Ian Shewan's ingenuity aids co-operatives
In a move that should have far reaching implications for co-operatives in Canada, the Canadian Lamb Producers Co-operative Inc. (“Canadian Lamb”) has obtained exemption relief from Canadian Securities administrators.
The exemption permits Canadian Lamb to sell its shares to lamb producers across Canada without the need for a costly prospectus or, in the case of Ontario, an offering statement. The exemption goes further by exempting the first trade of shares by a member to another member or to Canadian Lamb. Instead of a prospectus, a prospective lamb producer member will receive a disclosure document containing prescribed information and enter into a producer agreement with Canadian Lamb committing to sell a certain number of lambs to Canadian Lamb in each year during the currency of the producer agreement.
The idea behind the exemption was the brainchild of lan Shewan, leader of the business law group at Lerners LLP, who practises extensively in the area of co-operative corporations law.
Terry Ackerman, the Chief Executive Officer of Canadian Lamb, stated “we knew what we wanted to do and we also knew it had never been done before. We wanted to establish a federal co-operative for lamb producers across Canada, we wanted to be able to sell shares to lamb producers no matter what Province they were in, without the need for a prospectus and without the need to create local co-operatives in each Province. lan came up with the idea of trying to get an exemption from the Canadian Securities administrators and brought in a colleague with the necessary expertise in securities law to help with the proposal. lan helped us create something totally new and different for the industry that has nothing but upside for Canadian agricultural producers.”
“Securities legislation is there for investor protection” says Ian Shewan. “These producers know what the deal is. They will be making their money primarily by selling to the co-operative, not through their investment in the co-operative. I did not see why an investor needed a prospectus or offering statement in the circumstances.” The Canadian Securities administrators ultimately agreed and granted the exemption to Canadian Lamb.
It is believed the exemption will open the door for the creation of other Canadian agricultural cooperatives using the same model. Pat Smith, the President of Canadian Lamb stated “now cooperatives comprised exclusively of members from a single producer group can incorporate federally, apply for an exemption agreement and, once granted, develop members across Canada.”
Ian thinks the exemption approach could be applied beyond agricultural co-operatives. “I believe the exemption approach may ultimately extend beyond agricultural co-operatives. As long as membership is restricted to the producer of a product, the producer is contractually obligated to sell its product to the co-operative and the producer is generating the bulk of its revenue from the sale of the product and not its interest in the co-operative the similarities are certainly there. The precedent has been set.”
The new approach is getting notice. Terry Ackerman says “The model has attracted a lot of attention from agricultural producers and around the world already. We have been approached by producers in New Zealand, Australia and by beef, pork, fruit and vegetable producers (here in Canada). lan helped us develop a unique model for co-operatives that is now being watched with interest all over the word.”
Ian Shewan is a business law lawyer at Lerners LLP whose practice includes co-operative corporations law.