June 2003


Inside This Issue:


  • Insider Reports: Filing Changes

  • CNQ: Canadian OTC Live July 25, 2003

  • BC Company Act: Out with the Old and in with the New Business Corporation Act

  • Exciting Changes to BC Small Business Venture Capital Act



NASDAQ announced at its annual general meeting on June 25, 2003, it was pulling the plug on the BBXchange. 

It was only a few short weeks ago the  BBXchange announced it would be accepting listing applications from companies on July 1, 2003.

The first clue something was up was on June 12, 2003.  This was the date the BBX stated it would be posting its listing applications on-line.  The applications

were never posted and instead a brief two line message of apology. 

"The final application for listing on the BBX is not available for download.We regret that we were not able to meet our expected target date and will provide an update as soon as possible."

The tragedy, of course, is the amount of time issuers spent in getting themselves ready for the new BBXchange.

Companies hired business plan writers and instructed their lawyers, accountants and other advisors to get their company in shape to apply to the BBX.  Boards of directors were changed, stock holder meetings were held, private placements were conducted to increase the number of stockholders, and new committees were formed all with the view of listing on the new BBX.

What happened?

It is doubtful if we will ever learn the real reason behind the decision of NASDAQ to not go ahead with the BBX.  Bob Greifeld, the CEO of NASDAQ, announced it was not going ahead with the BBX as one of four business lines being abandoned.

The good news is that the OTCBB will continue as it is in its present form.  It is a sigh of relief for the over 3,000 OTCBB companies who would not have meet the standards of the BBX and were facing trading in the PinkSheets. 

The bad news is companies who were looking forward to higher quality small cap exchange will need to continue looking.

Insider Reports: Filing Changes

In Canada and the United States, insiders of public companies must begin filing their respective insider reports online in June 2003. 

In Canada, the effective date is June 9, 2003, and insiders of Canadian public companies must register and file all insider reports on the System for Electronic Disclosure by Insiders ("SEDI") electronic filing system in Canada.  Paper filings will no longer be accepted after this date. 

Insiders or their agents must register as a SEDI user and create an insider profile.  Reporting issuers must also register on SEDI.






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Insider Reports: Filing Changes

In Canada, insider activity must be reported within 10 calendar days after a transaction takes place unless the share change is due to a merger, amalgamation, stock split or consolidation.  In these circumstances the insider activity must be reported within one business day of the transaction.  This is a new rule.

The information required to be filed on SEDI is identical to the paper insider trading forms.

As a final note the SEDI user guide is available online and is 214 pages long.  The Canadian Securities Administrators Staff Notice 55-309, sets out the SEDI filing requirements and is available on the CSA website with the other regulations applicable to SEDI.

In the United States insiders of SEC reporting companies must file their Section 16 insider reports (Form 3, 4 & 5) electronically on the EDGAR system effective June 30, 2003

In addition, corporations must display their Section 16 filings on their corporate website or provide a link to a website that contains them.

In the US, insider activity must be reported within 2 calendar days after a transaction takes place.

Before an insider or their agent can file on EDGAR the insider must register by fax to obtain the required codes.

The SEC EDGAR site for insiders is very straight-forward in comparison to the Canadian SEDI site.  Still the filing manual is a hefty 80 or more pages.

Depending on your patience you may wish to use a filer service to file your insider reports via SEDI and or EDGAR.


CNQ: Canadian OTC Live July 25, 2003

The Canadian Trading and Quotation System Inc. ("CNQ"), is Canada’s newest equity market exchange and it will be going live July 25, 2003.  The CNQ trading system is a fully automated open book auction market with client and dealer orders exposed combined with a market making system to add further liquidity.  Quotes are in real time in Canadian or US dollars.

The new exchange is aimed at junior and start-up firms that might find it too expensive or complicated to list on the TSX Venture Exchange or one of the recognized US exchanges.

The listing requirements for the CNQ are a bit more challenging than that of the BBXchange in the US.  To list on the CNQ companies must have:

  • 150 public shareholders holding a board lot;
  • 500,000 shares in the public float worth at least C$ 50,000;
  • a public float which represents at least 10% of the issued and outstanding share capital (or 5% if the company has 200 shareholders);
  • confirmation of reporting issuer status in Ontario;
  • either:
    • a cash generating capacity, or
    • a recent history as a listed company & a minimum of $50,000 in working capital, or
    • a minimum of C$ 100,000 in working capital.
  • revenue and likelihood of profitability in the future if operating at time of application;
  • the ability to generate money and move its business forward if non-operating at time of application;
  • had previous work conducted on any applicable mining property and a NI 43-101 Report; and
  • a 12 month business plan;

The listing fee for the CNQ is C$ 10,000.  There is no annual sustaining fee and instead CNQ companies pay a monthly fee of C$ 300. 




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CNQ: Canadian OTC Live July 25, 2003 (continued)

The CNQ requires companies to file a monthly and quarterly report in a specified form once listed.  Companies are also required to maintain their reporting issuer status in Ontario in good standing.

There are no transactional reviews, approval, or fees on CNQ other than an obligation to file a form and lodge certain documents prior to specified transactions. 

The CNQ estimates the review process of a listing application will take approximately 20 days.

As of October 7, 2003,  we have had two clients submit listing applications to CNQ and have found the staff very helpful and accommodating. 

If you are interested in finding out more about the CNQ please do not hesitate to call our office or visit the CNQ web site.

BC Company Act: Out with the Old and in with the New Business Corporation Act

This fall the Business Corporation Act will replace the Company Act in British Columbia. There are significant differences between the old and new corporate statutes and how companies are expected to interact with the Registrar of Companies in BC. 

Overall the changes are positive but they will require the over 275,000 companies incorporated in BC to transfer over to the new electronic system within two years.

First a brief review of the statutory changes benefiting BC incorporated companies.  Under the new Business Corporation Act:

  • board of directors of a company can be composed entirely of directors who reside outside of Canada.  (The old Act required a  majority of the directors to be residents of Canada with at least one director resident in BC.) 
  • companies may hold stockholders meetings by telephone (internet) or outside the province. (The old Act required you obtain permission first from the Registrar of Companies.)
  • companies may indemnify its directors without court approval (Court approval was required under the old Act.)
  • companies can amalgamate with a related company without shareholder or court approval or entering into a formal amalgamation agreement. (Under the old Act you needed approval of the Registrar, stockholders and court.)
  • individuals may on behalf of a corporation to be formed enter into pre-incorporation contracts without the ignatory becoming personally liable as under old Act.
  • special resolutions only need 66% approval to pass versus 75% stockholder approval required under the old Act.
  • companies may chose not to prepare financial statements each year if all the stockholders agree.
  • companies may continue out (re-incorporate or re-domesticate) to another jurisdiction much easier than under the old Act.

The new Business Corporation Act will also bring with it a new electronic filing system of the BC Registrar of Companies.  Unlike the current BC Online system which is available to subscribers only, the new Registrar site will be available to everyone 24/7.  It will also allow a broader range of online filing.

For instance, when incorporating under the new system companies will file an incorporation application and notice of articles on a secured site on the internet instead of filing a memorandum and articles in paper form with the Registrar in Victoria.  Companies will also be able to file their annual reports, notice of change of directors, alterations etc. online. 

Existing corporation will be required to file a "Transition Application" within two years of the change over to the new electronic system.  The Transition Report is essentially an electronic profile of the existing company.  There is no regulatory filing fee associated with filing this report online.

There are a number of housekeeping matters companies will be required to do to their articles before moving over to the new Act.  Companies will need to update their articles to comply with the new Business Corporation Act and to





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BC Company Act: Out with the Old and in with the New Business Corporation Act (continued)

incorporate any provisions of the old Company Act deemed to be part of a company's articles.  Most of these changes can be made by a directors' resolution or an ordinary resolution of the stockholders.

If you have any questions about the new Business Corporation Act  please do not hesitate to call our office or visit the Business Corporations Act Project web site.

Exciting Changes to BC Small Business Venture Capital Act

The Small Business Venture Capital Act is designed to encourage arm’s length investors to make equity investments in businesses which enhance export, replace imports or otherwise diversify the British Columbia economy.

The BC government provides investors with an incentive equal to 30 percent of
their investment in an eligible small
business.  This investment may now be made either directly into the eligible small business corporation or through a specially formed venture capital corporation ("VCC"). Tax credits are realized through the issuance of tax credit certificates.

Changes to this legislation March 28, 2003 has opened-up this program to a wider group of investors and companies.

Some of these changes include:

  • eliminating the need to invest in an eligible small business through a VCC and allowing direct investments by investors in a eligible business corporation.
  • allowing investors to claim a tax credit made within the calendar year, or 60 days immediately following that calendar year.
  • allowing investors to invest using funds held in their self-directed RRSPS.
  • allowing eligible small businesses to issue common shares, non-voting shares, preferred shares, warrants, options and debentures to investors.
  • increasing the maximum investment limit to rolling $5,000,000 every two years.
  • increasing the maximum employees an eligible small business may have at the time of the initial investment from from 75 to 100.
  • allowing redemption or retraction of the shares after five years.
  • allowing VCC's up to 24 months to complete eligible investments.
  • allowing pro-rated tax recovery if investment held for at least three years before divesting.
  • allowing the program administrator discretion to waive a VCC's divestment obligation if an eligible small business no longer meets investment requirements.

Since the adoption of the new changes in March 2003 the Ministry of Competition Science and Enterprise has received a huge response from BC businesses electing to go the direct investment route.

Last year tax credit grants under the program were still available in late December.  This year the Ministry expects to run-out of available tax credit grants well before December.

The program is not open to all BC businesses.  In order to be deemed an eligible small business a company must be involved in one of the prescribed business activities outlined in the Small Business Venture Capital Act.  Certain business activities are prohibited such as resource exploration, financial services, land development, agriculture, restaurants and retail services etc.

If you are interested in more information on accessing the program under the Small Business Venture Capital Act please do not hesitate to call our office or visit the Ministry's web site for further information.

The information in this newsletter is of a general nature only about recent developments of interest to our clients. You are encouraged to contact legal counsel before acting on any information provided.

AlixeAuthor Alixe Cormick has assisted small and micro cap companies through each stage of their growth from inception to graduation to junior and more senior trading forums.

618 - 688 West Hastings Street
Vancouver, British Columbia, V6B 1P1
Phone: 604-659-9188
Fax: 604-659-9178