Brookfield Asset Management Ltd
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Issuer granted relief from requirement in restricted securities provisions of securities legislation to refer to restricted securities using a non-prescribed restricted security term -- relief granted subject to conditions, including condition that specified alternate term is used.
October 5, 2022
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 BROOKFIELD ASSET MANAGEMENT LTD.
DECISION
Background
The principal regulator in the Jurisdiction has received an application from Brookfield Asset Management Ltd. (the Filer) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that:
(a) the requirements in section 12.2 of National Instrument 41-101 -- General Prospectus Requirements (NI 41-101) to refer to the class A limited voting shares (Class A Shares), the class B limited voting shares (Class B Shares) and the special shares, series 1 (Special Limited Voting Shares) of the Filer using a term that includes appropriate restricted security terms and not to refer to the Class A Shares by a term that includes "common" unless the securities are common shares shall not apply in connection with: (i) a final long form prospectus in connection with the Special Distribution (as defined below) (the Special Distribution Prospectus); and (ii) other prospectuses that may be filed by the Filer under NI 41-101 or National Instrument 44-101 -- Short Form Prospectus Distributions, including a prospectus filed under National Instrument 44-102 -- Shelf Distributions (together with the Special Distribution Prospectus, the Prospectuses and each a Prospectus) (the Prospectus Disclosure Exemption);
(b) the requirements in Part 10 of National Instrument 51-102 -- Continuous Disclosure Obligations (NI 51-102) to refer to the Class A Shares, the Class B Shares and the Special Limited Voting Shares in prescribed continuous disclosure documents using a term that includes appropriate restricted security terms and not to refer to the Class A Shares, the Class B Shares or the Special Limited Voting Shares by a term that includes "common" unless the securities are common shares shall not apply (the NI 51-102 Exemption); and
(c) the requirements in (i) Part 2 of OSC Rule 56-501 -- Restricted Securities (OSC Rule 56-501) in respect of disclosure relating to the Class A Shares, the Class B Shares and the Special Limited Voting Shares in dealer and advisor documentation and rights offering circulars or offering memoranda of the Filer and (ii) Part 3 of OSC Rule 56-501 in respect of future stock distributions (as defined in OSC Rule 56-501) of Class A Shares or securities that are directly or indirectly convertible into or exercisable or exchangeable for Class A Shares shall not apply (the OSC Rule 56-501 Exemption, together with the Prospectus Disclosure Exemption and the NI 51-102 Exemption, 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; 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 on in each province and territory of Canada other than Ontario (collectively, the Non-Principal Jurisdictions).
Interpretation
Terms defined in National Instrument 14-101 Definitions, MI 11-102, NI 41-101, NI 51-102 and OSC Rule 56-501 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:
1. The Filer was incorporated on July 4, 2022 by Brookfield Asset Management Inc. (Brookfield) pursuant to an incorporation agreement dated the same date under the laws of British Columbia.
2. The head office of the Filer is located at EP 100, Brookfield Place, 181 Bay Street, Toronto, Ontario M5J 2T3 and the registered office of the Filer is located at 1055 West Georgia Street, Suite 1500, P.O. Box 11117, Vancouver, British Columbia V6E 4N7.
3. The Filer expects to file a preliminary long form prospectus with the securities regulatory authorities in each of the provinces and territories in Canada in connection with the planned special distribution (the Special Distribution) by Brookfield Asset Management Reinsurance Partners Ltd. (Brookfield Reinsurance) to the holders of its class A exchangeable limited voting shares (Brookfield Reinsurance Class A Shares) and class B limited voting shares (Brookfield Reinsurance Class B Shares) of Class A Shares of the Filer.
4. The Filer was established by Brookfield as a company through which investors, including the existing shareholders of Brookfield and Brookfield Reinsurance, can directly access its leading, pure play global alternative asset management business, to be owned and operated through Brookfield Asset Management ULC. Immediately before Brookfield Reinsurance effects the Special Distribution, Brookfield intends to implement a court approved plan of arrangement (the Arrangement). On completion of the Arrangement, (i) the shareholders of Brookfield will become shareholders of the Filer while retaining their shares of Brookfield, and (ii) Brookfield will change its name to "Brookfield Corporation".
5. The Filer is not a "reporting issuer" under the Securities Act (Ontario) or applicable securities legislation in any Non-Principal Jurisdiction. The Filer expects to become a reporting issuer in each of the provinces and territories of Canada upon obtaining a receipt for the Special Distribution Prospectus.
6. The Filer is not in default of the requirements of applicable securities legislation in the Jurisdictions.
7. The authorized share capital of the Filer currently consists of (a) an unlimited number of preference shares designated as Class A preference shares (issuable in series) (Class A Preference Shares), (b) an unlimited number of Class A Shares, (c) 85,120 Class B Shares and (d) an unlimited number of special shares (issuable in series), which an unlimited number of Special Limited Voting Shares have been authorized.
8. On completion of the Arrangement, the Class A Shares are expected to be listed on the Toronto Stock Exchange and the New York Stock Exchange.
9. The terms and conditions of the Class A Shares and Class B Shares are substantially equivalent, except for the differing voting rights attached to the two classes of shares, and are intended to be the same as the terms and conditions of Brookfield's class A limited voting shares (Brookfield Class A Shares) and Brookfield's class B limited voting shares (Brookfield Class B Shares).
10. The terms and conditions of the Special Limited Voting Shares will be substantially equivalent to the Class A Shares, except that the Special Limited Voting Shares are convertible into Class A Shares at any time at a conversion rate equal to one Class A Share for each Special Limited Voting Share. The holders of Special Limited Voting Shares are entitled to one vote per share and vote with the Class A Shares, as a class, with respect to any matters to be voted on by shareholders, including with respect to the election of one-half of the board of directors of the Filer (the Board).
11. Subject to the prior rights of the holders of the Class A Preference Shares and any other senior-ranking shares outstanding from time to time, holders of Class A Shares, Class B Shares and Special Limited Voting Shares rank on a parity with each other with respect to the payment of dividends (if, as and when declared by the Board) and the return of capital on the liquidation, dissolution or winding up of the Filer or any other distribution of the assets of the Filer among its shareholders for the purpose of winding up its affairs.
12. The Special Limited Voting Shares will be transitory in that they will be issued and then converted into Class A Shares as part of the Arrangement, which will be described in detail in the circular for the meeting of shareholders of Brookfield to approve the Arrangement (the Circular). The Special Limited Voting Shares will be issued to holders of Brookfield Class A Shares that elect to receive Class A Shares for their fair market value rather than on a rollover basis (each, an Electing Holder and, collectively, the Electing Holders). Immediately following completion of the Arrangement, the class of special shares and the Special Limited Voting Shares will be removed from the Filer's authorized capital such that its authorized share capital will consist of (i) an unlimited number of Class A Preference Shares, issuable in series (no series of which will be authorized), (ii) an unlimited number of Class A Shares and (iii) 85,120 Class B Shares.
13. Subject to applicable law and in addition to any other required shareholder approvals, all matters to be approved by shareholders of the Filer (other than the election of directors), must be approved by both: (i) a majority or, in the case of matters that require approval by a special resolution of shareholders, at least 66 2/3%, of the votes cast by holders of the Class A Shares who vote in respect of the resolution; and (ii) a majority or, in the case of matters that require approval by a special resolution of shareholders, at least 66 2/3%, of the votes cast by holders of the Class B Shares who vote in respect of the resolution. In addition, the holders of the Class A Shares will be entitled to elect one-half of the Board and the holders of the Class B Shares will be entitled to elect one-half of the Board.
14. The Class A Shares, the Class B Shares and the Special Limited Voting Shares qualify as "restricted securities" under NI 41-101 and NI 51-102 and as "restricted shares" under OSC Rule 56-501 (together, the Restricted Securities Provisions) because the Filer's constating documents contain provisions that restrict the voting rights of such securities in any election of the Board. Specifically, pursuant to the Filer's constating documents: (i) the holders of Class A Shares, together with the Special Limited Voting Shares, are entitled to elect one-half of the Board; (ii) the holders of Class B Shares are entitled to elect the other one-half of the Board; and (iii) neither the Class A Shares nor the Class B Shares, on their own right, have the right to vote for the entire Board.
15. The Filer believes that none of the "restricted security terms" or "restricted share terms" referred to in the Restricted Securities Provisions, namely, "non-voting security", "restricted voting security" and "subordinate voting security", accurately describe the Class A Shares, the Class B Shares or the Special Limited Voting Shares. It is submitted that, while the term "limited voting" is not enumerated as a category of restricted security in the Restricted Securities Provisions, in the circumstances it is the appropriate term to describe the Class A Shares, the Class B Shares and the Special Limited Voting Shares.
16. In any Prospectus and its other disclosure documents the Filer will refer to:
(a) the Class A Shares as "class A limited voting shares" and/or "class A shares";
(b) the Class B Shares as "class B limited voting shares" and/or "class B shares";
(c) the Class A Shares and the Class B Shares collectively as "shares" and the collective holders of those shares as "shareholders"; and
(d) the Special Limited Voting Shares once as "special shares, series 1" and then as "Manager Special Limited Voting Shares" or "Special Limited Voting Shares";
17. In any Prospectus and its other disclosure documents the Filer will refrain from: (a) using the terms "common share" or "per common share" when referring to the Class A Shares, the Class B Shares and/or the Special Limited Voting Shares; and (b) using the term "common equity" except for in the limited circumstances when it is discussing equity amounts as opposed to share numbers (e.g., dollar amounts and the values used in debt to capitalization ratios).
18. Referring to the Class A Shares and the Class B Shares using the terms set out in paragraph 16 above, which are used by Brookfield in its disclosure documents to refer to the Brookfield Class A Shares and the Brookfield Class B Shares, provides consistency in disclosure as the Class A Shares and the Class B Shares are intended to have the same terms and conditions as the Brookfield Class A Shares and the Brookfield Class B Shares.
19. Together, following completion of the Arrangement, holders of the Class A Shares and the Class B Shares will have all of the voting and other rights typically attached to common equity, including the right to elect all of the members of the Board.
20. Referring to the Class A Shares and Class B Shares collectively as "common equity" allows the Filer to delineate between the preference and non-preference equity in a manner that is familiar to the market, all while meeting the requirements of not referring to the Class A Shares or Class B Shares as "common" shares.
21. The Filer otherwise complies with Part 12 of NI 41-101 and Part 10 of NI 51-102.
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:
1. in connection with the Prospectus Disclosure Exemption, as it applies to any Prospectus filed by the Filer:
(a) representations 16 and 17 above continue to apply;
(b) the Filer has no restricted securities (as defined in section 1.1 of NI 41-101) issued and outstanding other than the Class A Shares, the Class B Shares and the Special Limited Voting Shares;
(c) the Prospectus includes disclosure consistent with representations 16 and 17 above;
(d) the Circular includes disclosure consistent with representations 10 and 12 above; and
(e) no special shares of the Filer, including the Special Limited Voting Shares, are issued other than the Special Limited Voting Shares to be issued to Electing Holders pursuant to the Arrangement and, upon completion of the Arrangement, all Special Limited Voting Shares will have been converted into Class A Shares and the class of special shares and the Special Limited Voting Shares will have been removed from the Filer's authorized capital.
2. in connection with the NI 51-102 Exemption, as it applies to disclosure documents filed by the Filer under NI 51-102:
(a) representations 16 and 17 above continue to apply;
(b) the Filer has no restricted securities (as defined in section 1.1(1) of NI 51-102) issued and outstanding other than the Class A Shares, the Class B Shares and the Special Limited Voting Shares;
(c) the Circular includes disclosure consistent with representations 10 and 12 above; and
(d) no special shares of the Filer, including the Special Limited Voting Shares, are issued other than the Special Limited Voting Shares to be issued to Electing Holders pursuant to the Arrangement and, upon completion of the Arrangement, all Special Limited Voting Shares will have been converted into Class A Shares and the class of special shares and the Special Limited Voting Shares will have been removed from the Filer's authorized capital.
3. in connection with the OSC Rule 56-501 Exemption, at the time the Filer relies on the Exemption Sought:
(a) representations 16 and 17 above continue to apply;
(b) the Filer has no restricted securities (as defined in section 1.1 of OSC Rule 56-501) issued and outstanding other than the Class A Shares, the Class B Shares and the Special Limited Voting Shares;
(c) the Circular includes disclosure consistent with representations 10 and 12 above; and
(d) no special shares of the Filer, including the Special Limited Voting Shares, are issued other than the Special Limited Voting Shares to be issued to Electing Holders pursuant to the Arrangement and, upon completion of the Arrangement, all Special Limited Voting Shares will have been converted into Class A Shares and the class of special shares and the Special Limited Voting Shares will have been removed from the Filer's authorized capital.