On October 13, 2006, the Canadian Securities Administrators (the "CSA") announced the implementation of amendments (the "Amendments") to National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102"), its related forms and companion policy, National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency ("NI 52-107") and National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers ("NI 71-102") and its related companion policy.  It is expected that the Amendments will come into force on December 29, 2006. 

The Amendments clarify certain provisions of the instruments, codify certain discretionary exemptions that have been granted by the CSA in the past and streamline certain requirements of the instruments. 

The Amendments to NI 52-107 primarily clarify the language in the instrument and expand the requirements of the exemption from the obligation to file audited financial statements available to foreign  issuers whose financial statements are audited in accordance with U.S. GAAS. The Amendments to NI 71-102 primarily clarify the language in the instrument. Summarized below are some of the more substantive Amendments relating to NI 51-102 and its related forms.

Amendments to NI 51-102
Financial Statements
·         An issuer that delivers its annual financial statements to all of its securityholders, other than holders of debt instruments, within 140 days of the issuer's financial year end is not required to send a request form to its registered and beneficial owners of its securities on an annual basis or to send its financial statements to securityholders on request.  This will allow issuers to send to their securityholders their annual financial statements along with their proxy materials in one mailing.

Disclosure for Equity Investees
·         An issuer with significant equity investees is now required to provide in its annual or interim MD&A summarized information about the equity investee, including information about the assets, liabilities and results of operations of the investee and the issuer's proportionate interest in the investee, including any contingent issuance of securities by the investee that might significantly affect the issuer's share of earnings.

·         The CSA generally considers that an equity investee is significant if the investee would meet the thresholds for the significance tests set out in Part 8 (Asset Test, Income Test and Investment Test) of the instrument using the financial statements of the equity investee and the issuer as at the issuer's financial year end.

Business Acquisition Reports (BARs)
·         Acquisitions that are reverse takeovers are now exempt from this Part of NI 51-102.  Issuers are required to provide disclosure of these transactions in an information circular or material change report and are still required to comply with Section 4.10 (Reverse Takeovers) of the instrument.

·         If an issuer completes a significant acquisition within 45 days of its financial year end, the issuer now has 90 days after the date of acquisition, or 120 days in the case of a venture issuer, to file the BAR.

·         An issuer is now able to calculate the significance of an acquisition based on its most recently filed audited annual financial statements provided that the issuer has not filed and is not in default of its obligations to file more recent audited annual financial statements.

·         The exemption for having to include the most recent interim financial statements of an acquired business has been modified.  The exemption now applies if (a) the acquired business does not constitute a material departure from the issuer's business, (b) the acquisition is not accounted for as a continuity of interests, and (c) either the issuer has previously filed the financial statements in another document or the issuer has filed the applicable BAR early.  There is also now a corresponding exemption relating to pro forma interim financial statements.

Refiling Documents
·         An issuer must issue and file a news release if it decides to re-file a document filed under NI 51-102 or re-state financial information for comparative periods in financial statements where the information will differ materially from the information originally disclosed.

·         An issuer is not required to issue and file a news release if it decides to re-state financial information for comparative periods in financial statements as a result of a retroactive application of a change in an accounting standard or policy or a new accounting standard.

Amendments to Form 51-102F1 MD&A
·         In its discussion of its liquidity, an issuer is now required to disclose any significant risk of defaults or arrears and how it intends to address this risk.

·         If an issuer files separate MD&A for its fourth quarter, it is not required to include a discussion of the quarter in its annual MD&A.

·         An issuer is required to include, as part of its description of each critical accounting estimate, quantitative information where such information is reasonably available.

Amendments to Form 51-102F2 AIF
·         An issuer can no longer incorporate by reference in its AIF any recent BARs.  It must now describe any such significant acquisitions in its AIF.

·         An issuer must disclose any bankruptcy or similar procedures planned for the current financial year.

·         An issuer must disclose whether it has requested a stability rating, whether or not obtained.

Amendments to Form 51-102F5 Information Circulars
·         An issuer only has to comply with Item 8 (Executive Compensation) and Item 10 (Indebtedness of Directors and Executive Offices) of Form 51-102F5 where a circular is being sent to securityholders in connection with an annual general meeting at which directors are to be elected or securityholders are asked to vote on a matter relating to executive compensation.

·         An issuer only has to comply with Item 9 (Securities Authorized for Issuance under Equity Compensation Plans) where a circular is being sent to securityholders in connection with an annual general meeting at which directors are to be elected or securityholders are asked to vote on a matter relating to executive compensation or a transaction that involves the issuer issuing securities.

If you have questions concerning this Flash, or Canadian securities laws generally, please do not hesitate to contact Mindy Gilbert (416-367-6907) in the Toronto office or Neil Kraviz (514-841-6522) in the Montréal office.

Davies Ward Phillips & Vineberg LLP, with over 235 lawyers, practises nationally and internationally from offices in Toronto, Montréal, New York and an affiliate in Paris and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients.

The information and comments herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstance. For particular applications of the law to specific situations, the reader should seek professional advice.