According to CSA Staff, detailed disclosure of cross- ownership is necessary to allow investors to make informed decisions. Cross-ownership “results in conflicts of interest that may lead investors to re- examine other variables such as purchase price, transaction timing or contingent payments,” which investors may not consider in the same manner if the cross-ownership is undisclosed. In addition, non- disclosure of cross-ownership may cause investors to question whether the transaction achieves a legitimate business purpose, whereas transparency allows investors to evaluate the transaction on its merits. CSA Staff regards the existence of cross-ownership to be material information for investors and their investment and/or voting decisions that should be disclosed in the applicable disclosure document (whether a material change report, a takeover bid circular, a listing or filing statement or an information circular). CSA Staff is also of the view that the disclosure should be made even if the applicable threshold (whether quantitative or qualitative) under the rules governing the disclosure document is not met. Although CSA Notice 51-359 is directed toward cannabis industry participants, the content is equally relevant to other issuers, including those operating in emerging growth industries. CSA Staff regards the existence of cross-ownership to be material information for investors and their investment and/or voting decisions that should be disclosed in the applicable disclosure document.
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Governance Insights 2020
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