The Ontario Securities Commission granted an exemption to Starlight U.S. Multi-Family (No. 1) Core Plus Fund (the Filer) from the requirement to obtain separate minority approval for each class of units in connection with a proposed business combination transaction. The exemption was granted under section 9.1 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101), which typically requires separate class votes for transactions affecting different classes of securities.
The decision was based on several factors, including the lack of material difference in interest between holders of each class of units regarding the transaction, the presence of safeguards such as an independent committee, fairness opinions, and appraisals, and provisions in the limited partnership agreement that stipulate unitholders will vote as a single class unless materially differently affected.
The Filer’s limited partnership interests are divided into seven classes, with varying rights and obligations, but the partnership agreement provides for single-class voting on matters unless there is a material difference in effect on the classes. The transaction involved the acquisition of all issued and outstanding limited partnership interests in a subsidiary of the Filer by Sherrin U.S. Multi-Family (No. 1) Holding LP (the Purchaser).
The exemption was conditional upon holding a special meeting for Disinterested Unitholders to vote as a single class on the transaction, preparing and delivering an information circular in accordance with securities law, and including the fairness opinion from CIBC in the information circular. The fairness opinion must conclude that the consideration to be received is fair from a financial point of view to the Disinterested Unitholders.
The decision was made to prevent a small group of unitholders from having a de facto veto right over the transaction, which would not align with the reasonable expectations of the Filer’s unitholders. The exemption sought was granted, ensuring that the transaction could proceed with a single class vote by Disinterested Unitholders.