If a bank has an automatic exercise of options program, they may be able to evade the insider reporting requirements (section 91 of the Securities Act) in respect to the sale of common shares of the Bank to employees.
In Royal Bank of Canada (Re), 2008 BCSECCOM 297 (CanLII), the Royal Bank of Canada filed an application in every jurisdiction for exemptive relief from insider reporting requirements in respect of the sale of common shares of the Royal Bank of Canada by certain insiders. This included officers of the Bank who hold or are, in the future, granted options under the Employee Stock Option Plan. The dispositions of the underlying shares were automatic and occurred at pre-determined regular intervals. The case was held for the Royal Bank of Canada. The insider reporting requirements would not apply to eligible employees so long as (1) the person receiving the options filed a report disclosing all transactions in the form prescribed by the Insider Reporting Requirements; and (2) the person receiving the options does not hold more than 10% of the voting rights attached to the Royal Bank of Canada.
– – –
This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.
Rajah Lehal: Rajah is the Founder and CEO of Clausehound.com. Rajah received his M.B.A. and J.D. degrees, from the University of Western Ontario Richard Ivey School of Business and the Faculty of Law respectively, during which time he was Co-President of Entrepreneurs@Ivey, a student-run entrepreneurship group and, as well, assisted Professor Richard McLaren with the launch of the Western Business Law Clinic. Rajah also received an Honours Philosophy degree from the University of Waterloo, where he also took a significant course load in Mathematics and Computer Science. Rajah worked for more than a decade in the information technology industry, including three years in software development and seven years as an Information Systems and Technology manager at both a major telecommunications company and at a financial services company. Rajah also received his legal training in the corporate law group at Stikeman Elliott LLP in Toronto, as well as internationally for the Technology Media and Telecom group in the Dubai office of Clyde & Co. Rajah is a Technology and Small Business Lawyer and is counsel for the Venture Law Practice Group at Cobalt Business Counsel, a corporate and securities law practice based in Toronto. Recently, Rajah has been interviewed for a Financial Post podcast and by the Globe and Mail for his work at Multiplicity, and has joined the Loan Review Committee Member for the CYBF Spin Master Innovation Fund and was asked to judge the Ivey IBK Business Plan Competition. Rajah is also on the board of directors of Sky’s the Limit charity that provides laptops to youths in need and is Canadian Responsible Leaders Chapter Head for the BMW Foundation. Rajah continues to be an active member in the start-up technology industry nationally and internationally.