Securities Law & Instruments


Related party transaction -- issuer to acquire another issuer through issuance of its own shares -- four related parties of the issuer are shareholders of the target issuer -- the issuance of shares by the issuer to existing related parties of the issuer constitutes a "related party transaction" under MI 61-101 and is subject to minority approval requirements -- issuer has disclosed details of the transaction in a material change report and in a disclosure document filed on SEDAR -- outside shareholders who are not "interested parties" intend to provide written consents to the proposed related party transaction, representing approximately 64.7% of the common shares held by all minority shareholders -- approval of the transaction by majority of minority shareholders at a shareholders' meeting would be foregone conclusion -- issuer provided a copy to all outside shareholders considering the transaction and will send a copy to any shareholder who requests it -- exemption from holding shareholders' meeting and formal delivery of information circular granted, provided written consent is obtained.

Applicable Legislative Provisions

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, ss. 5.6, 8.1, 9.1.

Companion Policy 61-101CP to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, s. 3.1.

March 25, 2010




(the Jurisdiction)








(the Filer)


(Section 9.1)


The principal regulator in the Jurisdiction has received an application from the Filer for a decision pursuant to section 9.1 of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions ("MI 61-101") for discretionary relief from the requirements that the Filer call a shareholders' meeting to consider a proposed related party transaction, and to send an information circular to shareholders in connection with such meeting (the "Requested Relief").

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

(a) the Ontario Securities Commission (the "Decision Maker") is the principal regulator for this application, and

(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 Québec.


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


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

1. The Filer is a corporation existing under the laws of the Province of Manitoba. The principal executive offices of the Filer are located at 8-1250 Waverley Street, Winnipeg, Manitoba, R3T 6C6.

2. The Filer is a reporting issuer in the provinces of British Columbia, Alberta, Manitoba, Ontario and Québec and is not in default of securities legislation in any such jurisdiction.

3. The authorized capital of the Filer consists of an unlimited number of common shares (the "Common Shares"). Each Common Share carries the right to one vote at all meetings of shareholders of the Filer. As of the date hereof, a total of 19,209,566 Common Shares are issued and outstanding. The Common Shares are listed and posted for trading on the TSX Venture Exchange under the symbol "DMA".

4. Pursuant to a share exchange agreement (the "Share Exchange Agreement") entered into effective February 18, 2010 among the Filer, Sanomune Inc., a private corporation ("Sanomune"), and each of the shareholders of Sanomune, the Filer is proposing to acquire all of the issued and outstanding shares of Sanomune (the "Transaction"), being approximately 3,751,463 common shares (each a "Sanomune Common Share") and 20,998,317 preference shares (each a "Sanomune Preference Share"), from the current Sanomune shareholders in exchange for the issuance of Common Shares.

5. The material terms of the Transaction were disclosed in the material change report (the "Material Change Report") of the Filer dated February 23, 2010, which was publicly filed on SEDAR on February 23, 2010.

6. As consideration for their shares, Sanomune shareholders will receive 0.517 of a Common Share for each Sanomune Common Share acquired, and 0.517 of a Common Share for each Sanomune Preference Share acquired.

7. As a result of the Transaction, it is expected that a total of 12,806,377 Common Shares will be issued to the current shareholders of Sanomune, representing approximately 40% of the Filer's issued and outstanding Common Shares post-Transaction.

8. The Filer's board of directors consists of a total of four directors, three of whom are "independent directors" as defined in MI 61-101. Approval of the Share Exchange Agreement and the terms of the Transaction from the Filer's board of directors, including unanimous approval of the independent directors, was received on February 18, 2010.

9. Pursuant to the terms of the Share Exchange Agreement, completion of the Transaction is subject to certain conditions, including receipt of necessary TSX-V and regulatory approvals (including the exemptive relief hereby granted) and approval of the Filer's shareholders (including the disinterested minority shareholder approval required by Section 5.6 of MI 61-101), among others. Subject to the satisfaction of such conditions, the Transaction is scheduled to close on or about April 15, 2010.

10. The Transaction falls within the definition of "related party transaction", as set out in MI 61-101, as, at the date that the Transaction was agreed to, the following parties were "related parties" of the Filer and Sanomune for the reasons set out below:

(a) CentreStone Ventures Limited Partnership ("CentreStone LP"), a shareholder of both the Filer and Sanomune, is a "control person" of both the Filer and Sanomune;

(b) CentreStone Ventures Inc. ("CentreStone GP"), as the general partner of CentreStone LP, is also a "control person" of both the Filer and Sanomune, and is a shareholder of Sanomune;

(c) Genesys Ventures Inc. ("GVI"), a shareholder of both the Filer and Sanomune, is a promoter of both the Filer and Sanomune; and

(d) Mr. Eric Johnstone, the Filer's Vice-President, Finance, is also a shareholder of Sanomune.

11. Assuming completion of the Transaction, CentreStone LP, CentreStone GP, GVI and Mr. Johnstone will each receive a portion of the Common Shares to be issued to Sanomune shareholders as consideration for their Sanomune shares. Mr. Rick Pauls, the interim President, Chief Executive Officer and a director of the Filer, is also the President of Sanomune, and until January 31, 2010, was also the Chairman and Managing Director of CentreStone GP. Mr. Pauls does not own any shares of Sanomune, and will not receive any Common Shares as a result of the Transaction.

12. The Transaction is exempt from the requirement to obtain a formal valuation set out in Section 5.4 of MI 61-101 pursuant to Section 5.5(b) thereof, however there are no exemptions available in respect of the Transaction from the disinterested minority approval requirement of Section 5.6 of MI 61-101.

13. The Filer has sought minority approval for the Transaction, as that term is defined in MI 61-101, and calculated in accordance with the terms of Part 8 of MI 61-101 ("Minority Approval"), albeit not a shareholder's meeting, but by way of written consent.

14. None of the shareholders of DiaMedica from whom written consent for the Transaction was sought are (i) the Filer, (ii) an "interested party", as such term is defined in MI 61-101, (iii) a related party of an interested party, unless the related party meets that description solely in its capacity as a director or senior officer of one or more entities that are neither interested parties nor issuer insiders of the Filer, or (iv) a joint actor with a person or company referred to in (ii) or (iii) in respect of the Transaction.

15. The Filer provided each shareholder from whom written consent for the Transaction was sought a disclosure document pertaining to the Transaction (the "Disclosure Document"), the contents of which comply with the disclosure requirements set out in Section 5.3(3) of MI 61-101, along with a form of written consent (the "Consent") seeking approval of the Transaction. The Disclosure Document and Consent provide all relevant details of the Transaction and include an acknowledgement that the Disclosure Document describes the Transaction in sufficient detail to allow shareholders to make an informed decision regarding approval of such transaction.

16. The Filer has received signed Consents from shareholders representing approximately 64.72% of Common Shares held by shareholders eligible to provide the Minority Approval required for the Transaction under Part 8 of MI 61-101, which exceeds the simple majority requirement set out in MI 61-101 for such approval.

17. The form of Consent and Disclosure Document were filed publicly on SEDAR on March 2, 2010.

18. The contents of the Material Change Report comply with the disclosure requirements contained in Section 5.2 of MI 61-101.

19. A copy of the Disclosure Document will be sent to any shareholder of the Filer who requests a copy.


The Decision Maker is satisfied that decision meets the test set out in MI 61-101 for the Requested Relief.

The decision of the Decision Maker is that the Requested Relief is granted provided that:

(a) the Filer has obtained Minority Approval by way of the written Consent;

(b) each Disinterested Shareholder from whom consent for the Transaction was sought received a copy of the Disclosure Document and Consent;

(c) the Disclosure Document and form of Consent were publicly filed on SEDAR no less than 14 days prior to the closing of the Transaction;

(d) the Material Change Report was publicly filed on SEDAR on or before closing of the Transaction; and

(e) the Filer has complied with the other applicable provisions of MI 61-101.

"Michael Brown"
Assistant Manager, Corporate Finance
Ontario Securities Commission