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Post by nemesis on Aug 17, 2020 16:25:36 GMT
It is now clear that Larry Dunn is coming to the shareholders once again with a plan to convert the MIC into a trust.
He indicates that he believes the major shareholder will vote for this new plan with some tweaks - likely some kind of
committee formed (of shareholders) to oversee the trust. It is in no way clear to me whether this proposed committee would
actually have any power to actually affect management's decision-making. Probably not.
My question at this time is what is to be gained from the trust structure that cannot be gained by using the existing MIC structure?
Obviously converting to a trust is extremely important for management's future plans or they would not be bringing it back for a second
round of voting. Any insight would be appreciated.
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Post by rationalinvestor on Aug 17, 2020 16:40:42 GMT
That's the absolute right question. I'm pretty confident they will try to answer that in their upcoming communication. Everyone's made that point abundantly clear!
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Post by Moderator on Aug 17, 2020 21:09:49 GMT
Their sales pitch is that a trust allows HE a more flexible portfolio approach, including the ability to hold and restructure properties taken in realization process.
In other words, management is given wide latitude to invest in other areas than mortgages and the liberty to commingle mortgages and real estate in one fund; in this new setup, HE can use our funds to restore the value of the "bad assets" taken as settlement of debt, reducing cash flow available for dividends.
Moreover, management can loan our funds, including to themselves for development and construction or any other projects.
What is in this for Investors? Just the promise to reinstate a regular redemption program from the performing assets, that are fewer and fewer as new defaults are triggered by Covid crisis. Nothing that could not have been done in MIC structure.
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brad1
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Post by brad1 on Aug 22, 2020 0:18:45 GMT
Their sales pitch is that a trust allows HE a more flexible portfolio approach, including the ability to hold and restructure properties taken in realization process. In other words, management is given wide latitude to invest in other areas than mortgages and the liberty to commingle mortgages and real estate in one fund; in this new setup, HE can use our funds to restore the value of the "bad assets" taken as settlement of debt, reducing cash flow available for dividends. Moreover, management can loan our funds, including to themselves for development and construction or any other projects. What I believe it's the big take-away from this restructuring from MIC to Trust is that we are losing ownership of our share in HE assets (mortgages and real estate). While this is super-good news for HE that will become the owner of our assets in HMIC/HRAC and will have the liberty to enjoy the benefits of this ownership any way they want, it is really bad news for us: - We will lose not only the ownership of our share in HE assets, but also any protection from Ontario Business Corporation Act, any Canadian Securities legislation and Securities regulators
- We will lose any protection as creditors, i.e. if HE becomes insolvent, our rights will be uncertain
- We will be trapped in this fund indefinitely with declining, uncertain returns and random redemption payouts at the discretion of the trustees
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bob
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Post by bob on Aug 22, 2020 17:02:30 GMT
brad1 , are you sure? Losing ownership in HE assets contradicts the narrative of this reorg...that we are the owners and have to take care of bad assets, not only enjoy the dividends coming from good assets that also belong to us but are locked in the HE vault, just because!
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brad1
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Post by brad1 on Aug 22, 2020 19:39:55 GMT
brad1 , are you sure? Losing ownership in HE assets contradicts the narrative of this reorg...that we are the owners and have to take care of bad assets, not only enjoy the dividends coming from good assets that also belong to us but are locked in the HE vault, just because! I am certain that we lose the ownership in HE assets once our shares are exchanged for trust units, search for paragraph 3.7 in the Declaration of trust in the Information Package we received in 2019. Interesting to check if anything is changed in the amended POA that is expected soon: "3.7 Legal Ownership of Trust Assets The legal ownership of the Trust Assets and the right to manage the investments of the Trust are vested exclusively in the Trustee and the Unitholders shall have no interest therein other than the beneficial interest in the Trust Fund conferred by their Units issued hereunder and they shall have no right to compel any partition, division, distribution or distribution of the Trust Fund or any of the Trust Assets. The Units shall be personal property and shall confer upon the holders thereof only the interest and rights specifically set forth in this Declaration of Trust. No Unitholder has or is deemed to have any right of ownership in any of the Trust Assets, including without limitation the Trust Fund. " |
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Post by rationalinvestor on Aug 26, 2020 18:53:35 GMT
brad1 nemesis ModeratorI asked HE about your comments. I thought I'd share with you the reply from their legal counsel, which they agreed to let me share on the forum. Of course, you can and should check with legal counsel yourself.
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Post by nemesis on Aug 26, 2020 21:56:56 GMT
Not going to lie - that's a whole lot of legalese that I can't begin to interpret. Anyone willing to put this missive from HE legal into 'every day' speak for the investors.
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barb
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Post by barb on Aug 27, 2020 0:39:26 GMT
rationalinvestor, thank you for your effort to follow up with HE, but the statement that we are better off losing the ownership of our interest in HE assets is quite counter-intuitive to say the least. Maybe in a parallel world I would gain from losing ownership of my property. I suppose that the communists managed to confiscate property from people with these kind of talk. Thank you, but I strongly believe that it's plain wrong to give up the ownership of my property and whoever is trying to take it away from me cannot have good intentions
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bojo
New Member
I'd rather be dead in ditch than agree to get scammed
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Post by bojo on Aug 27, 2020 0:43:59 GMT
Thank you, but I strongly believe that it's plain wrong to give up the ownership of my property and whoever is trying to take it away from me cannot have good intentions BRAVO! |
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Post by nemesis on Aug 27, 2020 18:01:48 GMT
The transfer to a trust and the control of a trustee is in fact and at law a more direct form of ownership interest. A trustee holds with no intervening interest the title and rights to assets solely for the benefit of the beneficiaries and with fiduciary obligations to them. This is a direct beneficial legal right to the assets, which holding through a corporation is not.
We ensure the assets are vested in the trustee to ensure those roles are properly defined and to provide for governance such that the assets are held and managed for the investors as a whole, with the interests of the investors as a group being governed by the requirements of trust law and the legally dictated requirements for a trustee together with the voting rights for major instructions as set out in the Trust Declaration.
So the legal response from HE says that the control of the mortgages and real estate within the trust are to be controlled by the Trustee.
The trustee is HarbourEdge
So nothing to be gained by investors here - whether we own shares or units, HE is still in total control of the company. Call them managers or directors of trustees - its all the same thing as it pertains to shareholders having NO CONTROL or OVERSIGHT whatsoever.
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brad1
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Post by brad1 on Aug 27, 2020 20:16:14 GMT
rationalinvestor , thanks for sharing. HE response confirms that our ownership in the assets is replaced with “beneficial interest”, something that Investors do not have in the current MIC structure. This seems to me similar to a more familiar situation: given that the tenants are much better protected than the landlords, Canadians should give up the ownership of their houses and become tenants! To ensure that the Investors are protected by the “beneficial interest”, the reorganization transfers their ownership rights in HE assets to the Trustee with the purpose of making them put the interests of investors first as required by the trust law (!!!  ). Why is this change necessary? Despite their authoritative, divisive and occasionally oppressive style in dealing with the Investors, I believed HE executives when they told us that the Investors interests come first and the deplorable financial status of the fund is a result of bad business decisions, occasional bad market conditions and loads of bad luck. HE executives should explain, in specific terms, how is the Trust capable to do for Investors what the MIC is not - for example selling real estate properties and distribute the proceeds to shareholders? This is an answer that the business people should be perfectly capable to provide, i.e. HE doesn't have to pay legal fees for it.
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Post by cookie on Sept 2, 2020 17:30:58 GMT
Does being a trust change the way retractions are taxed?
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Post by rationalinvestor on Sept 2, 2020 17:54:13 GMT
barb , bojo , brad1 , nemesis It appears that all four of you believe Investors will be giving up ownership of the MIC assets under a trust structure. Given HE has provided their legal opinion on this, do any of you (or anyone else) have a legal opinion supporting a different view? The first part of the legal opinion (copied below) says HMIC investors currently DO NOT own the assets. So, it seems HMIC investors aren't giving up ownership. It's something we currently do not own. The second part of the legal opinion says we're in a better position through the trust. So we seem to be in a better place, as I see it. HE has also responded as to why they should file an amended version of the Trust plan vs a New MIC plan. That seems reasonable to me. So does anyone have a legal opinion that negates anything above? If so, can you share?
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Post by thebigshort on Sept 2, 2020 19:25:07 GMT
Does being a trust change the way retractions are taxed? If by retraction you mean redemption and you have a non-registered account, then I don't think so. But, again, I have to confirm with my tax accountant. For a registered account, i.e. RRSP, RRIF I am certain you would not be affected |
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