Mount Logan Capital Inc.
Headnote
National Instrument 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from section 3.2 and 3.3 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards -- filer is not a "SEC Issuer" and sought relief to include financial statements of a US reporting issuer prepared in accordance with U.S. GAAP and audited in accordance with U.S. PCAOB GAAS in connection with a business combination -- filer will include the financial statements of the US target in a management information circular filed pursuant to NI 51-102 Continuous Disclosure Obligations.
Applicable Legislative Provisions
National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, ss. 3.2, 3.3.
May 16, 2025
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the "Jurisdiction") AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF MOUNT LOGAN CAPITAL INC. (the "Filer")
DECISION
Background
The principal regulator in the Jurisdiction (the "Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation"):
(a) pursuant to Section 13.1 of National Instrument 51-102 -- Continuous Disclosure Obligations ("NI 51-102"), from Item 14.2 of Form 51-102F5 -- Information Circular ("Form 51-102F5"), pursuant to Section 19.1 of National Instrument 41-101 -- General Prospectus Requirements ("NI 41-101"), from Item 32 of Form 41-101F1 -- Information Required in a Prospectus ("Form 41-101F1") and pursuant to Section 5.1 of National Instrument 52-107 -- Acceptable Accounting Principles and Auditing Standards ("NI 52-107"), from Sections 3.2 and 3.3 of NI 52-107 (collectively, the "Financial Statement Exemptions"), which require that the TURN Historical Statements (as hereinafter defined) and the Pro Forma Statements (as hereinafter defined) to be included in the information circular of the Filer (the "MLC Circular"), be prepared in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP") in compliance with International Financial Reporting Standards ("IFRS"), be prepared in accordance with Item 32 of Form 41-101F1, and in the case of the TURN Historical Statements only, be audited in accordance with Canadian Generally Accepted Accounting Standards ("Canadian GAAS"); and
(b) pursuant to Section 13.1 of NI 51-102, from Item 14.2 of Form 51-102F5 and pursuant to Section 19.1 of NI 41-101, from Item 8 of Form 41-101F1 (collectively, the "MD&A Exemptions", and together with the Financial Statement Exemptions, the "Exemptions Sought"), which require that the TURN MD&A (as hereinafter defined) to be included in the MLC Circular be prepared in accordance with Form 51-102F1 -- Management's Discussion & Analysis ("Form 51-102F1").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission 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 for purposes of the equivalent provisions of the securities legislation of each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador (collectively with Ontario, the "Jurisdictions"), which, pursuant to Section 5.2(6) of National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions ("NP 11-203"), also satisfies the notice requirement of Section 4.7(1)(c) of MI 11-102.
Interpretation
Terms defined in National Instrument 14-101 Definitions, MI 11-102, NI 41-101, NI 52-107, NP 11-203 and NI 51-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation existing under the Business Corporations Act (Ontario). The Filer's head office is located at 650 Madison Avenue, 3rd Floor, New York, New York, 10022 and the Filer's registered office is located at 365 Bay Street, Suite 800, Toronto, Ontario, M5H 2V1. The common shares of the Filer are listed on Cboe Canada ("Cboe") and the Filer's filing office with Cboe is located in Toronto, Ontario.
2. The Filer is a reporting issuer in all of the provinces of Canada, and is not in default in any material respect under applicable securities legislation in such jurisdictions.
3. The Filer entered into an Agreement and Plan of Merger dated January 16, 2025 (the "Merger Agreement") in connection with a proposed business combination (the "Transaction") among the Filer, 180 Degree Capital Corp. ("TURN"), Yukon New Parent, Inc. ("New Parent", and upon closing of the Transaction, "New Mount Logan"), Polar Merger Sub, Inc. ("TURN Merger Sub"), and Moose Merger Sub, LLC ("MLC Merger Sub").
4. The financial year end of the Filer is December 31.
5. The Filer is not an "SEC Issuer" as defined in NI 52-107. The Filer prepares its financial statements in accordance with Canadian GAAP in compliance with IFRS, which are audited in accordance with Canadian GAAS.
6. TURN is a corporation organized under the laws of the State of New York and is a publicly traded closed-end management investment company registered under the Investment Company Act of 1940 (the "Investment Company Act"). The common shares of TURN are listed on the Nasdaq Global Market ("Nasdaq").
7. As a company registered under the Investment Company Act, TURN is not an "SEC Issuer" as defined in NI 52-107. TURN currently prepares its financial statements in accordance with U.S. GAAP (as such term is defined in NI 52-107) and such financial statements are audited in accordance with United States Public Company Accounting Oversight Board Generally Accepted Accounting Standards ("U.S. PCAOB GAAS"), and, as a registrant under the Investment Company Act, TURN's financial statements are in the form required by the accounting and reporting rules of the United States Securities and Exchange Commission (the "SEC") applicable to registered investment companies ("Investment Company Form Statements"), which differs from the form of financial statements that are typically prepared by entities with an operating business ("Operating Company Form Statements").
8. The financial year end of TURN is December 31.
9. New Parent is a corporation organized under the laws of the State of Delaware and is a wholly-owned subsidiary of TURN.
10. Each of MLC Merger Sub and TURN Merger Sub is a wholly-owned subsidiary of New Parent.
11. Each of New Parent, MLC Merger Sub and TURN Merger Sub was formed solely in contemplation of the Transaction, and has not conducted any business other than in connection with the Transaction and as set forth in the Merger Agreement.
12. In accordance with the Merger Agreement, the Transaction will involve, among other things, the following:
(a) The Filer will redomicile its existence to the State of Delaware as a limited liability company.
(b) TURN Merger Sub will merge with and into TURN (the "TURN Merger").
(c) MLC Merger Sub will merge with and into the Filer (the "MLC Merger").
(d) Pursuant to the TURN Merger, the former holders of common shares of TURN will receive shares of common stock of New Mount Logan in exchange therefor.
(e) Pursuant to the MLC Merger, the former holders of common shares of the Filer will receive shares of common stock of New Mount Logan in exchange therefor.
13. Each of TURN and the Filer will hold a shareholder meeting to approve certain elements of the Transaction (together, the "Shareholder Meetings").
14. The MLC Circular will be included in the joint proxy statement/prospectus forming part of a registration statement of New Parent on Form S-4 relating to the Transaction (the "Joint Proxy Statement/Prospectus").
15. A preliminary version of the Joint Proxy Statement/Prospectus was filed with the SEC in March 2025 and is comprised of: (i) the MLC Circular to be prepared and delivered in connection with its Shareholder Meeting; (ii) a proxy statement of TURN to be prepared and delivered in connection with its Shareholder Meeting; and (iii) a registration statement of New Parent on Form S-4 to be filed by New Parent with the SEC, which constitutes a prospectus of New Mount Logan with respect to the shares of common stock of New Mount Logan to be issued to the shareholders of each of the Filer and TURN pursuant to the Transaction.
16. Upon closing of the Transaction (the "Closing"), which is anticipated to be completed in the second half of 2025, it is anticipated that New Mount Logan will be a reporting issuer in all of the Jurisdictions.
17. Upon Closing, it is anticipated that the shares of common stock of New Mount Logan will be listed on Nasdaq and New Mount Logan will be an "SEC Issuer" within the meaning of NI 52-107 and an "SEC foreign issuer" within the meaning of National Instrument 71-102 -- Continuous Disclosure and Other Exemptions Relating to Foreign Issuers ("NI 71-102") and NI 52-107. Accordingly, New Mount Logan will satisfy most of its continuous disclosure requirements in Canada by way of the exemptions provided in NI 71-102, including the filing of financial statements prepared in accordance with U.S. GAAP and audited in accordance with U.S. PCAOB GAAS as permitted by sections 3.7 and 3.8 of NI 52-107 and other filings, including management's discussion and analysis, in accordance with the provisions of Part 4 of NI 71-102.
18. Upon Closing, the business of New Mount Logan will primarily be the current business of the Filer.
19. The Filer will apply to have its common shares delisted from Cboe Canada as of Closing, and following Closing the Filer will apply to cease to be a reporting issuer in the Jurisdictions and New Mount Logan will cause TURN to apply to cease to be registered under the Investment Company Act and to have its common shares delisted from Nasdaq.
20. The Joint Proxy Statement/Prospectus will include, and is required under U.S. federal securities laws and related rules and regulations to include, the following financial statements and management's discussion and analysis:
(a) Audited "seed stage" balance sheet of New Parent as at February 7, 2025 and audited "seed stage" consolidated statement of stockholders' equity for the period from inception through February 7, 2025.
(b) Audited annual consolidated balance sheets of the Filer as at December 31, 2024 and December 31, 2023, and audited consolidated statements of operations, stockholders' equity and cash flows of the Filer for each of the years ended December 31, 2024 and December 31, 2023 (and, if necessary, unaudited balance sheets and consolidated statements of operations, stockholders' equity and cash flows as at or for the interim period ended March 31, 2025, as applicable) prepared in accordance with U.S. GAAP and audited, if applicable, in accordance with U.S. PCAOB GAAS (the "MLC Historical U.S. GAAP Statements").
(c) Management's discussion and analysis relating to the MLC Historical U.S. GAAP Statements prepared in accordance with Item 303 of Regulation S-K.
(d) TURN's audited annual financial statements (collectively, the "TURN Historical Statements") prepared in accordance with U.S. GAAP as Investment Company Form Statements, and audited in accordance with U.S. PCAOB GAAS, consisting of:
i. audited annual statement of assets and liabilities of TURN as at December 31, 2024 and December 31, 2023;
ii. audited consolidated statements of operations and cash flows of TURN for each of the years ended December 31, 2024 and December 31, 2023;
iii. audited consolidated statement of changes in net assets for each of the years ended December 31, 2024, December 31, 2023 and December 31, 2022;
iv. audited consolidated financial highlights for each of the years ended December 31, 2024, December 31, 2023, December 31, 2022, December 31, 2021, December 31, 2020 and December 31, 2019;
v. audited consolidated schedule of investments for each of the years ended December 31, 2024 and December 31, 2023; and
vi. if necessary, unaudited consolidated statement of assets and liabilities, unaudited consolidated statement of operations, unaudited consolidated statement of cash flows, unaudited consolidated statement of changes in net assets, consolidated financial highlights and unaudited consolidated schedule of investments at or for the interim period ended March 31, 2025, as applicable.
(e) Management's discussion and analysis relating to the TURN Historical Statements prepared in accordance with Item 303 of Regulation S-K (collectively, the "TURN MD&A").
(f) Unaudited pro forma condensed balance sheet of New Mount Logan as at December 31, 2024 and unaudited pro forma condensed statement of operations of New Mount Logan for the year ended December 31, 2024 (and, if necessary, unaudited pro forma condensed statement of operations for the interim period ended March 31, 2025) prepared in accordance with Article 11 of Regulation S-X and U.S. GAAP (collectively, the "Pro Forma Statements").
21. With respect to the Pro Forma Statements, any differences between the MLC Historical U.S. GAAP Statements and TURN Historical Statements in terms of presentation as Operating Company Form Statements and Investment Company Form Statements, respectively, will be reflected through adjustments when combined into the Pro Forma Statements.
22. The Filer will continue to prepare and file its financial statements in accordance with Canadian GAAP in compliance with IFRS and, in respect of its annual financial statements, audited in accordance with Canadian GAAS, and file its related management's discussion and analysis, as required under NI 51-102, until such time as it is no longer required to do so.
23. Sections 3.7 and 3.8 of NI 52-107 provide that an SEC Issuer may prepare financial statements included in an information circular in accordance with U.S. GAAP and audited in accordance with U.S. PCAOB GAAS. However, as noted above, as a company registered under the Investment Company Act, TURN is not an SEC Issuer, and therefore, absent the Financial Statement Exemptions, the TURN Historical Statements and Pro Forma Statements to be included in the MLC Circular would be required to be prepared in accordance with Canadian GAAP in compliance with IFRS and, in the case of the TURN Historical Statements, audited in accordance with Canadian GAAS.
24. Item 14.2 of Form 51-102F5 provides that the disclosure included in the MLC Circular in respect of the Transaction must include disclosure for TURN prescribed under securities legislation and described in the form of prospectus that TURN would be eligible to use immediately prior to the sending and filing of the MLC Circular, being Form 41-101F1. Item 8 of Form 41-101F1 provides that an SEC Issuer may prepare its management's discussion and analysis in accordance with Item 303 of Regulation S-K under the Securities Exchange Act of 1934 of the United States of America, in lieu of preparing its management's discussion and analysis in accordance with Form 51-102F1. However, as noted above, TURN is not an SEC Issuer, and therefore, absent the MD&A Exemptions, the TURN MD&A would be required to be prepared in accordance with Form 51-102F1.
25. The TURN Historical Statements, TURN MD&A and Pro Forma Statements comply with all requirements under U.S. federal securities laws and the related rules and regulations as they relate to the financial statements and management's discussion and analysis required to be included in the Joint Proxy Statement/Prospectus.
26. Following Closing, New Mount Logan will be an SEC Issuer, and will be entitled to, and intends to, file its financial statements prepared in accordance with U.S. GAAP under Section 3.7 of NI 52-107 and audited in accordance with U.S. PCAOB GAAS under Section 3.8 of NI 52-107.
27. Following Closing, New Mount Logan will be entitled to, and intends to, file its management's discussion and analysis prepared in accordance with Item 303 of Regulation S-K as permitted by NI 51-102.
Decision
The Decision Maker 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 Maker under the Legislation is that:
(a) the Exemptions Sought are granted to the Filer in respect of (i) the TURN Historical Statements, provided that those financial statements are prepared in accordance with U.S. GAAP as Investment Company Form Statements, and they are, where applicable, audited in accordance with U.S. PCAOB GAAS, (ii) the Pro Forma Statements, provided that those financial statements are prepared in accordance with Article 11 of Regulation S-X and U.S. GAAP; and (iii) the TURN MD&A, provided that the TURN MD&A is prepared in accordance with Item 303 of Regulation S-K, all to be included in the MLC Circular; and
(b) the Exemptions Sought will terminate in respect of the Filer if the Filer does not complete the Transaction in the manner contemplated in this decision.
"Cameron McInnis"
Chief Accountant, Office of the Chief Accountant, Corporate Finance Division
Ontario Securities Commission
OSC File #: 2025/0203