Below is the transcript from the continued hearing held on January 21, 2021. There has been much speculation around the details of this call, and I have received an overwhelming volume of questions related to same, so sharing the transcript will ensure there is no ambiguity or misinformation as we move forward with our case.
The Section 13 and 15(d) reporting requirements are complex sets of rules that intermingle each other, and on their own, require a great deal of interpretation to fully understand their implications. SubV references these sections in their eligibility requirements, and further complicates their application and interpretations as it relates to eligibility.
A SubV election can be made by a small business debtor who is not ‘subject to the reporting requirements of Section 13 and 15(d) of the Securities and Exchange Act of 1934’.
The US Trustee called this eligibility into question when he filed his motion to rescind our SubV election on the basis DigitalTown did not meet the criteria.
As we have progressed through the various hearings, the requirements and respective interpretations have been somewhat addressed in segments for the purposes of determining our eligibility.
It has been established and agreed that DigitalTown was not subject to the reporting requirements of Section 13, and therefore met the burden.
As it relates to the Section 15(d) requirements:
- DigitalTown’s position was that it was not subject to the Section 15(d) reporting requirements because those requirements were automatically suspended on March 1, 2020, the first day of our fiscal year.
- The Trustee argued our reporting requirements were not automatically suspended because we had more than 300 shareholders of record.
- While DigitalTown had 359 shareholders of record on the date of filing, we demonstrated we had less than 300 shareholders of record as it relates to each registration statement, and the judge agreed we met this burden.
- The Trustee further argued we were ineligible because we were delinquent in our filings at the time we filed the case.
- The judge confirmed we were not required to meet that rule.
There are now two remaining issues that must be addressed:
- DigitalTown’s application of Section 78l as it relates to automatic suspension of Section 15(d) reporting requirements; and,
- the potential revival of reporting obligations when the Form 15 was filed in August 2020.
The Judge refrained from entering an order on January 21 and continued the hearing to allow DigitalTown an opportunity to explore avenues to obtain the necessary authority to address these two issues.
The next hearing to continue discussions on these two points is January 28, 2021 at 10:00am CST.
The Judge further raised a procedural issue the Trustee is required to mitigate, and a hearing has been set for February 10, 2021 at 11:00am CST related to that matter.
If we are successful in maintaining our SubV eligibility, the Judge will set new dates for the plan confirmation hearing. If we are not successful in maintaining our SubV eligibility, the case will proceed under traditional Chapter 11 and dates will be set accordingly. The motion previously filed by the Trustee to convert the case to Chapter 7 has already been denied.
Below is the link to view and download the transcript.