National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- application for a decision that the issuer is not a reporting issuer under applicable securities laws -- issuer in default of certain obligations as a reporting issuer under applicable securities laws -- outstanding securities are beneficially owned, directly or indirectly by more than 15 security holders in Ontario and more than 51 security holders worldwide -- issuer currently in the process of a voluntary dissolution supervised by the Superior Court of Ontario -- issuer has issued a press release announcing that it has submitted an application to cease to be a reporting issuer -- requested relief granted.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).
CSA Staff Notice 12-307 Applications for a Decision that an Issuer is not a Reporting Issuer.
July 8, 2014
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, AND ONTARIO (THE "JURISDICTIONS") AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF DIVERSINET CORP. (THE "FILER")
The securities regulatory authority or regulator in each of the Jurisdictions (the "Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") that the Filer is deemed to have ceased to be a reporting issuer (the "Exemptive Relief Sought").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a coordinated review application):
(a) the Ontario Securities Commission (the "OSC") is the principal regulator for this application, and
(b) the decision is the decision of the principal regulator and evidences the decision of each other Decision Maker.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 Passport System 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 governed by the Business Corporations Act (Ontario) (the "OBCA") with its registered address located at 2235 Sheppard Avenue East, Suite 1700, Toronto, Ontario M2J 5B5.
2. The Filer is a reporting issuer in the Provinces of Ontario, British Columbia and Alberta.
3. On August 9, 2013, the Filer announced a voluntary winding-up pursuant to the OBCA.
4. Effective at the close of business on August 13, 2013, the common shares of the Filer were delisted from TSX Venture Exchange.
5. The Filer's authorized share capital consists of an unlimited number of common shares (the "Shares"), of which 43,721,847 Shares are issued and outstanding. Other than the Shares, the Filer has no other securities issued and outstanding.
6. A geographical breakdown of the Filer's registered shareholders, based on a report dated June 19, 2014 provided by Filer's transfer agent, Computershare Investor Services Inc., (the "Report") is as follows:
(a) the Filer has 191 registered shareholders holding 43,721,847 Shares;
(b) the Filer has 52 registered shareholders in Canada, 134 in the United States and 5 in foreign jurisdictions; and
(c) all of the Canadian registered shareholders reside in Ontario and hold collectively 22,569,206 Shares, representing 51.62% of the Filer's outstanding Shares.
7. As of the date of this decision, the Filer is in default of its obligations under National Instrument 52-110 Audit Committees to have an audit committee. The Filer is also in default for failing to file its interim financial statements and related management's discussion and analysis for the periods ended September 31, 2013 and March 31, 2014, as well as its annual financial statements and related management's discussion and analysis for the year ended December 31, 2013 as required under National Instrument 51-102 -- Continuous Disclosure Obligations, and the related certification of such financial statements and management's discussion and analysis as required under National Instrument 52-109 -- Certification of Disclosure in Filers' Annual and Interim Filings (collectively, the "Defaults").
8. The Filer is not eligible to use the procedure to voluntarily surrender its reporting issuer status in British Columbia pursuant to BC Instrument 11-502 Voluntary Surrender of Reporting Issuer Status because the Filer has more than 50 security holders.
9. The Filer is not eligible to file under the simplified procedure in CSA Staff Notice 12- 307 Applications for a Decision that an Issuer is not a Reporting Issuer ("CSA Notice 12-307") because the Filer has more than 51 security holders in certain jurisdictions and in total worldwide and because of the Defaults.
10. At the annual and special meeting of shareholders of the Filer held on September 11, 2013 (the "Special Meeting"), the shareholders approved a special resolution authorizing the sale of substantially all of the assets of the Filer (the "Sale Resolution"). A total of 99.80% of the votes cast at the Special Meeting were in favour of the Sale Resolution.
11. At the Special Meeting, the shareholders approved a special resolution authorizing the formal winding-up of the Filer and the distribution of its remaining assets to shareholders (the "Winding Up Resolution") pursuant to a Plan of Liquidation and Distribution (the "Liquidation Plan"). A total of 99.79% of the votes cast at the Special Meeting were in favour of the Winding Up Resolution.
12. Duff & Phelps Canada Restructuring Inc. (the "Liquidator") was appointed the liquidator of the estate and effects of the Filer for the purpose of winding-up its business and affairs and distributing its assets.
13. The Liquidation Plan was approved by the board of directors of the Filer and became effective on September 23, 2013.
14. On October 18, 2013, the winding-up order and claims procedure order were approved by the Ontario Superior Court of Justice (Commercial List) (the "Court") for a voluntary winding-up of the Filer pursuant to the Liquidation Plan in accordance with the OBCA. Pursuant to the winding-up order, the court ordered that the Filer and the Liquidator are not required to produce or place before the Filer's shareholders any further financial statements as required under subsections 154(1) and 160(1) of the OBCA or otherwise and that the Filer and the Liquidator are exempt from the requirements of Part XII of the OBCA regarding the appointment and duties of an auditor.
15. Pursuant to the Liquidation Plan:
(a) a process established by the Liquidator and approved by the Court was initiated for the identification, resolution and barring of certain claims against the Filer (the "Claims Process");
(b) all of the powers of the board of directors of the Filer have ceased and the directors have been deemed to have resigned; and
(c) certain former members of the Board and/or former officers of the Filer, namely David Hackett, Albert Wahbe and Jay Wigdale (the "Inspectors"), were appointed inspectors of the Filer pursuant to Section 194 of the OBCA and Section 6.1 of the Liquidation Plan.
16. Pursuant to paragraph 4.2(c) of the Liquidation Plan, the Liquidator was to maintain the listing of the common shares on the OTCQB marketplace, operated by the OTC Markets Group (the "OTCQB"), until the Completion of the Claims Process (as defined herein).
17. By press release issued on December 2, 2013, the Filer announced that the final day for trading in the Shares on the OTCQB would be on or about December 16, 2013.
18. On December 16, 2013, the Claims Process was completed ("Completion of the Claims Process") and the Filer's shares were delisted from the OTCQB effective prior to the open of markets on December 17, 2013. As a result, the Filer's shares are no longer listed, traded or quoted for trading on any "marketplace" in Canada or elsewhere (as defined in National Instrument 21-101 Marketplace Operation), and the Filer does not intend to have any of its securities listed, traded or quoted on such a marketplace in Canada or any other jurisdiction.
19. Pursuant to paragraph 4.2(e) of the Liquidation Plan, transfers of the Shares made after December 16, 2013 are void unless made with the explicit sanction of the Liquidator. The Liquidator will not sanction any share transfers unless, in the opinion of the Liquidator, material extenuating circumstances exist and such circumstances can be evidenced to the Liquidator in a manner satisfactory to the Liquidator. Notwithstanding the foregoing, the Liquidator has maintained and reserved the right not to sanction any share transfers regardless of the circumstances.
20. To facilitate this restriction on transfer, the Liquidator applied to CDS Clearing and Depository Services Inc. ("CDS") and Depository Trust & Clearing Corporation ("DTCC") requesting that they place a restriction on the Common Shares so that no transfers among participants may occur after the Completion of the Claims Process.
21. On December 16, 2013, CDS published a bulletin announcing that the Common Shares would be fully restricted in CDS as of opening of business on December 17, 2013. On December 19, 2013 DTCC published a bulletin announcing that the Shares would be fully restricted in DTCC as of opening of business on December 20, 2013.
22. By press release issued on December 2, 2013, the Filer announced that it had applied to the OSC, as principal regulator, for a decision under the securities legislation of Ontario, Alberta and British Columbia that the Filer has ceased to be a reporting issuer.
23. The Filer has no current intention to seek public financing by way of an offering of securities.
24. As a result of the appointment of the Liquidator and the Inspectors, the Filer is no longer able to satisfy any of the requirements pertaining to boards of directors and committees thereof.
25. The Liquidator is required by the Liquidation Plan to report to the Filer's shareholders with respect to all matters relating to the assets, the Filer and such other matters as may be relevant to the Liquidation Plan. The Liquidator intends to issue a press release and/or report to the Court when the timing and quantum of shareholder distributions are determined. All such materials will be posted on the Liquidator's website.
26. The Liquidator has established a website in respect of the winding-up proceedings where it intends to continue to post information and, where considered advisable, will continue to issue press releases. In accordance with the Liquidation Plan and the Court Orders issued on October 18, 2013, the Liquidator will continue to report to the shareholders of the Filer on the Liquidation Plan at such times and intervals as the Liquidator may deem appropriate. In addition, the Liquidator will report to the Court from time to time with respect to its administration of the winding-up proceedings.
27. The Filer has ceased exercising commercial activity of any kind and will be dissolved after the Claims Process is complete, all claims are resolved, tax clearance certificates are issued in accordance with the Income Tax Act and all assets are distributed. The Liquidator has filed a report with the Court on October 4, 2013, which, inter alia, summarized the financial situation of the Filer and the contemplated process and timing by which the Shares would be delisted. A copy of that report is publicly available on the Liquidator's website.
28. The remaining assets of the Filer consist primarily of cash (approximately US$3.5 million) with some accounts receivables (approximately $150,000) owing from Mihealth Global Systems Inc. The Filer has no other assets.
29. The Filer, upon the granting of the Exemptive Relief Sought, will no longer be a reporting issuer or the equivalent in any jurisdiction in Canada.
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 Exemptive Relief Sought is granted.