information provided by the Filer about the First North Exchange and its status as a junior market for the purposes of review by staff of the BCSC is accurate at the date of the BCSC Decision.

13.          The Filer is not in default of any securities legislation in any jurisdiction of Canada.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a)           the Filer complies with the conditions and requirements of Canadian securities legislation applicable to a venture issuer;

(b)           the First North Exchange is not restructured in a manner that makes it unreasonable to conclude that it is still a junior market and the representations in section 9, above, continue to be true;

(c)           the Filer has common shares listed on the TSXV;

(d)           the Filer does not have any of its securities listed or quoted on any of the Toronto Stock Exchange, Aequitas NEO Exchange Inc., a U.S. marketplace, or a marketplace outside of Canada and the United States of America other than the First North Exchange, the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc;

(e)           in the event an exemption under Canadian securities legislation applies to a requirement in the Instruments applicable to the Filer, and a condition to the exemption requires the issuer to be a venture issuer, the Filer may invoke the benefit of that exemption if the Filer meets the conditions required by the exemption except for the condition that the Filer be a venture issuer;

(f)            in the event an exemption under Canadian securities legislation applies to a requirement applicable to the Filer as a reporting issuer who is not a venture issuer in the Instruments, and a condition to the exemption requires the issuer to not be a venture issuer, the Filer does not invoke the benefit of the exemption; and

(g)           for the purposes of the Minority Approval Relief, in addition to conditions (a) through (f) above, the Filer would be entitled to rely on the exemption from the requirement to obtain minority approval set out in subsection 5.7(1)(b) of MI 61-101 but for the fact that the Filer does not satisfy the requirements of subsection 5.7(1)(b)(i) of MI 61-101.

“Jo-Anne Matear”
Manager, Corporate Finance
Ontario Securities Commission