Material Change vs Material Fact – Securities Regulation

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You can grab notes on other topic from here.

Remember, 1(1): Material Change = change in business operations or capital of a company that would reasonably be expected to have a significant effect on market price or value of the securities, or a decision to implement a change referred to above by the board or senior management who believe that confirmation by the board is probable

• This definition distinguishes the following:

o a) Internal vs external changes: Limited to internal changes (business operations or capital of company), unless that external change impacts your business in a way that is more fundamental than rest of the world (then you have an obligation to disclose)

  • E.g. fact that government passes law such that cigarettes can no longer be sold at drugstores is material for Shoppers’ Drug Mart.

o b) Actual vs proposed: Definition in 1(1) of Material Change covers both – actual, and proposed by directors OR proposed by managers who believe that approval of directors is probable

  • Proposed: decision to make change, triggers the disclosure ^ makes sense since you are trying to get info to marketplace in time for it to be useful to marketplace.
  • Note: it is likely that when mgmt. has decided, you can likely see that on a balance of probabilities it will be accepted by the board

o c) Material change vs fact: Obligation to disclose material CHANGES, not facts

  • Lines get blurred b/w material facts/changes all the time ^ difficult to determine

Royal Trust Co v Campbeau

Ratio: Difference in material change vs. material fact (example)^ only have to disclose material changes, not material facts

Facts: Campbeau going to make bid for Royal Trust Co based on getting 2/3 SH approval, stock was going to go way up in price. Standard Trust Co realized that those holding lots of votes were not going to tender to bid, and Campbell bid was going to fail. When it failed, Campbeau complained, saying directors told people that they knew 40% of shares would not tender to the bid, had obligation to disclose that ^ had they done that, I wouldn’t have spent all this $ on this bid

Decision: No, the fact that shareholders won’t tender to the bid, that is a MATERIAL FACT, not a material CHANGE (doesn’t affect operations/business of the company) ^ no obligation under s. 75 to disclose material fact


Also difficult to tell – whether a change in the weather and a subsequent crappy sales promotion of leather goods is a material fact or a material change (TJ found it to be a material fact)

  1. Materiality Standard from National Policy 51-201

Pezim v. British Columbia (1994, SCC)

Ratio: National Policy Statements/ Sec Commissions should be given deference wrt to determining what constitutes a material change

Per Iacobucci: “the Commission’s policy-making role is limited. By that I mean that their policies cannot be elevated to the status of law”. However, Iacobucci J: also noted that considerable deference should be accorded to the securities commission in determining what constitutes a “material change” because this is within the expertise of the commission

You can grab notes on other topic from here.

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