Ontario Court of Appeal Clarifies Scope of “Promoter” Definition

The Ontario Court of Appeal decision in Goldsmith v. National Bank of Canada,¹  provides important guidance on the meaning of the term “promoter,” a significant characterization, as under Canadian securities laws a “promoter” can be liable for a public company’s misrepresentations in prospectuses and continuous disclosure documents. In Goldsmith, the Court established a narrow framework for determining whether a person is a promoter, concluding that a “promoter” is someone who:

• “plays a vital role in the organization of or reorganization of an issuer’s business;”
• “played a driving role in founding an issuer, and consequently wields influence comparable to that of an officer or director;” or
• is “an active participant” or a “driving force” behind a reorganization or is at the very heart of the issuer and organization.”