Headnote National Policy 11-203 Process for Exemptive Relief Application in Multiple Jurisdictions – Issuer granted relief from requirements of section 12.3 of National Instrument 41-101 General Prospectus Requirements in respect of future distribution of restricted securities and securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for restricted securities – relief subject to conditions.
OSC Rule 56-501 Restricted Shares – Exemption granted from the requirements of section 3.2 of OSC Rule 56-501 in respect of future exempt distributions of securities that are directly or indirectly, convertible into, or exercisable or exchangeable for restricted securities – relief subject to conditions.
Applicable Legislative Provisions
National Instrument 41-101 General Prospectus Requirements, s. 12.3 OSC Rule 56-501 Restricted Shares, s. 3.2
October 18, 2013
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
DREAM UNLIMITED CORP.
(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) that:
(a) the requirements under section 12.3 of National Instrument 41-101 General Prospectus Requirements (NI 41-101) for a prospectus distribution of restricted securities shall not apply to the Filer in connection with any future distributions of Class A subordinate voting shares of the Filer or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, Class A subordinate voting shares of the Filer, other than Class B common shares and First Preference Shares, Series 1 of the Filer (the 41-101 Exemption); and
(b) the requirements under section 3.2 of Ontario Securities Commission Rule 56-501 (OSC Rule 56-501) for a prospectus exemption to be available for a stock distribution of securities shall not apply to the Filer in connection with any future distributions of securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, Class A subordinate voting shares of the Filer (the 56-501 Exemption and, together with the 41-101 Exemption, the Exemptions 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; 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, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut in respect of the 41-101 Exemption.
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
The decision is based on the following facts represented by the Filer:
The Filer was created under the Business Corporations Act (Ontario) (the OBCA) by articles of arrangement filed pursuant to a plan of arrangement completed on May 30, 2013 involving, among others, Dundee Corporation (Dundee) and the holders of Class A subordinate voting shares, Class B common shares and First Preference Shares, Series 1 of Dundee (the Arrangement). The Filer’s head office is located in Toronto, Ontario.
The Filer has been a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut since May 30, 2013 and in Ontario since May 31, 2013. The Filer is not in default of securities legislation in any jurisdiction of Canada.
The Arrangement was approved at a meeting of holders of Class A subordinate voting shares, Class B common shares and First Preference Shares, Series 1 of Dundee (collectively, the Voting Shareholders) in accordance with the requirements of the OBCA and by a majority of the “disinterested” holders of Class A subordinate voting shares of Dundee pursuant to Multilateral Instrument 61-101 Protection of Security Holders in Special Transactions. In connection with the meeting, Dundee prepared and delivered an information circular to its Voting Shareholders that contained the disclosure regarding the Arrangement required by applicable securities laws (the Information Circular). Following the approval of the Arrangement by Voting Shareholders, the Arrangement was approved by the Superior Court of Justice of Ontario.
Pursuant to the Arrangement, DREAM acquired, directly or indirectly, 70% of the common shares and Class C preference shares of Dundee Realty from Dundee and DREAM issued Class A Subordinate Voting Shares (the DREAM Subordinate Voting Shares) to Dundee representing approximately 28.57% of the total number of outstanding DREAM Subordinate Voting Shares and Class B common shares of DREAM (the DREAM Common Shares).
In addition, pursuant to the Arrangement, holders of Dundee’s Class A subordinate voting shares and Class B common shares received, directly or indirectly, their proportionate interest in DREAM based on their Dundee share ownership through a distribution of DREAM Subordinate Voting Shares and DREAM Common Shares.
Additionally, pursuant to the Arrangement, holders of Dundee’s First Preference Shares, Series 1 (each of which had a liquidation amount of $25.00) received, for each share held, (i) a new First Preference Share, Series 4 of Dundee with a liquidation amount of $17.84 and an annual dividend of 5%, and (ii) a First Preference Share, Series 1 of DREAM (the DREAM Series 1 Preference Shares) with a liquidation amount of $7.16 and an annual dividend of 7%, payable quarterly.
At the time of completion of the Arrangement, the DREAM Subordinate Voting Shares were held by Dundee and the holders of the Class A subordinate voting shares of Dundee, and the DREAM Common Shares were held by the holders of the Class B common shares of Dundee. Holders of DREAM Subordinate Voting Shares and DREAM Common Shares are entitled to one vote and 100 votes, respectively, for each such share held on all votes taken at meetings of the shareholders of DREAM. Subject to the rights of holders of DREAM Series 1 Preference Shares and other shares of DREAM ranking prior to the DREAM Subordinate Voting Shares and DREAM Common Shares, the DREAM Subordinate Voting Shares and DREAM Common Shares participate equally, share for share, as to dividends. The DREAM Common Shares are convertible into DREAM Subordinate Voting Shares on a one-for-one basis at any time, subject to adjustment.
The Filer is seeking the 41-101 Exemption in connection with any future distributions of DREAM Subordinate Voting Shares, or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, DREAM Subordinate Voting Shares, by means of a prospectus, and the Filer is seeking the 56-501 Exemption in connection with any future distributions of securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, DREAM Subordinate Voting Shares, pursuant to a prospectus exemption. Dundee was a reporting issuer at the time of the Arrangement and it prepared and delivered the Information Circular to the Voting Shareholders in connection with the Arrangement. The Arrangement, being the restricted security reorganization pursuant to which DREAM Subordinate Voting Shares were created, received prior majority approval of the Voting Shareholders and of the holders of Class A subordinate voting shares of Dundee, excluding “interested parties” and “control persons” pursuant to Multilateral Instrument 61-101 – Protection of Security Holders in Special Transactions.
The Filer was not a reporting issuer at the time that it issued the DREAM Subordinate Voting Shares as part of the Arrangement. Upon completion of the Arrangement, the Filer became a reporting issuer and the Voting Shareholders (who had approved the Arrangement) became holders of DREAM Subordinate Voting Shares, DREAM Common Shares and DREAM Series 1 Preference Shares.
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 Exemptions Sought are granted provided that:
(a) in respect of the 41-101 Exemption, any subsequent restricted security reorganization, if any, carried out by the Filer related to the DREAM Subordinate Voting Shares, other than a restricted security reorganization that results only in the creation of a security that is not itself a subject security or a restricted security but that is, directly or indirectly, convertible into or exercisable or exchangeable for DREAM Subordinate Voting Shares, complies with the provisions of section 12.3 of NI 41-101; and
(b) in respect of the 56-501 Exemption, any subsequent restricted security reorganization, if any, carried out by the Filer related to the DREAM Subordinate Voting Shares, other than a restricted security reorganization that results only in the creation of a security that is not itself a subject security or a restricted security but that is, directly or indirectly, convertible into or exercisable or exchangeable for DREAM Subordinate Voting Shares, complies with the provisions of section 3.2 of OSC Rule 56-501.
“Shannon O’Hearn”
Shannon O’Hearn
Manager, Corporate Finance
Ontario Securities Commission