Element Technical Services Inc. (formerly Essential Energy Services Ltd.)
Headnote
National Policy 11-206 Process for Cease to be a Reporting Issuer Applications -- application under the procedure for "other applications" that the issuer is not a reporting issuer under applicable securities laws -- issuer not eligible for the simplified procedure, as it: (i) was in default for failure to file interim filings, and (ii) had more than 15 securityholders resident in Alberta -- requested relief to cease to be a reporting issuer granted.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).
National Policy 11-206 Process for Cease to be a Reporting Issuer Applications.
Citation: Re Element Technical Services Inc., 2024 ABASC 21
February 7, 2024
IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR CEASE TO BE A REPORTING ISSUER APPLICATIONS AND IN THE MATTER OF ELEMENT TECHNICAL SERVICES INC. (the Filer)
ORDER
Background
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for an order under the securities legislation of the Jurisdictions (the Legislation) that the Filer has ceased to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer (the Order Sought).
Under the Process for Cease to be a Reporting Issuer Applications (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that subsection 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in the Provinces of British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland and Labrador (together with the Jurisdictions, the Reporting Jurisdictions); and
(c) this order is the order of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this order, unless otherwise defined.
Representations
This order is based on the following facts represented by the Filer:
1. The Filer is a corporation amalgamated under the Business Corporations Act (Alberta) (the ABCA) with its head office located in Calgary, Alberta.
2. Pursuant to an amalgamation agreement dated September 15, 2023 (the Amalgamation Agreement) between Element Technical Services Inc. (Element), Essential Energy Services Ltd. (Essential) and 2544592 Alberta Ltd. (Subco), Subco, a wholly-owned subsidiary of Element, amalgamated (the First Amalgamation) with Essential under section 181 of the ABCA and continued as one corporation (Amalco).
3. Pursuant to the Amalgamation Agreement and the First Amalgamation, each issued and outstanding common share of Essential (an Essential Share) was exchanged for a redeemable preferred share in the capital of Amalco (each an Amalco Redeemable Preferred Share). Each Amalco Redeemable Preferred Share was redeemed by Amalco for cash consideration of $0.40 per Amalco Redeemable Preferred Share. Each outstanding option, deferred share unit and restricted share unit of Essential vested immediately prior to the First Amalgamation and was settled for cash consideration, less applicable withholdings.
4. Immediately following the completion of the First Amalgamation, Amalco was a wholly-owned subsidiary of Element. Amalco and Element subsequently amalgamated (the Second Amalgamation and, together with the First Amalgamation, the Business Combination) under section 184 of the ABCA and continued as the Filer.
5. Prior to the First Amalgamation, Essential was a reporting issuer under the securities legislation of each of the Reporting Jurisdictions.
6. Essential disclosed, in its management information circular with respect to the special meeting (the Special Meeting) of its shareholders held on November 7, 2023 to approve the First Amalgamation, that Amalco would make an application to seek to have Amalco cease to be a reporting issuer under the Legislation in each of the Reporting Jurisdictions following the First Amalgamation, to be effective as soon as reasonably practicable following the completion of the First Amalgamation.
7. At the Special Meeting, the First Amalgamation was approved by 66.79 percent of the votes cast by holders of the Essential Shares and by 65.25 percent of the votes cast by minority shareholders (being shareholders other than those whose votes must be excluded in accordance with Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions).
8. The First Amalgamation was completed on November 10, 2023 and resulted in Amalco becoming a reporting issuer under the securities legislation of the Reporting Jurisdictions.
9. The Second Amalgamation was approved by director's resolution under section 117 of the ABCA dated effective September 15, 2023 and by extraordinary resolution of the Filer's shareholders as required by its unanimous shareholders agreement. The Second Amalgamation was completed on November 10, 2023 and resulted in the Filer becoming a reporting issuer under the securities legislation of the Reporting Jurisdictions.
10. The Filer, as successor to Essential, was required, on or before November 14, 2023, to file interim financial statements and management's discussion and analysis and related certifications for the interim period ended September 30, 2023, however such filings have not been made (the Post-Business Combination Defaults).
11. The Filer is applying for an order that the Filer has ceased to be a reporting issuer in all of the Reporting Jurisdictions.
12. The Essential Shares were delisted from the Toronto Stock Exchange effective as of the close of trading on November 15, 2023.
13. The Filer's authorized capital consists of an unlimited number of common shares (Filer Shares). Following the Business Combination, the Filer has 16,780,622 Filer Shares outstanding.
14. The Filer has no securities outstanding other than the Filer Shares.
15. Management of the Filer has determined that there are a maximum of 33 beneficial securityholders of Filer Shares, of which:
(a) 11 beneficial securityholders of Filer Shares reside in the province of Saskatchewan, representing 5,478,273 Filer Shares in the aggregate, or 32.65% of the total issued and outstanding Filer Shares.
(b) 16 beneficial securityholders of Filer Shares reside in the province of Alberta, representing 8,426,974 Filer Shares in the aggregate, or 50.22% of the total issued and outstanding Filer Shares.
(c) 3 beneficial securityholders of Filer Shares reside in the province of British Columbia, representing 2,612,000 Filer Shares in the aggregate, or 15.57% of the total issued and outstanding Filer Shares.
(d) 1 beneficial securityholder of Filer Shares resides in the province of Manitoba, representing 156,375 Filer Shares in the aggregate, or 0.93% of the total issued and outstanding Filer Shares.
(e) 2 beneficial securityholders of Filer Shares reside in the United Shares of America, representing 107,000 Filer Shares in the aggregate, or 0.64% of the total issued and outstanding Filer Shares.
16. Management of the Filer has determined that there are fewer than 15 beneficial securityholders in each Reporting Jurisdiction, other than Alberta, where there are a maximum of 16 beneficial securityholders.
17. Management has undertaken a thorough and diligent examination of the Filer's minute books, including a review of the securityholders' register of the Filer and the addresses of all holders of Filer Shares listed therein and a review of the share certificates representing the Filer Shares. The Filer has determined that all of the Filer's securities are represented by physical share certificates, all of which are included in the minute book (either as originals or copies) and that no share certificates have been issued in the name of a depository or an intermediary located in Canada or in a foreign jurisdiction.
18. The Filer is unable to rely on the simplified procedure set out in National Policy 11-206 Process for Cease to be a Reporting Issuer Applications because it has more than 15 securityholders in Alberta and because of the Post-Business Combination Defaults.
19. The Filer is not an OTC reporting issuer under Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets.
20. The outstanding securities of the Filer, including debt securities, are beneficially owned, directly or indirectly, by fewer than 15 securityholders in each of the Reporting Jurisdictions, other than Alberta, and fewer than 51 securityholders in total worldwide.
21. No securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace as defined in National Instrument 21-101 Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported.
22. The Filer has no current intention to seek public financing by way of an offering of its securities in Canada.
23. The Filer is not in default of its obligations as a reporting issuer under the securities legislation of any jurisdiction of Canada, other than the Post-Business Combination Defaults.
24. The Filer, upon grant of the Order Sought, will no longer be a reporting issuer in any jurisdiction of Canada.
Order
Each of the Decision Makers is satisfied that the order meets the test set out in the Legislation for the Decision Maker to make the order.
The decision of the Decision Makers under the Legislation is that the Order Sought is granted.
OSC File #: 2023/0555