Insider
Continued From Page 10
remove the impetus for a number
of rule exceptions and routine
exemptions and improve the relevance of insider reports generally.
The reporting insider definition
also includes a policy-based basket
clause that captures any insider
that meets the two criteria of access
and power or influence.
Post-conversion
beneficial ownership
Significant shareholders are
included in the definition of
reporting insider. Beneficial
ownership of, or control or direction over, securities with more
than ten per cent of the voting
rights attached to a reporting
issuer’s securities are the defining attributes of a significant
shareholder.
NI 55-104 extends reporting
insider treatment to a “significant
shareholder based on post-conver-
sion beneficial ownership” which
treats securities that may be
acquired within 60 days as if they
were owned. Accordingly, a share-
holder who holds less than ten per
cent of the votes attaching to the
outstanding securities of a
reporting issuer may be a reporting
insider as a result of holding con-
vertible securities, such as war-
rants, or through other rights to
acquire securities.
Equity-based compensation
The new rule allows issuers to
report grants of stock options and
similar securities. If an issuer elects
to file such reports, its reporting
insiders may rely on an exemption
from the normal filing deadline for
reporting the receipt of such grants
and file a single annual report. The
“These provisions are
similar to the deemed
beneficial ownership
rules under the take-over bid regime...
existing exemptions for purchases
or sales pursuant to automatic
plans have also been continued.
Derivative transactions
The basic insider reporting
requirement now applies to both
(i) direct or indirect changes in
beneficial ownership of, or control
or direction over, securities of a
reporting issuer, and (ii) interests
or rights associated with related
financial instruments involving a
security of the reporting issuer.
The definition of a related
financial instrument includes
derivatives and other instruments
that affect a reporting insider’s economic interest in securities of a
reporting issuer or economic
exposure to a reporting issuer.
Accordingly, economic arrangements, such as total return swaps,
that were formerly subject to disclosure under Multilateral Instrument 55-103 Insider Reporting for
Certain Derivative Transactions
(Equity Monetization) are now
integrated in the primary insider
reporting requirement.
NI 55-104 also includes a supplementary insider reporting
obligation that applies to any
other agreement, arrangement
or understanding that has the
effect of altering a reporting
insider’s economic exposure to a
reporting issuer that involves a
security of the reporting issuer or
a related financial instrument.
The companion policy and
response to the comments published with NI 55-104 indicate
that cash-settled and synthetic
arrangements are reportable.
Changes for eligible
institutional investors
An additional condition to the
insider reporting exemption for
eligible institutional investors
under NI 62-103 has been intro-
duced in connection with NI
55-104. In order for such investors
to continue to report exclusively
under the early warning or alterna-
tive monthly reporting systems,
they must now include disclosure
of their position under related
financial instruments in these
reports, and disclose significant
changes in this position. Changes
to interests in, or rights or obliga-
tions associated with, related
financial instruments that have a
similar economic effect as an
increase or decrease of 2. 5 per cent
of the investor’s security-holding
percentage of voting or equity
securities of the reporting issuer
are considered to be significant.
David Surat is counsel in the
Securities and Capital Markets
Group in the Toronto office of
Borden Ladner Gervais LLP.
Alfred Page is partner and Toronto
regional leader of the Securities
and Capital Markets Group, and
the Venture Capital industry focus
group, at the same firm.
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Practice Management
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Coaching eases skill transfer
to the ‘messy real world’
Project
Continued From Page 9
and celebrating success.
“Planning is the heart of
project management, legal or
otherwise,” Levy writes. But he
recognizes that in the legal
world, as in warfare, “no battle
plan survives contact with the
enemy.” He acknowledges that
certain practice areas are more
amenable to project management, such as trademark and
patents. But even the least predictable practice areas, such as
litigation, have components
that can be carved out and
managed like projects — for
example, document review,
which can cheaply be out-sourced to contract lawyers.
Legal project management is
not a quick fix for a law firm.
The proper implementation of
project management as a firm-wide initiative requires the
development of tools and techniques tailored to each practice
area to plan work and generate
budgets. In addition, partners,
associates and staff must be
trained in the principles and
practice of project management — a substantial investment
in time and money for a busy
firm. Furthermore, for training
to have any lasting effect, according to Levy, it must be followed
up with coaching to ease the
transfer of the skills learned on
paper to the messy real world.
But will the adoption of project management lead to the
ascent of fixed-fee billing?
Levy briefly discusses “the
special LPM connection with
fixed fees,” but he later concludes that although legal
project management provides
a support structure for fixed-fee billing, the two are not
synonymous.
Fixed-fee billing may be
the wrong term for the new
paradigm in billing which will
emerge as more law firms
embrace project management.
Fixed-fee billing is too rigid
an arrangement to account for
the vagaries of complex legal
work; it could easily become a
straightjacket for both clients
and counsel.
As more lawyers become
devotees of project management,
with cost estimates becoming
the norm at the outset of a matter and with ongoing negotiations over costs at different
stages as the matter progresses,
the legal world may see the
advent of a new form of billing
— “flexible fee billing.” ;
