Headnote National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Application for relief from the prospectus and registration requirements for certain trades made in connection with an employee share offering by a French issuer – The issuer cannot rely on the employee exemption in National Instrument 45-106 Prospectus and Registration Exemptions as the securities are not being offered to Canadian employees directly by the issuer but rather through special purpose entities – Canadian participants will receive disclosure documents – The special purpose entities are subject to the supervision of the local securities regulator – Canadian participants will not be induced to participate in the offering by expectation of employment or continued employment – No market for the securities of the issuer in Canada – Number of Canadian participants is de minimis – Relief granted, subject to conditions
August 20, 2010
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 Rexel (the “Filer”)
Decision
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the “Legislation”) for:
- an exemption from the prospectus requirements of the Legislation (the “Prospectus Relief”) and the dealer registration requirements of the Legislation (the “Registration Relief” and, collectively with the Prospectus Relief, the “Exemption Sought”) so that such requirements do not apply to:
(a) trades in units (“Units”) of
(i) Rexel International Classique (the “Principal Classic Compartment”), a compartment of Rexel Actionnariat International (the “Fund”) which is a fonds communs de placement d’entreprise or “FCPE”); and
(ii) Rexel International Relais 2010 (the “Temporary Fund”, and together with the Principal Classic Compartment, the “Compartments”),
made pursuant to the global employee share offering of the Filer (the “Employee Share Offering”) to or with Qualifying Employees (as defined below) resident in the Jurisdiction and in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador and Northwest Territories (together with the Jurisdiction, the “Offering Jurisdictions”) who elect to participate in the Employee Share Offering (the “Canadian Participants”); and
(b) trades of ordinary shares of the Filer (the “Shares”) by the Compartments to Canadian Participants upon the redemption of Units at the request of Canadian Participants.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(c) the Ontario Securities Commission is the principal regulator (the “Principal Regulator”) for this application, and
(d) 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 and Northwest Territories.
Interpretation
Terms defined in National Instrument 14-101 Definitions, National Instrument 45-106 Prospectus and Registration Exemptions 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 is a corporation formed under the laws of France and its head office is located in France. It is not, and has no current intention of becoming, a reporting issuer under the Legislation or under the securities legislation of the other Offering Jurisdictions. The Shares are listed on Euronext Paris.
The Filer carries on business in Canada through the following affiliated companies: Rexel North America Inc. and Rexel Canada Electrical Inc. (collectively, the “Canadian Affiliates,” together with the Filer and other affiliates of the Filer, the “Rexel Group”). Each of the Canadian Affiliates is directly or indirectly controlled by the Filer and is not, and has no current intention of becoming, a reporting issuer under the Legislation or under the securities legislation of the other Offering Jurisdictions. The greatest number of employees of Canadian Affiliates are employed in Ontario and in comparison with the other Offering Jurisdictions, the greatest proportion of the Filer’s Canadian operations is located in Ontario.
As of the date hereof and after giving effect to the Employee Share Offering, Canadian residents do not and will not beneficially own more than 10% of the Shares and do not and will not represent in number more than 10% of the total number of holders of the Shares as shown on the books of the Filer (for purposes of this representation, the calculation of Shares owned by Canadian residents after giving effect to the Employee Share Offering shall include Shares which could be received by Canadian Participants upon the redemption of Units held by Canadian Participants).
Only persons who are employees of a member of the Rexel Group during the subscription period for the Employee Share Offering and who meet other employment criteria (“Employees”), and persons who have retired from an affiliate of the Filer and who continue to hold units in FCPEs in connection with previous employee share offerings by the Filer (the “Retired Employees,” and together with the Employees, the “Qualifying Employees”), will be allowed to participate in the Employee Share Offering.
As set forth above, the Temporary Fund is and the Principal Classic Compartment is a compartment of, a fonds communs de placement d’entreprise, or FCPE, which is a form of collective shareholding vehicle of a type commonly used in France for the conservation or custodianship of shares held by employee investors, which must be registered with and approved by the Autorité des marchés financiers in France (the “French AMF”) at the time of its creation. The Compartments are established for the purpose of implementing the Employee Share Offering. There is no current intention for the Compartments to become reporting issuers under the Legislation or under the securities legislation of the other Offering Jurisdictions. Only Qualifying Employees will be allowed to purchase Units and such holdings will be in an amount reflecting the number of Shares held by the Compartments on their behalf.
Canadian Participants will be invited to participate in the Employee Share Offering under the following terms:
(a) Canadian Participants will subscribe for Units in the Temporary Fund, which will subscribe for Shares on behalf of the Canadian Participants at a subscription price that is equal to the average of the opening price of the Shares on the 20 trading days preceding the date of fixing of the subscription price by the management board of the Filer (the “Reference Price”), less a 20% discount.
(b) The Shares will be held in the Temporary Fund and the Canadian Participant will receive Units in the Temporary Fund.
(c) After completion of the Employee Share Offering, the Temporary Fund will be merged with the Principal Classic Compartment (subject to the approval of the French AMF and the decision of the supervisory board of the Fund). Units of the Temporary Fund held by Canadian Participants will be replaced with Units of the Principal Classic Compartment on a pro rata basis and the Shares subscribed for under the Employee Share Offering will be held in the Principal Classic Compartment (the “Merger”). The term “Classic Compartment” used herein means, prior to the Merger, the Temporary Fund, and following the Merger, the Principal Classic Compartment.
(d) The Units will be subject to a hold period of approximately five years (the “Lock-Up Period”), subject to certain exceptions prescribed by French law (such as a release on death, disability or involuntary termination of employment).
(e) With respect to dividends paid on the Shares held in the Classic Compartment, Canadian Participants may choose (i) to receive a pay-out of any dividend payment, or (ii) to contribute any dividend payment to the Classic Compartment for purchase of additional Shares. To reflect this reinvestment, new Units (or fractions thereof) of the Classic Compartment will be issued to such participants.
(f) At the end of the Lock-Up Period, a Canadian Participant may:
(i) request the redemption of his or her Units in consideration for the underlying Shares or a cash payment equal to the market value of such Shares; or
(ii) continue to hold Units in the Classic Compartment and request the redemption of those Units at a later date.
(g) In the event of an early redemption resulting from the Canadian Participant exercising one of the exceptions to the Lock-Up Period prescribed by French law, the Canadian Participant may request the redemption of Units in consideration for the underlying Shares or a cash payment equal to the market value of such Shares.
(h) In addition, the Filer will grant the Canadian Participant the right to receive at the end of the Lock-Up Period, free of charge: (i) two Shares for each of the first 10 Units subscribed for by the Canadian Participant, and (ii) one Share for each additional Unit beginning with the 11th Unit that is subscribed for, but subject to the limitation that no further free Shares will be granted to a Canadian Participant in respect of any Units purchased to the extent that the Canadian Participant’s personal investment has exceeded €750 (collectively, the “Matching Contribution”). The right to receive the Matching Contribution is subject to a continued employment condition (with certain exceptions) until the end of the Lock-Up Period; if this condition is satisfied, Shares granted under the Matching Contribution shall be delivered directly to the Canadian Participant or to the Classic Compartment on behalf of the Canadian Participant.
The Classic Compartment’s portfolio will principally consist of Shares of the Filer and may, from time to time, include cash in respect of dividends paid on the Shares which may be paid out to Canadian Participants or reinvested in Shares and cash or cash equivalents pending investments in Shares or held for the purpose of Unit redemptions.
The manager of the Funds, BNP Paribas Asset Management SAS (the “Management Company”) is a portfolio management company governed by the laws of France. The Management Company is registered with the French AMF to manage French investment funds. The Management Company is not, and to the best of the Filer’s knowledge has no current intention of becoming, a reporting issuer under the Legislation or under the securities legislation of the other Offering Jurisdictions.
The Management Company’s portfolio management activities in connection with the Employee Share Offering and the Classic Compartments are limited to subscribing for Shares from the Filer using amounts contributed by Qualifying Employees, and selling such Shares as necessary in order to fund redemption requests.
The Management Company is also responsible for preparing accounting documents and publishing periodic informational documents as provided by the rules of the Compartments and by the French AMF’s regulations. The Management Company’s activities do not affect the underlying value of the Shares. Canadian Participants will receive a statement indicating the number of Units they hold and the value of each Unit at least once a year.
Shares issued under the Employee Share Offering will be deposited in the Classic Compartment through BNP Paribas Securities Services (the “Depositary”), a large French commercial bank subject to French banking legislation.
Under French law, the Depositary must be selected by the Management Company from among a limited number of companies identified on a list maintained by the French Minister of the Economy, Finance and Industry and its appointment must be approved by the French AMF. The Depositary carries out orders to purchase, trade and sell securities in the portfolio and takes all necessary action to allow the Classic Compartment to exercise the rights relating to the securities held in its portfolio.
Participation in the Employee Share Offering is voluntary, and Canadian Participants will not be induced to participate in the Employee Share Offering by expectation of employment or continued employment.
The total amount that may be invested by a Canadian Participant in the Employee Share Offering cannot exceed 25% of his or her estimated gross annual remuneration for the 2010 calendar year.
None of the Filer, the Management Company, the Canadian Affiliates or any of their employees, agents or representatives will provide investment advice to Canadian Participants with respect to an investment in the Shares or Units.
It is anticipated that first trades of Shares by Canadian Participants will be effected through the facilities of, and in accordance with, the rules and regulations of Euronext Paris.
The Canadian Participants will receive an information package in the French or English language, at their choice, which will include materials summarizing the terms and conditions of the Employee Share Offering and describing Canadian income tax considerations relating to subscribing for and holding the Units and redeeming Units for cash or Shares at the end of the Lock-Up Period.
Canadian Participants may also consult the Filer’s annual report and/or the French Document de Référence filed with the French AMF and a copy of the rules of the Classic Compartment (which are analogous to company by-laws). The Canadian Participants will also have access to the continuous disclosure materials relating to the Filer that are furnished to holders of Shares generally.
There are approximately 2,123 Employees and 15 Retired Employees resident in Canada, with the largest number of Employees in Ontario (880). Qualifying Employees are also located in the other Offering Jurisdictions. The total number of Employees resident in Canada represent in the aggregate less than 8% of the number of Employees worldwide.
The Filer and the Canadian Affiliates are not in default under the Legislation or under the securities legislation of the other Offering Jurisdictions. To the best of the Filer’s knowledge, the Management Company is not in default under the Legislation or under the securities legislation of the other Offering Jurisdictions.
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 first trade in Shares acquired by Canadian Participants pursuant to this Decision in an Offering Jurisdiction is deemed a distribution or a primary distribution to the public under the Legislation of such Offering Jurisdiction, unless the following conditions are met:
(a) the issuer of the security
(i) was not a reporting issuer in any jurisdiction of Canada at the distribution date, or
(ii) is not a reporting issuer in any jurisdiction of Canada at the date of the trade;
(b) at the distribution date, after giving effect to the issue of the security and any other securities of the same class or series that were issued at the same time as, or as part of the same distribution as, the security, residents of Canada
(i) did not own; directly or indirectly; more than 10% of the outstanding securities of the class or series, and
(ii) did not represent in number more than 10% of the total number of owners; directly or indirectly; of securities of the class or series; and
(c) the trade is made
(i) through an exchange, or a market, outside of Canada, or
(ii) to a person or company outside of Canada.
“Paulette Kennedy” Commissioner Ontario Securities Commission
“Mary Condon” Commissioner Ontario Securities Commission