http://www.theglobeandmail.com/globe-investor/investment-ideas/david-parkinson/miner-moves-to-yukon-to-be-truly-russian/article1859254/

How does a Canadian company become more Russian? By moving to Yukon.

High River Gold Mines (HRG-T1.22----%) – a $1-billion market-capitalization mining company technically based in Toronto, yet majority-owned by Russia’s OAO Severstal, with its senior management in Moscow and its mining assets all in Russia and Burkina Faso – is asking shareholders to approve a plan to re-incorporate the company in Yukon Territory, thousands of kilometres from both its operations and the Toronto Stock Exchange, where its stock trades.

High River Gold Mines (HRG-T)

1.22 -- --%

As of Jan 5, 2011 4:00

Range:

“The international scope of the company’s business and the location of its assets, combined with the fact that the majority shareholder of the company is Severstal of Russia, require that the High River’s corporate governance regime be flexible enough to permit the company to avail itself of the talents and skills of persons who are citizens of countries other than Canada or who otherwise reside outside of Canada,” High River said in the management information circular sent to shareholders in late December.

The shareholder vote on the matter, at a special meeting in Toronto Jan. 24, is a slam-dunk to pass; it requires only a simple majority, and Severstal’s gold division, Nord Gold NV, holds 73 per cent of High River’s stock.

At present, two of High River’s six board members are Canadians. The other four are Russians – including three who are employees of Severstal.

High River officials were unavailable for comment.

Jay Kellerman, a securities lawyer at Stikeman Elliott LLP who specializes in the global mining sector, said this kind of jurisdiction-shopping is increasingly prevalent among mining companies. Toronto remains one of the world’s major centres for mining financing, yet strong metal prices have accelerated foreign investment in Canadian mining businesses and geographic lines have blurred.

“I have more clients with head offices outside of Toronto than inside Toronto, and more clients with head offices outside of Canada than inside of Canada,” he said. “I’d be advising [High River] to do the same thing.

“It’s one less thing to worry about – having to have Canadian directors.”

A few decades ago, Canadian federal, provincial and territorial laws generally required companies to have the majority of their boards resident in Canada. Yukon removed all residency restrictions in the 1980s to try to attract businesses to register there (disgraced entertainment company Livent Inc. had plans to re-incorporate there before it went bankrupt in 1998), but those efforts were undermined when British Columbia removed its residency requirements in 2004.

Today, the two biggest jurisdictions for company incorporation – the federal statute as well as Ontario’s – still require that at least 25 per cent of a board be made up of Canadian residents, as do Alberta, Saskatchewan, Manitoba, and Newfoundland and Labrador. In all other provinces and territories, there are no residency requirements.

Mr. Kellerman said many companies like High River, which become Canadian in name only, might prefer to remain incorporated in Canada to avoid the prohibitive tax hit they and their shareholders would face if the company were to re-incorporate in another country. Canadian-incorporated companies also receive preferential status in dealing with the U.S. Securities and Exchange Commission compared with other foreign filers.

But David Rounthwaite, a securities lawyer who does advisory work for the Canadian Coalition for Good Governance, suggested that Canadian retail investors may have reason for concern when companies jump jurisdictions in order to drop Canadian representation from their board.

“What can be the motive, other than less supervision of its business?” he said.

The Yukon move is unlikely to win High River any new fans among its minority shareholders – who already successfully fought Severstal’s 2009 bid to buy out the entire company at what they considered a low-ball price.

“I’m not happy about it,” said Chris Charlwood, a Vancouver retail investor who led the minority-shareholder battle in 2009. “But at least it’s still a Canadian jurisdiction, they’re still bound by Canadian laws and Canadian securities regulations.”