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ANSWERS (B) It may be fully binding. In Wallace v. Allen, the Ontario Court of Appeal examined a letter of intent that stated it "must be reduced into a binding agreement of purchase and sale by the parties within the next 40 days," as well as the parties' conduct surrounding the subject transaction and concluded that the parties' intent was for the letter of intent to be binding. Accord- ingly, Acquisitionco's letter of intent is potentially a legally binding agreement and should be redrafted to clearly reflect the parties' intentions. (C) Since Acquisitionco is a public company listed on the TSX, it is subject to disclosure obligations under the policies of the TSX and applicable securities laws. You must determine whether entering into the letter of intent constitutes a material fact that is required to be disclosed pursuant to applicable securities laws. In this case, the significance of the transaction to Acqui- sitionco and the size of the break fee favour the determination that the transaction is a material transaction of Acquisitionco that requires its disclosure. The non-disclosure agreement, if properly drafted, should provide for exceptions permitting Acquisitionco to make such disclosures as are required by law. YES You should advise Acquisitionco of the requirements of the Ontario Bulk Sales Act. This legislation is designed largely to protect unsecured creditors when a business is sold. To comply, Acquisitionco would have to receive from Targetco a statement showing all of its trade creditors and must then ensure that such creditors are paid or must pay the purchase price to a trustee if a certain percentage of such creditors agree. After the closing, Acquisitionco would have to file an affidavit with the court evidencing such compliance. If Acquisitionco does not do that, then if Targetco's trade creditors are not paid, Acquisitionco may have to account to them for the value of the assets purchased. Unless a creditworthy indemnity is available, Acquisitionco would run quite a risk if it bought Targetco's assets without complying with the Bulk Sales Act. (C) You might well reconsider the asset sale option, but there may be other options. It may be possible to structure the acquisition in such a way to "squeeze out" the recalcitrant shareholders through a court-ordered arrangement or through a post-closing amalgamation in which the shares of the recalcitrant shareholders are converted into fixed-value redeemable shares that are redeemed immediately following the amalgamation. Under the OBCA, such a transaction would result in the squeezed shareholders having dissent rights. The compulsory sale provi- sions contained in Part XV of the OBCA are only available where the target is an offering corporation. (C) Something in between is the best course. Some import- ant factors come into play here. On the one hand, your client is eager for the deal to close and definitely does not want a delay due to issues regarding legal opinions. On the other hand, there are issues of professional ethics and basic integrity that are engaged such as the requirement of solicitor competence and honest dealing. An opinion accepted from a solicitor who you know is not competent to give one is of no value to you. You should ask the associate to obtain the assistance of a senior colleague with expertise in share purchases and transaction opinions. If he doesn't, it would be appropriate for you to contact a senior member of the associate's firm to require that the transaction be appropriately staffed. YOUR RANKING? One or less correct: might be time to brush up Two or Three correct: not bad, but some further work needed Four correct: very well done, but not perfect Five correct: impressive A daily blog of FEEDS LEGAL 14 • FEBRUARY 2011LegalFeeds_Cl_Jan_11.indd 1 visit INHOUSE 12/17/10 10:01:33 AM Canadian Legal News 1 2 3 4 5 canadianlaw yermag.com/ legalfeeds