Cannabis Strategies Acquisition Corp. – s. 4(b) of Ont. Reg. 289/00 under the OBCA

Consent

Headnote

Consent given to an offering corporation under the Business Corporations Act (Ontario) to continue under the Business Corporations Act (British Columbia).

Statutes Cited

Business Corporations Act, R.S.O. 1990, c.B.16, as am., s. 181.
Securities Act, R.S.O. 1990, c.S.5, as am.

Regulations Cited

R.R.O. 1990, Regulation 289/00, as am., s. 4(b), made under the Business Corporations Act, R.S.O. 1990, c.B.16, as am.

IN THE MATTER OF
R.R.O. 1990, REGULATION 289/00, AS AMENDED
(the “Regulation”) MADE UNDER
THE BUSINESS CORPORATIONS ACT (ONTARIO), R.S.O. 1990, c. B.16, AS AMENDED
(the “OBCA”)

AND

IN THE MATTER OF
CANNABIS STRATEGIES ACQUISITION CORP.
(the “Applicant”)

CONSENT
(Subsection 4(b) of the Regulation)

UPON the application (the “Application”) of the Applicant to the Ontario Securities Commission (the “Commission”) requesting the consent of the Commission, pursuant to subsection 4(b) of the Regulation, for the Applicant to continue in another jurisdiction pursuant to section 181 of the OBCA;

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON the Applicant having represented to the Commission that:

1.             The Applicant was incorporated under the OBCA on July 31, 2017 as Cannabis Strategies Acquisition Corp.

2.             The head office of the Applicant is located at 590 Madison Avenue, 26th Floor, New York, New York, 10022.

3.             The Applicant is an offering corporation as defined in the OBCA and is a reporting issuer under the Securities Act (Ontario) (the “Act”) and the securities legislation of each of the other provinces and territories of Canada (other than Québec) (collectively, the “Legislation”).

4.             The Applicant is a “special purpose acquisition corporation”, or “SPAC”, under Section 10.17 of the Aequitas NEO Exchange Inc. (“NEO”) Listing Manual (the “Listing Manual”), as varied by exemptive relief, having completed its SPAC initial public offering on December 21, 2017 pursuant to a final prospectus that was filed in each of the provinces and territories of Canada (other than Québec) dated December 14, 2017.

5.             The Applicant’s authorized share capital currently consists of Class A restricted voting shares (each, a “Class A Share”) and Class B shares (each, a “Class B Share”). In addition, warrants of the Applicant (each, a “Warrant”) are outstanding, each of which is exercisable, beginning 65 days after completion of a “qualifying transaction” by the Applicant, to acquire one Class A Share (or Subordinate Voting Share, as further described below), and rights of the Applicant (each, a “Right”) are outstanding, each of which represents the entitlement to receive, for no additional consideration, one-tenth of one Class A Share (or Subordinate Voting Share, as further described below). As at December 10, 2018, there were 13,475,000 Class A Shares outstanding, 3,958,674 Class B Shares outstanding, 16,359,058 Warrants outstanding and 13,737,188 Rights outstanding.

6.             The Class A Shares, the Warrants and the Rights of the Applicant are listed on the NEO under the symbols “CSA.A”, “CSA.WT” and “CSA.RT”, respectively. The Class B Shares of the Applicant are not listed on the NEO or any other marketplace.

7.             On October 17, 2018, the Applicant entered into definitive agreements, as may be amended, supplemented or otherwise modified from time to time (collectively, the “Definitive Agreements”) with each of LivFree Wellness, LLC (“LivFree”), Washoe Wellness, LLC (“Washoe”), The Canopy NV, LLC (“Canopy”), Sira Naturals, Inc. (“Sira”) and Cannapunch of Nevada LLC (“Cannapunch”, and collectively with LivFree, Washoe, Canopy and Sira, the “Target Businesses”) and/or, inter alios, their respective equity holders, providing for the potential acquisition (the “Transaction”), directly or indirectly, by the Applicant of the businesses of each of Target Businesses (the “Qualifying Transaction”).

8.             The Qualifying Transaction is intended to constitute the Applicant’s “qualifying transaction” under the Listing Manual.

9.             Following the completion of the Qualifying Transaction and in accordance with and as part of the Transaction, the Applicant proposes to, among other things, discontinue as a corporation under the laws of Ontario and continue under the laws of British Columbia (the “Continuance”).

10.          The Applicant’s current principal regulator is the Commission. Following the completion of the Continuance, the Applicant’s principal regulator will continue to be the Commission.

11.          The Continuance is proposed to be made for the purpose of complying with director residency requirements and to facilitate the adoption of constrained share provisions to seek to ensure compliance with non-Canadian cannabis legislation, which is not permitted under section 45 of the OBCA, following the completion of the Transaction.

12.          Subject to obtaining requisite consent, including under Ontario Securities Commission Rule 56-501 – Restricted Shares (“OSC Rule 56-501”), the Applicant’s founding shareholders (including its sponsor) will be granted a one-time right, immediately prior to the closing of Transaction, to convert their existing Class B Shares on a one-for-one basis into a newly-created class of multiple voting shares of the Applicant (the “Multiple Voting Shares”). The terms of the remaining Class B Shares would then be amended and they would be re-named subordinate voting shares of the Applicant (the “Subordinate Voting Shares”). Upon the closing of the Transaction, any non-redeemed Class A Shares would be converted into Subordinate Voting Shares. The Multiple Voting Shares would be subject to a five-year sunset provision and customary coat-tail arrangements.

13.          A description of the material provisions respecting the Transaction, including the proposed Continuance, the share structure comprised of Multiple Voting Shares and Subordinate Voting Shares, as well as the constrained share provisions, was provided to the Applicant’s shareholders in the management information circular of the Applicant dated [●], 2019 (the “Circular”) in respect of the Applicant’s special meeting of shareholders held on [●], 2019 (the “Meeting”).

14.          In accordance with the OBCA and the Act, the special resolution of shareholders to be obtained at the Meeting in connection with the Continuance (the “Continuance Resolution”) requires the approval of 66 2/3% of the aggregate votes cast by holders of the Class A Shares and the Class B Shares (voting together as if they were a single class of shares) present in person or by proxy at the Meeting, as well as, among other things, a majority of the minority vote pursuant to OSC Rule 56-501.

15.          The Applicant’s shareholders had the right to dissent with respect to the proposed Continuance pursuant to section 185 of the OBCA, and the Circular disclosed particulars of this right in accordance with applicable law.

16.          The Continuance Resolution was approved at the Meeting by [●]% of the votes cast by the shareholders of the Applicant. Less than [●]% (by number of shares) of the shareholders exercised their dissent rights under section 185 of the OBCA.

17.          Immediately following completion of the Transaction, the Applicant intends to apply to the Director under the OBCA pursuant to section 181 of the OBCA for authorization of the Continuance.

18.          Following the Continuance, the Applicant intends to remain a reporting issuer in Ontario and in each of the other provinces and territories of Canada (other than Québec). The Applicant’s head office is expected to continue to be located at 590 Madison Avenue, 26th Floor, New York, New York, 10022.

19.          The Applicant is not in default of any applicable requirement of (i) any of the provisions of the OBCA, the Act or the Legislation, including any of the rules or regulations made thereunder; and (ii) any of the rules, regulations or policies of the NEO.

20.          The Applicant is not on the list of defaulting reporting issuers maintained pursuant to subsection 83 of the Act or the Legislation.

21.          The Applicant is not a party to any proceeding or, to the best of its knowledge, information and belief, pending proceeding under the OBCA, the Act or Legislation.

22.          Certain of the material rights, duties and obligations of a corporation governed by the the Business Corporations Act (British Columbia) (the “BCBCA”) are different from those of a corporation governed by the OBCA. The material differences have been disclosed to the Applicant’s shareholders in the Circular.

23.          Pursuant to subsection 4(b) of the Regulation, where a corporation applying to continue to another jurisdiction is an offering corporation, the application for continuance must be accompanied by a consent from the Commission.

AND UPON the Commission being satisfied that to do so is not prejudicial to the public interest;

THE COMMISSION HEREBY CONSENTS to the continuance of the Applicant as an exempted company under the BCBCA.

DATED at Toronto on this 22nd day of March 2019.

“Tim Moseley”                                                                      “Cecilia Williams”
Vice-Chair                                                                             Commissioner
Ontario Securities Commission                                            Ontario Securities Commission