The Securities Commission has granted an exemption from the prospectus requirement to a South African company (the Filer) for the distribution of shares of another South African entity (GND) to its Canadian shareholders. This distribution is to be executed as a dividend in specie on a pro rata basis. The exemption was necessary because the distribution did not fall under any existing legislative exemptions, and the Filer is not a reporting issuer in Canada.
The Filer has a de minimis presence in Canada, with Canadian shareholders holding approximately 0.01% of its outstanding ordinary shares. The Filer and GND are both subject to South African regulatory requirements and are not in default of any Canadian securities legislation.
The key reasoning for the exemption includes the minimal impact on Canadian markets, the lack of an investment decision required from Canadian shareholders to receive the distribution, and the fact that there will be no active trading market for the GND shares in Canada post-distribution.
The outcome is that the Filer is allowed to distribute the GND shares to its Canadian shareholders without issuing a prospectus, under the condition that any first trade of these shares in Canada must comply with certain conditions outlined in National Instrument 45-102 – Resale of Securities or OSC Rule 72-503 – Distributions Outside Canada to not be considered a distribution.
The decision is based on the Securities Act, R.S.O. 1990, c. S.5, as amended, specifically sections 53 and 74(1), and is supported by the National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.