Headnote
National Policy 11-203 Process for Exemptive Relief Application in Multiple Jurisdictions - application from U.K. listed company (Parent) and its Canadian wholly-owned subsidiary (Subco) for an order pursuant to section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), exempting Subco from the requirements of NI 51-102; for an order pursuant to section 8.6 of National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109) exempting Subco from the requirements of NI 52-109; for an order pursuant to section 8.1 of National Instrument 52-110 Audit Committees (NI 52-110) exempting Subco from the requirements of NI 52-110; for an order pursuant to section 3.1 of National Instrument 58-101 Corporate Governance Practices (NI 58-101) exempting Subco from the requirements of NI 58-101; for an order pursuant to section 121(2)(a)(ii) of the Securities Act (Ontario) exempting certain insiders of Subco from the insider reporting requirements of the Act – Subco is a wholly-owned subsidiary of Parent – Parent has provided a full and unconditional guarantee of Subco’s securities – Subco cannot rely on the credit support issuer exemption in section 13.4 of NI 51-102 because Parent is not an “SEC issuer” – relief granted on conditions substantially analogous to the conditions contained in section 13.4 of NI 51-102 and also on the condition that Parent meets the definition of ‘designated foreign issuer’ in National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102) except for the fact that it is not a reporting issuer in a Jurisdiction.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c.S.5, as am., s. 121(2)(a)(ii) National Instrument 51-102 Continuous Disclosure Obligations, ss. 13.1 and 13.4 National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings s. 8.6 National Instrument 52-110 Audit Committees, s. 8.1 National Instrument 58-101 Corporate Governance Practices, s. 3.1 National Instrument 55-102 System for Electronic Disclosure by Insiders, s. 6.1.
IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA, BRITISH COLUMBIA, SASKATCHEWAN, MANITOBA, ONTARIO, QUÉBEC, NEW BRUNSWICK, NOVA SCOTIA, NEWFOUNDLAND AND LABRADOR, PRINCE EDWARD ISLAND, THE NORTHWEST TERRITORIES, YUKON TERRITORY AND NUNAVUT (collectively, the "Jurisdictions")
AND
IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF XSTRATA CANADA CORPORATION AND XSTRATA PLC (the "Filers")
DECISION
Background
The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application (the "Application") from the Filers for a decision under the securities legislation of the Jurisdictions (the "Legislation") that:
(a) Xstrata Canada Corporation ("Xstrata Canada") be granted an exemption from the requirements of Parts 4 through 12 of National Instrument 51-102 – Continuous Disclosure Obligations ("NI 51-102") pursuant to section 13.1 of NI 51-102;
(b) Xstrata Canada be granted an exemption from the requirements of National Instrument 58-101 – Disclosure of Corporate Governance Practices ("NI 58-101") pursuant to section 3.1 of NI 58-101;
(c) Xstrata Canada be granted an exemption (the "Certification Relief") from the requirements of National Instrument 52-109 – Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109") pursuant to section 8.6 of NI 52-109;
(d) Xstrata Canada be granted an exemption (the "Audit Committee Relief") from the requirements of National Instrument 52-110 – Audit Committees ("NI 52‑110") pursuant to section 8.1 of NI 52-110; and
(e) the insider reporting requirements and requirement to file an insider profile under National Instrument 55-102 – System for Electronic Disclosure by Insiders will not apply to an insider of Xstrata Canada in respect of securities of Xstrata Canada (the "Insider Reporting Relief");
(the exemptions in clause (a) and (b), collectively, the "Continuous Disclosure Relief").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for the Application;
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11‑102 – Passport System is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Québec, Saskatchewan, the Northwest Territories, Nunavut and Yukon; and
(c) the decision is the decision of the principal regulator and evidences the decision of each Decision Maker.
Interpretation
Defined terms contained in National Instrument 14-101 – Definitions have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following facts represented by the Filers:
Xstrata
1Xstrata plc ("Xstrata") is a corporation existing and incorporated under the laws of England and Wales with its principal executive offices in Zug, Switzerland. Xstrata's ordinary shares are listed on the London and Swiss stock exchanges under the symbol "XTA".
2Xstrata is a major producer of copper, coking coal, thermal coal, ferrochrome, nickel, vanadium and zinc, with a growing platinum group metals business and additional exposure to gold, cobalt, lead and silver. Xstrata's operations and projects span six continents and 20 countries.
3As a company incorporated in the United Kingdom (the "U.K.") and whose ordinary shares are admitted to the premium listing segment of the Official List of the United Kingdom Financial Services Authority (the "FSA") and admitted to trading on London Stock Exchange plc's (the "LSE") main market for listed securities, Xstrata is subject to the financial reporting requirements of the Listing Rules (the "U.K. Listing Rules") and the Disclosure Rules and the Transparency Rules of the FSA (together with the U.K. Listing Rules, the "U.K. Disclosure Rules") pursuant to which Xstrata publishes and files its financial statements prepared in accordance with International Financial Reporting Standards. Financial statements are currently required by the U.K. Disclosure Rules to be filed on a semi-annual basis. Under the U.K. Disclosure Rules, Xstrata's annual financial statements are required to be published as soon as possible after they have been approved by the board of Xstrata and within four months of Xstrata's financial year end. The half yearly financial statements in respect of the first six months of Xstrata's financial year are required to be published as soon as possible, but no later than two months after the end of the period to which the report relates. The annual and half yearly financial statements must remain available to the public for at least five years. Xstrata's financial year end is December 31. In addition, Xstrata is required by the U.K. Disclosure Rules to make public a statement by its management during the first six-month period of the financial year and another statement by its management during the second six-month period of the financial year (each, an "Interim Management Statement"). An Interim Management Statement must include an explanation of material events and transactions that have taken place during the relevant period and their impact on the financial position of Xstrata and its controlled undertakings and a general description of the financial position and performance of Xstrata and its controlled undertakings during the relevant period. (All regulated information published by issuers in the U.K. pursuant to the U.K. Disclosure Rules is required to be published on an online facility called the National Storage Mechanism (the "NSM"). The NSM is a website that provides public access to documents that were previously maintained in the FSA's document viewing facility.)
4Xstrata is in compliance with the requirements of the U.K. Disclosure Rules concerning the disclosure made to the public, to securityholders of Xstrata or to the FSA relating to Xstrata and the trading of its securities (the "U.K. Disclosure Requirements") and has filed all documents that it is required to have filed by the U.K. Disclosure Requirements;
5Xstrata is not a reporting issuer or equivalent in any Jurisdiction.
6Xstrata is not in default of any of the requirements of the Legislation.
7Xstrata does not have a class of securities registered under section 12 of the Securities Exchange Act of 1934 of the United States (the "1934 Act") and is not required to file reports under section 15(d) of the 1934 Act.
8None of Xstrata's equity securities are owned of record by residents of Canada. The total number of equity securities of Xstrata owned, directly or indirectly, by residents of Canada does not exceed 10 per cent, on a fully-diluted basis, of the total number of Xstrata's equity securities.
9Xstrata indirectly holds a 44% joint venture interest in the Collahuasi copper mine in Chile (the "Collahuasi Property"). At the date of this decision, the Collahuasi Property is a property material to Xstrata for purposes of National Instrument 43-101 – Standards of Disclosure for Mineral Projects ("NI 43-101").
Xstrata Canada
10Xstrata Canada is a corporation amalgamated under the laws of the Province of Ontario with its principal executive offices located in Toronto, Ontario, and is the successor by amalgamation to Xstrata Canada Inc. ("XCI"), a corporation existing and incorporated under the laws of the Province of Ontario. Xstrata Canada is a wholly-owned indirect subsidiary of Xstrata. XCI was incorporated for the purpose of acquiring Xstrata Canada (formerly known as Falconbridge Limited), which corporation was the result of an amalgamation between Noranda Inc. and the former Falconbridge Limited that occurred on June 30, 2005. Xstrata Canada's financial year end is December 31.
11Xstrata Canada is principally engaged in the mining and production of copper, nickel and zinc.
12The authorized capital of Xstrata Canada consists of an unlimited number of Common Shares. As of December 10, 2011, there were issued and outstanding 377,994,397 common shares (the "Common Shares"), all of which are owned indirectly by Xstrata, and no issued and outstanding preferred shares.
13Xstrata Canada is a reporting issuer or its equivalent in each of the Jurisdictions.
14Xstrata Canada is not in default of any of the requirements of the Legislation.
15The Common Shares were delisted from the Toronto Stock Exchange (the "TSX") on November 1, 2006 and from the New York Stock Exchange on August 17, 2006. No securities of Xstrata Canada are listed on a securities exchange.
16As of December 10, 2011, Xstrata Canada had outstanding the following unsecured notes and debentures (collectively, the "Notes"):
(a) US$250 million principal amount of 6.2% notes due June 15, 2035;
(b) US$250 million principal amount of 5.5% notes due June 15, 2017;
(c) US$341 million principal amount of 6% notes due October 15, 2015;
(d) US$250 million principal amount of 5.375% notes due June 1, 2015;
(e) US$300 million principal amount of 7.25% notes due July 15, 2012; and
(f) US$250 million principal amount of 7.35% notes due June 5, 2012.
17The Notes are all fully and unconditionally guaranteed as to Xstrata Canada's payment obligations by Xstrata (the "Guarantee").
18The only securities issued by Xstrata Canada that are owned by parties unaffiliated with Xstrata are the Notes.
19Xstrata and Xstrata Canada currently have investment grade credit ratings. Xstrata's and Xstrata Canada's long-term debt securities are rated BBB+ by Standard & Poor's with a stable outlook, Baa2 by Moody's Investors Service with a positive outlook and A (low) by Dominion Bond Rating Service Limited with a stable trend. The Notes have the same ratings.
20As a result of the Guarantee, the holders of the Notes in effect have a greater interest in the financial condition of Xstrata than they have in Xstrata Canada alone.
21The Legislation currently provides certain exemptions from continuous disclosure and other obligations on reporting issuers incorporated in foreign jurisdictions that have a limited presence in the markets in the Jurisdictions. National Instrument 71-102 – Continuous Disclosure and Other Exemptions Relating to Foreign Issuers ("NI 71-102") provides numerous exemptions for such issuers from the continuous disclosure requirements of NI 51-102.
22In addition, reporting issuers which are not incorporated in a foreign jurisdiction are also relieved of a significant portion of the continuous disclosure obligations under NI 51-102 pursuant to section 13.4 of NI 51-102 where the reporting issuer has issued only non-convertible debt and preferred shares that have been fully and unconditionally guaranteed by an "SEC issuer".
23Xstrata is not an SEC issuer for the purposes of section 13.4 of NI 51‑102. As a result, the exemptions from NI 51-102 for credit support issuers who have issued only designated credit support securities fully and unconditionally guaranteed by an SEC issuer are not applicable to Xstrata Canada and Xstrata.
Decision
Each Decision Maker is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the following decision has been met.
- THE DECISION of the Decision Makers under the Legislation is that the Continuous Disclosure Relief and the Audit Committee Relief is granted to Xstrata Canada provided that:
(a) Xstrata is the direct or indirect beneficial owner of all of the issued and outstanding voting securities of Xstrata Canada;
(b) Xstrata is incorporated or organized under the laws of the U.K., and Canadian residents own, directly or indirectly, outstanding voting securities carrying no more than 50 per cent of the votes for the election of directors, and none of the following is true:
(i) the majority of the executive officers or directors of Xstrata are residents of Canada;
(ii) more than 50 per cent of the consolidated assets of Xstrata are located in Canada; and
(iii) the business of Xstrata is administered principally in Canada;
(c) Xstrata does not have a class of securities registered under section 12 of the 1934 Act and is not required to file reports under section 15(d) of the 1934 Act;
(d) Xstrata's ordinary shares are admitted to the premium listing segment of the Official List of the FSA and admitted to trading on the LSE's main market for listed securities and Xstrata is subject to and complies with the U.K. Disclosure Requirements and has filed all documents that it is required to have filed by the U.K. Disclosure Requirements;
(e) the U.K. is a designated foreign jurisdiction as such term is defined in section 1.1 of NI 71-102;
(f) the total number of equity securities of Xstrata owned, directly or indirectly, by residents of Canada does not exceed 10 per cent, on a fully-diluted basis, of the total number of Xstrata's equity securities, calculated in accordance with sections 1.2 and 1.3 of NI 71-102;
(g) Xstrata Canada does not issue any securities, and does not have any securities outstanding, other than:
(i) designated credit support securities (as such term is defined in NI 51-102) for which Xstrata has provided a full and unconditional guarantee;
(ii) securities issued to and held by Xstrata or an affiliate of Xstrata;
(iii) debt securities issued to and held by banks, loan corporations, loan and investment corporations, savings companies, trust corporations, treasury branches, savings or credit unions, financial services cooperatives, insurance companies or other financial institutions; or
(iv) securities issued under exemptions from the prospectus requirement in section 2.35 of National Instrument 45-106 – Prospectus and Registration Exemptions;
(h) Xstrata has provided a full and unconditional guarantee of the payments to be made by Xstrata Canada, as stipulated in the terms of the Notes or in one or more agreements governing the rights of holders of the Notes, that results in the holders of the Notes being entitled to receive payment from Xstrata within 15 days of any failure by Xstrata Canada to make a payment, and no other person or company has provided a guarantee or alternative credit support (as such term is defined in NI 51-102) for the payments to be made under any issued and outstanding securities of Xstrata Canada;
(i) Xstrata Canada files on SEDAR in electronic format copies of all documents Xstrata is required to file with the FSA under the U.K. Disclosure Requirements, at the same time or as soon as practicable after such documents are made public on the NSM, provided that Xstrata Canada shall not be required to file on SEDAR prospectuses submitted to the FSA in connection with securities offerings that do not take place in Canada;
(j) Xstrata Canada files on SEDAR in electronic format copies of all documents that are published by Xstrata via a Regulatory Information Service (the approved disseminators of regulatory information under the continuous disclosure regime in the U.K.) and are accessible by the public on the NSM (other than documents not required to be filed on SEDAR pursuant to paragraph (i) above), at the same time or as soon as practicable after such documents are published via a Regulatory Information Service;
(k) Xstrata's disclosure documents required to be filed electronically pursuant to paragraph (i) and (j) above comply with the requirements of NI 52-107 applicable to foreign issuers;
(l) at least once a year, Xstrata Canada discloses in, or as an appendix to, a document that Xstrata is required to file under the U.K. Disclosure Requirements and that Xstrata Canada files in the Jurisdictions:
(i) that Xstrata is subject to the regulatory requirements of the FSA; and
(ii) that pursuant to the terms of this decision, the Decision Makers have provided Xstrata Canada with exemptive relief from certain continuous disclosure requirements under the Legislation provided that, among other things, Xstrata Canada files in the Jurisdictions and provides to its securityholders the disclosure documents filed by Xstrata and provided to its securityholders pursuant to the U.K. Disclosure Requirements;
(m) Xstrata complies with the U.K. Disclosure Requirements in respect of making public disclosure of material information on a timely basis and immediately issues in the Jurisdictions and files any news release that discloses a material change in Xstrata's affairs;
(n) Xstrata Canada issues in the Jurisdictions a news release and files a material change report for all material changes in respect of the affairs of Xstrata Canada that are not also material changes in the affairs of Xstrata;
(o) Xstrata Canada files on SEDAR, in electronic format, in or with the copy of each consolidated interim financial report and consolidated annual financial statements of Xstrata filed pursuant to paragraph (i) above, for the periods covered by the consolidated interim financial report or consolidated annual financial statements of Xstrata filed, consolidating summary financial information for Xstrata presented with a separate column for each of the following:
(i) Xstrata;
(ii) Xstrata Canada;
(iii) any other subsidiaries of Xstrata on a combined basis;
(iv) consolidating adjustments; and
(v) the total consolidated amounts;
(p) the consolidating summary financial information required by paragraph (o) above shall be prepared on a basis consistent with section 13.4(1.1) of NI 51-102;
(q) so long as the securities issued by Xstrata Canada include debt, Xstrata Canada concurrently sends to all holders in the Jurisdictions of such securities all disclosure materials that are sent to holders of similar debt of Xstrata in the manner and at the time required by the U.K. Disclosure Requirements and if any such documents are required to be sent, at least once each year, Xstrata includes with such documents the disclosure required under paragraph (l) above;
(r) in the event that Xstrata Canada issues designated credit support securities that are non-convertible preferred shares or convertible preferred shares that are convertible into securities of Xstrata, Xstrata Canada concurrently sends to all holders in the Jurisdictions of such securities all disclosure materials that are sent to holders of similar preferred shares of Xstrata in the manner and at the time required by the U.K. Disclosure Requirements and if any such documents are required to be sent, at least once each year, Xstrata includes with such documents the disclosure required under paragraph (l) above;
(s) any amendments or supplements to disclosure documents of Xstrata filed by Xstrata Canada pursuant to this decision shall also be filed;
(t) the documents of Xstrata filed by Xstrata Canada pursuant to this decision comply with the requirements of NI 43-101;
(u) on or prior to March 30, 2012, Xstrata Canada files a technical report under NI 43-101 in respect of the Collahuasi Property;
(v) Xstrata Canada files a technical report under NI 43-101 to support scientific or technical information in Xstrata's disclosure to shareholders describing each mineral project on a property material to Xstrata;
(w) Xstrata Canada files such other documents relating to Xstrata that Xstrata would be required to file by current and future requirements of the Legislation if Xstrata were a designated foreign issuer (as defined in NI 71-102) and Xstrata complies with current and future requirements of the Legislation applicable to designated foreign issuers as if Xstrata were a designated foreign issuer, provided that Xstrata will not be considered to be a reporting issuer because it complies with such requirements in order to satisfy the conditions of this decision, and provided further that any requirement of the Legislation that requires designated foreign issuers to file disclosure documents may be satisfied by the filing of such documents by Xstrata Canada; and
(x) the Continuous Disclosure Relief and Audit Committee Relief will expire on the date that is five years after the date of this decision.
”Jo-Anne Matear”
- THE FURTHER DECISION of the Decision Makers under the Legislation is that the Certification Relief is granted to Xstrata Canada provided that:
(a) Xstrata Canada qualifies for the Continuous Disclosure Relief and Audit Committee Relief and Xstrata Canada and Xstrata are in compliance with the requirements and conditions set out in paragraph 1 above;
(b) Xstrata Canada is not required to, and does not, file its own annual or interim filings; and
(c) the Certification Relief will expire on the date that is five years after the date of this decision.
”Jo-Anne Matear”
- THE FURTHER DECISION of the Decision Makers is that the Insider Reporting Relief be granted to insiders of Xstrata Canada provided that:
(a) if the insider is not Xstrata,
(i) the insider does not receive, in the ordinary course, information as to material facts or material changes concerning Xstrata before the material facts or material changes are generally disclosed; and
(ii) the insider is not an insider of Xstrata in any capacity other than by virtue of being an insider of Xstrata Canada;
(b) if the insider is Xstrata, Xstrata does not beneficially own any designated credit support securities of Xstrata Canada;
(c) Xstrata Canada qualifies for the Continuous Disclosure Relief and Audit Committee Relief and Xstrata Canada and Xstrata are in compliance with the requirements and conditions set out in paragraph 1 above; and
(d) such Insider Reporting Relief will expire on the date that is five years after the date of this decision.
“Margot C. Howard” Commissioner Ontario Securities Commission
“Mary G. Condon” Vice-Chair Ontario Securities Commission