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Jul 12, 2013

Early Warning Reporting for Pledgees Under Section 102.1 of National Instrument 62-103

By Jeffrey K. Merk, Andrew Magnus and Matthew V. Liberatore

*This article appeared in the June 2013 issue of Corporate Financing, vol. XVIII, no. 2, and was written by Jeffrey Merk, Andrew Magnus and Matthew Liberatore.

The Canadian securities regulatory regime has put in place various mechanisms to allow the "market" to be aware of whom has dispositive control of blocks of securities of reporting issuers. The disclosure system applies to every person holding the securities but allows some exceptions for lenders acting in the ordinary course of their business until the lenders actually have dispositive rights, whether exercised or not. There is a paucity of filings being made by lenders — which leads one to conclude that significant blocks of shares are never subject to realization by lenders. This article will examine some of the legal requirements that would apply when blocks of shares are pledged and financial remedies are to be exercised.

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