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Aphria Inc.’s purchase of Nuuvera Inc. is raising legal questions that reverberate beyond the marijuana deal itself.

Six Aphria directors and the cannabis grower’s chief financial officer did not disclose to the market that they personally held a total of 900,000 Nuuvera shares when the two companies struck an $826-million cash-and-stock deal in late January. By the time it closed last Friday, the transaction’s value had been cut in half.

Under Ontario corporate law, the Aphria directors were not required to disclose their Nuuvera shares to the market – or recuse themselves from voting on the deal – unless Aphria deemed their holdings to be material. Just how large an investment needs to be for it to become material is subjective. And Aphria says that the 0.9 per cent of Nuuvera shares its insiders owned on a fully diluted basis is too “immaterial” to trigger a public disclosure.

Aphria’s deal for Nuuvera turned the Aphria insiders’ $900,000 investment into about $4.75-million in about seven months, as of Friday’s closing price.

The acquisition was done by way of a so-called plan of arrangement, which is a court-supervised process under corporate law. Had the purchase been a takeover bid, the Ontario Securities Commission would have required the number of Nuuvera shares held by each Aphria director and officer to be disclosed, regardless of how material those positions are.

Governance experts question whether the regulatory distinction between deal types should exist.

“For all intents and purposes, in substance, it’s the same type of transaction – just the legal form is different,” said Michel Magnan, a professor at Concordia University who focuses on corporate governance.

“It’s just that you’ve got this regulatory loophole that allows you to do a transaction and disclose less.”

Frank Allen, the executive director of investor advocacy group FAIR Canada, asked why the two deal structures call on buyers to disclose different information when their outcome is the same: a change in ownership.

“The form of a change-of-control transaction should not dictate a different disclosure profile,” he said. “Shareholders should not be put at an informational disadvantage merely because of the structural form.”

Aphria shareholders were not required to vote on the Nuuvera deal, but Mr. Magnan said they could have acted on information in other ways had it been available. For example, they could have sold their shares or voted differently on directors at the annual meeting.

“There would be other opportunities for their voices to be heard,” he said. “But if, of course, you’ve never heard of it, then you don’t know about it. Just disclose it and people will judge for themselves.”

Aphria bought Nuuvera for 62 cents a share, plus 0.3546 of a common share of Aphria.

Vic Neufeld, chief executive of Aphria, was one of the six Aphria directors who owned shares in Nuuvera.

“We didn’t profit, we rolled into more Aphria shares,” he told The Globe and Mail last Friday during a coincidental encounter at the Shangri-la hotel in Toronto.

As a result of the Nuuvera deal, Mr. Neufeld gained 63,828 new shares in Aphria. At Tuesday’s closing price of $12.67, that is more than $800,000 worth of stock, increasing his common share count in the company by 7 per cent. The cash portion of the transaction boosted Mr. Neufeld’s windfall – on paper – to more than $900,000.

Another corporate governance expert said Aphria could have done more to disclose insiders’ positions in Nuverra, even if it was not legally required.

“It’s important in these cases to reassure shareholders that there are appropriate processes in place to provide independent oversight of the transaction,” said Matt Fullbrook, the manager of the Clarkson Centre for Board Effectiveness at the University of Toronto’s Rotman School of Management.

“It sounds like Aphria didn’t disclose much of anything in advance, so they’ve opened themselves up to some criticism.“

On Tuesday, Aphria published a news release about its strategy for the Nuuvera assets without addressing concerns raised this week by The Globe. It said Nuuvera will be renamed Aphria International and remain a subsidiary of Aphria, exploring overseas markets including Germany, Italy and Australia. Its Canadian assets will be moved to the same division as Aphria’s Canadian assets.

In February, Aphria slashed the cash portion of the deal, as cannabis stocks fell after a rally and Aphria took a closer look at Nuuvera’s assets and found factors that resulted in several “miscalculations” in the deal price, as Mr. Neufeld called them.

According to Mr. Neufeld, one of these miscalculations was that Aphria required Nuuvera to acquire the rest of an asset called Avanti Rx Analytics Inc. that it didn’t already own, which was 49 per cent. But to buy that, it would have had to pay double what it did for its existing 51 per cent. Aphria made Nuuvera swallow the difference, reducing its cash position to below the amount the deal required Nuuvera to have on hand.

“That was one of four to five, I’m going to call them miscalculations, or wrong assumptions, prior to due diligence, but determined and discovered by my team during due diligence,” Mr. Neufeld said.

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