Headnote
Multilateral Instrument 11-02 – Passport System – relief from registration and prospectus requirements to permit issuance of ordinary shares and American Depositary Shares by a U.K. issuer to a de minimis number of its current Canadian shareholders – rights offering registration exemption technically not available.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1).
National Instrument 41-101 – Rights Offering.
June 17, 2008
In the Matter of the Securities Legislation of Ontario (the Jurisdiction)
and
In the Matter of the Process for Exemptive Relief Applications in Multiple Jurisdictions
and
In the Matter of Barclays PLC (the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that (the Exemption Sought):
(a) Subsection 25(1)(a) (the Dealer Registration Requirement) of the Securities Act (Ontario) (the Act) does not apply to the Filer when it trades in its own New Ordinary Shares (as defined below) and New ADSs (as defined below) with Qualifying Shareholders (as defined below) under the Open Offer; and
(b) Section 53 (the Prospectus Requirement) of the Act does not apply to the distribution of New Ordinary Shares and New ADSs to Qualifying Shareholders under the Open Offer.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission (the OSC) is the principal regulator for this application, and
(b) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
The Filer and its Affiliates
The Filer is a public limited company registered in England and Wales and is the ultimate holding company of the Barclays group of companies. The Filer is domiciled in the United Kingdom and its registered and head office is located at 1 Churchill Place, London, England E14 5HP. The Filer is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management. Operating in over 50 countries and employing 135,000 people, the Filer moves, lends, invests and protects money for over 30 million customers and clients worldwide.
Under the Memorandum and Articles of Association, the authorized share capital of the Filer is £2,540,000,000, US$77,500,000, €40,000,000 and ¥4,000,000,000, consisting of (i) 9,996,000,000 ordinary shares (Ordinary Shares), (ii) 1,000,000 staff shares of £1 each, (iii) 400,000 sterling preference shares of £100 each, (iv) 400,000 dollar preference shares of US$100 each, (v) 150,000,000 dollar preference shares of US$0.25 each, (vi) 400,000 euro preference shares of €100 each and (vii) 400,000 yen preference shares of ¥10,000 each. As at May 27, 2008 there were 6,567,915,680 Ordinary Shares, no staff shares and no preference shares outstanding.
The principal trading market for Ordinary Shares is the London Stock Exchange (the LSE). Ordinary Shares are also listed on the New York Stock Exchange (the NYSE) in the form of American Depositary Shares (ADSs) and on the Tokyo Stock Exchange (the TSE). Each ADS of the Filer represents four Ordinary Shares and is represented by an American Depository Receipt (ADR). On May 21, 2008 the Filer gave its notice to de-list to the Tokyo Stock Exchange. The Filer expects such de-listing to become effective on or around June 28, 2008.
The Filer is a "foreign private issuer" as defined in Rule 3b-4(c) under the 1934 Act, and the Ordinary Shares are registered under Section 12(b) of the 1934 Act.
The Filer is current with all required filings with the LSE and the NYSE and under the 1934 Act.
The Filer is not a reporting issuer, or its equivalent, in any province or territory of Canada, and is not registered as a dealer or adviser under the securities legislation of any province or territory of Canada. Ordinary Shares are not listed or quoted for trading on any Canadian stock exchange or market.
Barclays Bank PLC (Barclays Bank) is a direct, wholly owned subsidiary of the Filer and is the principal bank of the Barclays group. Barclays Bank is a public limited company registered in England and Wales and its registered and head office is located at the same address as the Filer's registered and head office. Barclays Bank operates through branches in many countries and has numerous direct and indirect subsidiaries. Barclays Bank is a "foreign private issuer" as defined in Rule 3b-4(c) under the 1934 Act and its various debt and equity securities are registered under Section 12(b) of the 1934 Act.
Barclays Bank is a reporting issuer in each of the provinces of Canada, whose principal regulator is the OSC, and is not in default of any of its obligations as a reporting issuer under any applicable securities legislation in any of the jurisdictions of Canada.
The Filer and Barclays Bank jointly file many of their reports under the 1934 Act, including their annual report on Form 20-F. Since Barclays Bank is a reporting issuer in each of the provinces of Canada, shareholders of the Filer in Canada have access to such joint reports without charge at the SEDAR website (www.sedar.com), including French versions thereof where required by applicable legislation.
The Global Open Offer
The Filer expects to announce a conditional offer (the Open Offer) to holders (Shareholders) of its Ordinary Shares and ADSs to subscribe for newly issued Ordinary Shares (the New Ordinary Shares) or New Ordinary Shares in the form of ADSs (the New ADSs), as applicable. Shareholders as of the close of business on a date to be specified in the UK Prospectus (as defined below) and the US Prospectus (as defined below) (the Record Date) will be qualified to participate in the Open Offer (the Qualifying Shareholders).
Qualifying Shareholders will be given the opportunity to subscribe for New Ordinary Shares or New ADSs, as applicable, at a fixed issue price (in the case of Ordinary Shares, the Ordinary Share Issue Price or, in the case of ADSs, the ADS Issue Price) up to a maximum of their pro rata entitlement, which shall be calculated based on the number of Ordinary Shares or ADSs, as applicable, outstanding on the Record Date (in the case of Ordinary Shares, the Existing Ordinary Shares or, in the case of ADSs, the Existing ADSs). The Ordinary Share Issue Price per New Ordinary Share will represent a discount to the closing mid-market price for Ordinary Shares on the LSE on the last practicable date prior to the announcement of the Open Offer. The Filer currently expects that the ADS Issue Price per New ADS will represent a discount to the closing price for ADSs on the NYSE on the last practicable date prior to the announcement of the Open Offer.
Fractions of New Ordinary Shares or New ADSs, as applicable, will not be allotted to Qualifying Shareholders in the Open Offer and entitlements under the Open Offer will be rounded down to the nearest whole number of New Ordinary Shares or New ADSs, as applicable. Accordingly, Qualifying Shareholders with less than a minimum number of Existing Ordinary Shares or Existing ADSs, as applicable, will not be entitled to subscribe for any New Ordinary Shares or New ADSs, as applicable. The fractional entitlements will be aggregated and taken up in the Conditional Placing (as defined below) for the benefit of the Filer. Additionally, it is currently expected that any New Ordinary Shares, including Ordinary Shares underlying New ADSs, not subscribed for will not be sold in the market or placed for the benefit of the Qualifying Shareholders who do not subscribe under the Open Offer, but will be placed under the Conditional Placing for the benefit of the Filer.
The New Ordinary Shares, when issued and fully paid, will be identical to and in all respects will rank pari passu with the Existing Ordinary Shares. The New ADSs, when issued and fully paid, will rank pari passu with the Existing ADSs.
The Filer currently expects that the Open Offer will be open for acceptance for a minimum of 15 business days following announcement, subject to any alterations as required by or agreed with securities regulators in applicable jurisdictions or as required by the depositary bank of the ADS facility to administer the Open Offer. Generally, the Open Offer is expected to be made worldwide, as public offers in the United Kingdom and the United States, as exempt private placements in certain jurisdictions and as offers made pursuant to grants of discretionary relief in other jurisdictions, including Canada. A few jurisdictions are expected to be excluded from the Open Offer.
Pursuant to one or more placing agreements (each a Conditional Placing Agreement), each to be entered into by the Filer and an investor as specified in the UK Prospectus (the Conditional Placees), any New Ordinary Shares, including Ordinary Shares underlying New ADSs, not subscribed for under the Open Offer will be issued to the Conditional Placees at the Issue Price, subject to the terms and conditions of the Conditional Placing Agreements, with the proceeds retained for the benefit of the Filer (the Conditional Placing). The Open Offer is conditional on the New Ordinary Shares being admitted to the official list of the UK Listing Authority and admitted to trading on the LSE.
It is expected that the New Ordinary Shares that are issued to the Conditional Placees pursuant to the Conditional Placing Agreement will be distributed outside Canada. However, if such New Ordinary Shares are distributed within Canada, they will be distributed in accordance with an exemption from the prospectus filing requirement of applicable securities legislation.
Pursuant to the authority granted at the Filer's 2008 annual general meeting, the Filer is permitted to issue New Ordinary Shares, including Ordinary Shares underlying New ADSs, representing up to one-third of the Filer's issued and outstanding share capital as of February 27, 2008 in the Conditional Placing and Open Offer. Qualifying Shareholders who subscribe for their full pro rata entitlement under the Open Offer will not suffer any dilution of their shareholdings (except for any diminution due to the loss of fractional shares in the calculation of entitlements).
In accordance with United Kingdom securities laws, including the Financial Services and Markets Act (2000) (FSMA) and applicable Financial Services Authority (FSA) rules under the FSMA, the Filer submitted a draft prospectus to the FSA relating to the New Ordinary Shares (the UK Prospectus) on May 22, 2008.
In accordance with the 1933 Act, the Filer will file with the US Securities and Exchange Commission (the SEC) a registration statement on Form F-3 (the Registration Statement), containing the final US prospectus (the US Prospectus), to register the New Ordinary Shares and the New ADSs. Copies of the US Prospectus, once available, and application forms setting out individual maximum pro rata entitlements (the Application Forms) will be disseminated to registered Qualifying Shareholders with addresses in the United States. Copies of the US Prospectus will be available without charge at the SEC's website (www.sec.gov) and at the Filer's website (www.barclays.com) once the Registration Statement is filed with the SEC.
The Registration Statement will contain, or incorporate by reference, disclosure of information with respect to, among other things: (i) the Filer as the offeror; (ii) reasons for the Conditional Placing and Open Offer; (iii) particulars of the New Ordinary Shares and New ADSs; (vi) financial statements of the Filer; (iv) procedures for subscribing for the New Ordinary Shares and New ADSs; and (v) other material information. Registered Qualifying Shareholders with addresses in the United States will complete and submit their Application Form pursuant to the instructions to be set forth in the US Prospectus. Qualifying Shareholders with addresses in the United States who hold their Ordinary Shares or ADRs through an intermediary or nominee will subscribe for New Ordinary Shares or New ADSs in accordance with the instructions provided by such intermediary or nominee.
There were 838 ADR holders and 1,434 registered holders of Ordinary Shares with US addresses at December 31, 2007, whose shareholdings represented approximately 3.94% of total outstanding Ordinary Shares on that date.
The requisite applications will be made to list the New Ordinary Shares on the LSE and the NYSE (including the Filer's ADSs).
The Canadian Open Offer
The Filer exercised reasonable efforts in attempting to ascertain the number of direct or indirect securityholders of its outstanding securities that are resident in Canada.
The Filer requested information regarding the number of holders of Ordinary Shares resident in Canada from the registrar for the Ordinary Shares. The registrar provided the Filer with information regarding the number of registered holders and the number of Ordinary Shares held by such holders. However, information regarding the number of beneficial holders of Ordinary Shares or their shareholdings could not be obtained from the registrar. In addition, the Filer requested information on the number of registered and beneficial holders of ADSs of, and the number of ADSs held by, residents of Canada from The Bank of New York, the depositary for the ADSs.
Based on such inquiries, Barclays has determined that, at May 28, 2008, there were 15 registered ADR holders and 292 registered holders of Ordinary Shares with Canadian addresses, who collectively held 650,327 Ordinary Shares and in total represented approximately 0.09% of the Shareholders and held approximately 0.01% of the total outstanding Ordinary Shares on that date, and that, at March 19, 2008, there were 8,466 beneficial holders of ADSs with Canadian addresses, who collectively held 20,899,912 ADSs, or approximately 1.27% of the total outstanding Ordinary Shares on that date.
Section 1.15 of Companion Policy 45-102CP – To National Instrument 45-102 Resale of Securities provides that, in determining the percentage of outstanding securities owned directly or indirectly by residents of Canada and the number of such owners resident in Canada, if, after reasonable inquiry, information on residence of a customer is unavailable, a non-reporting issuer such as the Filer may assume that a customer is a resident of the foreign jurisdiction in which the nominee has it principal place of business. In accordance with such policy, the Filer has assumed that, other than the Shareholders identified in the preceding paragraph, all of its Shareholders are resident outside of Canada.
To the knowledge of the Filer after reasonable inquiry, as of the date hereof,
(a) the number of beneficial holders of Ordinary Shares resident in Canada does not constitute 10 percent or more of all holders of Ordinary Shares;
(b) the number of Ordinary Shares beneficially held by securityholders resident in Canada does not constitute, in the aggregate, 10 percent or more of the outstanding Ordinary Shares;
(c) the number of beneficial holders of Ordinary Shares resident in any Province, Territory or jurisdiction of Canada does not constitute five percent or more of all holders of Ordinary Shares; and
(d) the number of Ordinary Shares beneficially held by securityholders resident in any Province, Territory or jurisdiction of Canada does not constitute, in the aggregate, five percent or more of the outstanding Ordinary Shares.
If relief is granted pursuant to this Application, upon announcement of the Open Offer, copies of the US Prospectus, a wrapper with additional Canada specific disclosure in English and in French, and Application Forms will be disseminated to the OSC, each other securities regulatory authority in Canada and to each Qualifying Shareholder whose last address is in Canada. The Canadian wrapper will include, among other things, disclosure regarding the presentation of financial statements and the resale restrictions applicable to Qualifying Shareholders in Canada.
In addition, any other material relating to the Open Offer that is disseminated by or on behalf of the Filer to the Qualifying Shareholders in the United States will concurrently be disseminated to the OSC and each Qualifying Shareholder in Canada.
All Qualifying Shareholders in Canada will be entitled to participate in the Open Offer on terms at least as favourable as the terms that apply to the Qualifying Shareholders with an address in the United States.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted, provided that:
the Open Offer is made to Qualifying Shareholders in Canada on terms no less favourable than the Open Offer to the Qualifying Shareholders in the United States;
the US Prospectus and related offering materials disseminated in the United States are concurrently sent to the OSC, each other securities regulatory authority in Canada and to each Qualifying Shareholder resident in Canada, together with a wrapper with additional Canada specific disclosure in English and in French (that will include, among other things, disclosure regarding the presentation of financial statements and the resale restrictions applicable to Qualifying Shareholders in Canada);
to the knowledge of the Filer after reasonable inquiry, as of the date hereof:
(a) the number of beneficial holders of Ordinary Shares resident in Canada does not constitute 10 percent or more of all holders of Ordinary Shares;
(b) the number of Ordinary Shares beneficially held by securityholders resident in Canada does not constitute, in the aggregate, 10 percent or more of the outstanding Ordinary Shares;
(c) the number of beneficial holders of Ordinary Shares resident in any Province, Territory or jurisdiction of Canada does not constitute five percent or more of all holders of Ordinary Shares; and
(d) the number of Ordinary Shares beneficially held by securityholders resident in any Province, Territory or jurisdiction of Canada does not constitute, in the aggregate, five percent or more of the outstanding Ordinary Shares; and
- the first trade in the New Ordinary Shares and New ADSs shall be a distribution under the Legislation unless the conditions set out in Subsection 2.14(1) of National Instrument 45-102 – Resale of Securities are satisfied at the time of such first trade.
The further decision of the principal regulator under the legislation is that the Application and this decision shall be held in confidence by the principal regulator until the earlier of (i) the date of the announcement of the Open Offer and the dissemination of the material related to the Open Offer to the Qualifying Shareholders (which is expected to occur on or about June 19, 2008), and (ii) July 19, 2008.
"Suresh Thakrar" "Paul K. Bates"
Commissioner Commissioner
Ontario Securities Commission Ontario Securities Commission