Headnote
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – temporary exemption granted for the additional independence requirements – filer granted relief to hire an individual for a summer intern position who is an adult child of an audit committee member and shares a home with this audit committee member provided the audit committee member would be considered “impendent” for the purposes of National Instrument 52-110 Audit Committee but for the payment by the filer to the adult child of the salary for the approximately 16-week term of employment.
Applicable Legislative Provisions
National Instrument 52-110 Audit Committee, s. 1.5.
March 31, 2011
In the Matter of the Securities Legislation of Ontario (the Jurisdiction)
and
In the Matter of the Process for Exemptive Relief Application in Multiple Jurisdictions
and
In the Matter of Canadian Tire Corporation, Limited (the Filer)
Decision Document
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction to grant a temporary exemption from the additional independence requirements of Subsection 1.5 of National Instrument 52-110 Audit Committees (NI 52-110) (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application (the Principal Regulator), 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 each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon Territory, Northwest Territories and Nunavut (collectively, with Ontario, the Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions 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 principal, registered and head office of the Filer is located at 2180 Yonge Street, 18th Floor, Toronto, Ontario.
The Filer, a corporation incorporated under the Business Corporations Act (Ontario), is a reporting issuer or the equivalent in each of the Jurisdictions, has its securities listed on the Toronto Stock Exchange, and is not in default of any requirement of Canadian securities legislation.
One of the individuals who has applied for a summer intern position with the Filer (the Intern) is an adult child of one of the directors of the Filer, who is also member and chairman of the Filer’s Audit Committee (the Member), and the Intern lives in the same home as the Member.
The Filer would like to offer the Intern a summer intern position in the Filer’s retail division on a temporary basis for approximately a 16-week term of employment.
The Intern will not be involved in the preparation of financial information regarding the Filer, the Intern will not be authorized to make decisions on behalf of the Filer and in carrying out his employment. The Intern will report directly to a manager within the retail division.
The remuneration that will be paid by the Filer to the Intern for his employment as a summer intern with the Filer is consistent with the remuneration that the Filer is paying its other employees who have comparable positions.
The payment to the Intern of the salary for the approximately 16-week term of employment is deemed to be an indirect acceptance of compensation by the Member and creates a “material relationship”, for the purposes of NI 52-110, between the Member and the Filer.
Consequently, the Member is no longer considered “independent” for the purposes of NI 52-110 and the Filer can no longer satisfy the Audit Committee composition requirements of subsection 3.1(3) in NI 52-110, which requires every member of the Audit Committee be “independent”.
The Filer believes that the remuneration being paid by the Filer to the Intern for his employment as a summer intern with the Filer is not a significant amount and therefore would not be expected to interfere with the exercise of the Member's independent judgment.
The Board of Directors of the Filer has considered the relationship between the Member and the Filer created by the temporary employment of the Intern and has determined that such relationship is not reasonably expected to interfere with the exercise of the Member’s independent judgment.
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 Member would be considered “independent” for the purposes of NI 52-110 but for the payment by the Filer to the Intern of the salary for the approximately 16-week term of employment.
“Jo-Anne Matear”
Assistant Manager
Corporate Finance Branch