Brookfield Infrastructure Partners L.P. and Brookfield Infrastructure Corporation
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Filer wants to put in place an exchangeable security structure, but is unable to rely on the exemptions for designated exchangeable securities in applicable securities legislation -- Relief granted from continuous disclosure requirements, certification requirements, insider reporting requirements, audit committee requirements and corporate governance requirements -- Filer unable to rely on exemption for designated exchangeable securities in applicable securities legislation since the exchangeable securities are non-voting and its other outstanding securities are held by a different entity than the issuer of the underlying securities. Relief subject to conditions substantially similar to the conditions contained in section 13.3 of NI 51-102.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, 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 55-102 System for Electronic Disclosure by Insiders (SEDI), s. 6.1.
National Instrument 55-104 Insider Reporting Requirements and Exemptions, s. 10.1(2).
National Instrument 58-101 Disclosure of Corporate Governance Practices, ss. 1.3(c) and 3.1.
December 27, 2024
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 INFRASTRUCTURE PARTNERS L.P. AND BROOKFIELD INFRASTRUCTURE CORPORATION
DECISION
Background
Previous Decision
In 2021, Brookfield Infrastructure Partners L.P. (BIP) and Brookfield Infrastructure Holdings Corporation (formerly Brookfield Infrastructure Corporation) (BIPC) made an application to the Ontario Securities Commission (the Commission) under the securities legislation of the Jurisdiction of the principal regulator and obtained from the Commission, as the principal regulator, a decision In the Matter of Brookfield Infrastructure Corporation and Brookfield Infrastructure Partners L.P., dated October 26, 2021 (the Previous Decision) providing Brookfield Infrastructure Corporation Exchange Limited Partnership (the Issuer) with relief from the Continuous Disclosure Requirements, the Certification Requirements, the Insider Reporting Requirements, the Audit Committee Requirements and the Corporate Governance Requirements (each as defined below) to accommodate the issuance by the Issuer of class B exchangeable limited partnership units (the Exchangeable Units), which at such time were exchangeable into class A exchangeable subordinate voting shares (Exchangeable Shares) of BIPC.
Exemption Sought
This application is submitted by the Filers (as defined below) in connection with a reorganization that took place on December 24, 2024 pursuant to a plan of arrangement (the Reorganization). Pursuant to the Reorganization, Brookfield Infrastructure Corporation (New BIPC) became the successor to BIPC and the New Exchangeable Shares (as defined below) replaced the Exchangeable Shares for purposes of the Exchangeable Unit Provisions and the Support Agreement (each as defined below).
The principal regulator in the Jurisdiction has received an application from BIP and New BIPC (the Filers) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Issuer and, in respect of (c), the insiders of the Issuer, from the following requirements:
(a) the requirements of National Instrument 51-102 -- Continuous Disclosure Obligations (NI 51-102) (the Continuous Disclosure Requirements);
(b) the requirements of National Instrument 52-109 -- Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109) (the Certification Requirements);
(c) the insider reporting requirement (as defined in National Instrument 14-101 -- Definitions (NI 14-101) (the Insider Reporting Requirements);
(d) the requirements of National Instrument 52-110 -- Audit Committees (NI 52-110) (the Audit Committee Requirements); and
(e) the requirements of National Instrument 58-101 -- Disclosure of Corporate Governance Practices (NI 58-101) (the Corporate Governance Requirements),
in each case to accommodate the issuance by the Issuer of class B exchangeable limited partnership units (the Exchangeable Units) and the Reorganization (collectively, the Exemption Sought).
The Filers have applied for the Exemption Sought on substantially the same terms and conditions as the Previous Decision, except that the new decision being sought would replace references to BIPC with New BIPC, references to the Exchangeable Shares with the New Exchangeable Shares (as defined below), and update certain representations.
The Filers have applied for a revocation of the Previous Decision effective as of the date of this decision.
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 Filers have 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, the Northwest Territories, Yukon and Nunavut.
Interpretation
Terms defined in NI 14-101 and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by BIP and New BIPC:
BIP
1. BIP is a Bermuda exempted limited partnership that was established on May 21, 2007.
2. The limited partnership units of BIP (the BIP Units) are listed on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (the TSX) under the symbols "BIP" and "BIP.UN", respectively. BIP's authorized capital also includes Class A preferred limited partnership units, issuable in series, and general partnership units.
3. Holders of BIP Units do not have voting rights except in limited circumstances.
4. BIP is a reporting issuer in all of the provinces and territories of Canada (collectively, the Jurisdictions) and is an SEC foreign issuer within the meaning of section 1.1 of National Instrument 71-102 -- Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102) and satisfies its continuous disclosure obligations by complying with U.S. federal securities laws as is permitted under NI 71-102.
5. BIP's sole asset is its managing general partnership interest and preferred limited partnership interest in Brookfield Infrastructure L.P. (the Holding LP), a Bermuda exempted limited partnership that was established on August 17, 2007.
6. Brookfield Infrastructure Partners Limited, a Bermuda company, holds the general partner interest in BIP and is wholly-owned by Brookfield Corporation (Brookfield).
7. BIP, the Holding LP and certain of their subsidiaries have retained Brookfield and its related entities to provide management, administrative and advisory services under a master services agreement.
8. BIP is not in default of any requirement of the Legislation or equivalent legislation in any of the Jurisdictions.
New BIPC
9. New BIPC is a corporation existing and in good standing under the Business Corporations Act (British Columbia). New BIPC was incorporated on October 3, 2024. New BIPC's registered office is located at 1500 Royal Centre, 1055 West Georgia Street, P.O. Box 11117, Vancouver, British Columbia, V6E 4N7. New BIPC's head office is located at 250 Vesey Street, 15th Floor, New York, New York, 10281, United States of America.
10. The class A exchangeable subordinate voting shares of New BIPC (New Exchangeable Shares) are listed on the NYSE and the TSX under the symbol "BIPC".
11. New BIPC is a reporting issuer in all of the Jurisdictions.
12. The authorized share capital of New BIPC consists of: (a) an unlimited number of New Exchangeable Shares; and (b) an unlimited number of class B multiple voting shares (the New Class B Shares).
13. The holders of the New Class B Shares are entitled to cast three (3) times the number of votes attached to all of the New Exchangeable Shares, for a total of 75% of the votes of New BIPC. BIP, through Brookfield Infrastructure Holdings (Canada) Inc. (CanHoldco), currently indirectly owns all the New Class B Shares, which represent the residual right to participate in the assets of New BIPC upon liquidation or winding up of New BIPC.
14. The New Exchangeable Shares were provided with nominal voting rights in order to assist with index inclusion. The voting rights attached to the New Exchangeable Shares do not allow holders of New Exchangeable Shares to affect the control of New BIPC regardless of how many New Exchangeable Shares are outstanding.
15. New BIPC's sole material asset is its class A.1 shares and class B share of BIPC, and New BIPC will consolidate BIPC and its businesses in its financial statements.
16. Each New Exchangeable Share has been structured with the intention of providing an economic return equivalent to a BIP Unit, and the rights, privileges, restrictions and conditions attached to each New Exchangeable Share (the New Exchangeable Share Provisions) are such that each New Exchangeable Share is, as nearly as practicable, functionally and economically, equivalent to a BIP Unit. In particular:
(a) each New Exchangeable Share is exchangeable at the option of a holder for one (1) BIP Unit (subject to adjustment to reflect certain capital events) or its cash equivalent (the form of payment to be determined at the election of New BIPC);
(b) the New Exchangeable Shares are redeemable by New BIPC at any time (including following a notice requiring redemption having been given by BIP) for BIP Units (or their cash equivalent, at New BIPC's election) on a one-for-one basis (subject to adjustment to reflect certain capital events);
(c) upon a liquidation, dissolution or winding up of New BIPC, holders of New Exchangeable Shares are entitled to receive BIP Units (or their cash equivalent, at New BIPC's election) on a one-for-one basis (subject to adjustment to reflect certain capital events) and not any remaining property or assets of New BIPC following such payment (a New BIPC Liquidation);
(d) upon a liquidation, dissolution or winding up of BIP, including where substantially concurrent with a New BIPC Liquidation, all of the New Exchangeable Shares will be automatically redeemed for BIP Units (or their cash equivalent, at New BIPC's election) on a one-for-one basis (subject to adjustment to reflect certain capital events); and
(e) subject to applicable law and in accordance with the New Exchangeable Share Provisions, each New Exchangeable Share entitles the holder to dividends from New BIPC payable at the same time as, and equivalent to, each distribution on a BIP Unit. The New Exchangeable Share Provisions also provide that if a distribution is declared on the BIP Units and an equivalent dividend is not declared and paid concurrently on the New Exchangeable Shares, then the undeclared or unpaid amount of such dividend accrues and accumulates and is to be paid upon the first to occur of any of the circumstances contemplated by paragraphs (a) to (d) above, if not yet paid.
17. New BIPC is not in default of any requirements of the Legislation or equivalent legislation in any of the Jurisdictions.
18. The relief granted by the OSC to BIP and New BIPC dated December 24, 2024 relating to the requirements of Part 5 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions is conditioned on, among other things: BIP owning, directly or indirectly, all of the voting securities of New BIPC (other than the New Exchangeable Shares); BIP having voting control over New BIPC and controlling the appointment and removal of directors of New BIPC; and no material changes being made to the New Exchangeable Share Provisions.
The Issuer and the Acquisition
19. The Issuer was formed under the laws of the Province of Alberta on April 21, 2021 as an indirect subsidiary of BIP. The registered and head office of the Issuer is located at Suite 1210 -- 225 6th Ave SW, Calgary, Alberta T2P 1N2.
20. The Issuer was formed in connection with the bid by Bison Acquisition Corp. (the Purchaser) to acquire any or all of the common shares (the IPL Common Shares) of Inter Pipeline Ltd. (IPL) not already owned by BIP or its institutional partners (the Bid).
21. The Bid was made pursuant to a takeover bid circular dated February 22, 2021, as amended and extended.
22. The consideration offered to holders of IPL Common Shares in connection with the Bid consisted of: (a) cash; (b) Exchangeable Shares; or (c) Exchangeable Units (only in the case of eligible Canadian holders of IPL Common Shares), at the election of each holder of IPL Common Shares.
23. The Bid expired on September 3, 2021 and 286,254,231 IPL Common Shares were tendered and taken-up under the Bid.
24. An aggregate of approximately 17.9 million Exchangeable Shares and 4 million Exchangeable Units were issued to former holders of IPL Common Shares in connection with the Bid.
25. The Purchaser and IPL entered into an arrangement agreement dated September 3, 2021, as amended, pursuant to which the Purchaser and the Issuer proposed to acquire all of the issued and outstanding IPL Common Shares not otherwise owned by BIP or its institutional partners by way of a plan of arrangement under section 193 of the Business Corporations Act (Alberta) (the Arrangement). Pursuant to the Arrangement, holders of IPL Common Shares were entitled to elect to receive the same consideration as set forth in the Bid for each IPL Common Share.
26. A special meeting of the holders of IPL Common Shares was held on October 28, 2021 and the Arrangement was completed on October 28, 2021.
27. BIPC is a mutual fund corporation for Canadian tax purposes and is therefore restricted from holding "taxable Canadian property", including the IPL Common Shares, exceeding a certain percentage of its total assets.
28. As a result of BIPC's status as a mutual fund corporation for Canadian tax purposes, the Exchangeable Shares issued as consideration in connection with the acquisition of IPL were delivered to holders of IPL Common Shares by the Purchaser and not by BIPC.
29. A rollover for tax purposes involving the Exchangeable Shares could only be obtained by transferring the IPL Common Shares to BIPC directly in exchange for the Exchangeable Shares as consideration.
30. The Exchangeable Units were created in order to offer an exchangeable security that can be delivered to eligible Canadian holders of IPL Common Shares seeking a rollover for tax purposes, which was not available to those who elected to receive Exchangeable Shares.
31. The Exchangeable Units are not and will not be listed on a stock exchange nor are they transferrable.
32. The authorized capital of the Issuer consists of: (a) class A limited partnership units (the LP Units); (b) Exchangeable Units; and (c) general partner units (the GP Units).
33. BIP indirectly owns all the LP Units and the GP Units, and therefore indirectly controls 100% of the voting securities of the Issuer.
34. The Issuer distributed the Exchangeable Units to the public under the Bid in reliance upon section 2.16 of National Instrument 45-106 -- Prospectus Exemptions (NI 45-106). The distribution of Exchangeable Units under the Arrangement was made in reliance upon section 2.11 of NI 45-106.
35. The Issuer became a reporting issuer in certain of the Jurisdictions in connection with the issuance of Exchangeable Units to the public under the Bid and became a reporting issuer in the remaining Jurisdictions in which IPL was a reporting issuer upon completion of the Arrangement, and the Issuer, accordingly, is subject to the continuous disclosure and insider reporting requirements of the Legislation applicable to reporting issuers. Accordingly, the Exemption Sought relates to exemptions from the continuous disclosure and insider reporting requirements of the Legislation that will apply to the Issuer.
The Exchangeable Units and the Relationship between BIP, BIPC, New BIPC and the Issuer
36. Pursuant to the Reorganization, among other things, all holders of Exchangeable Shares, other than Brookfield and its subsidiaries, exchanged their Exchangeable Shares for New Exchangeable Shares on a one-for-one basis.
37. The Exchangeable Units were created with the intention to provide eligible Canadian holders of IPL Common Shares a rollover for tax purposes that is not otherwise available in connection with the receipt of the Exchangeable Shares (now New Exchangeable Shares). The rights, privileges, restrictions and conditions attached to each Exchangeable Unit (the Exchangeable Unit Provisions) are structured such that, by virtue of its rights, entitlements and otherwise, upon completion of the Reorganization, each Exchangeable Unit provides the holder with economic rights which are, as nearly as possible except for tax implications, equivalent to a New Exchangeable Share. In particular:
(a) each Exchangeable Unit is exchangeable at the option of a holder for one New Exchangeable Share (subject to adjustment to reflect certain capital events) (an Exchange);
(b) upon a liquidation, dissolution or winding up of the Issuer (a Liquidation), holders of Exchangeable Units shall be entitled to receive from the assets of the Issuer a liquidation payment that will be satisfied by issuance of New Exchangeable Shares on a one-for-one basis (subject to adjustment to reflect certain capital events);
(c) commencing on the tenth anniversary of the take-up of the IPL Common Shares under the Bid (or earlier upon the occurrence of certain events), BIP has the right to purchase (directly or indirectly) all of the then outstanding Exchangeable Units for New Exchangeable Shares on a one-for-one basis (subject to adjustment to reflect certain capital events) (a Final Exchange);
(d) upon a liquidation, dissolution or winding up of the Issuer, BIP has an overriding right to purchase (directly or indirectly) all but not less than all of the then outstanding Exchangeable Units for New Exchangeable Shares on a one-for-one basis (subject to adjustment to reflect certain capital events);
(e) upon a liquidation, dissolution or winding up of New BIPC (a BIPC Liquidation), all of the Exchangeable Units will be automatically purchased by BIP (directly or indirectly) for New Exchangeable Shares on a one-for-one basis (subject to adjustment to reflect certain capital events); and
(f) subject to applicable law and in accordance with the Exchangeable Unit Provisions, each Exchangeable Unit will entitle the holder to distributions from New BIPC payable at the same time as, and equivalent to, each dividend on a New Exchangeable Share. The Exchangeable Unit Provisions also provide that if a dividend is declared on the New Exchangeable Shares and an equivalent distribution is not declared and paid concurrently on the Exchangeable Units, then the undeclared or unpaid amount of such dividend accrues and accumulates and is to be paid upon the first to occur of any of the circumstances contemplated by paragraphs (a) to (e) above, if not yet paid.
38. BIP, New BIPC and the Issuer, among others, are party to a support and exchange agreement (the Support Agreement), pursuant to which BIP and New BIPC covenanted that, so long as Exchangeable Units not owned by BIP are outstanding, (a) BIP will take all actions reasonably necessary to enable the Issuer to pay the amount payable upon an Exchange, Final Exchange, Liquidation or BIPC Liquidation, and (b) BIP shall ensure that the Issuer has sufficient money or other assets available to enable the due declaration and due and punctual payment of a distribution on the Exchangeable Units equivalent to the distribution on the New Exchangeable Shares.
39. The Exchangeable Units do not have voting rights in respect of New BIPC.
40. BIP controls, directly or indirectly, the Issuer and New BIPC. As a result, BIP will consolidate New BIPC and the Issuer, in its financial statements.
41. The Exchangeable Units are disclosed as a non-controlling interest in the financial statements of BIP.
42. The LP Units of the Issuer are owned by CanHoldco and the GP Unit is held by Brookfield Infrastructure Corporation Exchange GP Inc., an indirect subsidiary of BIP.
43. New BIPC is the "parent issuer" (as defined in Part 13.3 of NI 51-102) in respect of the Exchangeable Units issued by the Issuer and the New Exchangeable Shares are therefore the "underlying security" (as defined in Part 13.3 of NI 51-102).
44. The Issuer is an "exchangeable security issuer" (as defined in Part 13.3 of NI 51-102) in respect of the Exchangeable Units.
45. The Exchangeable Units are a "designated exchangeable security" (as defined in Part 13.3 of NI 51-102) but for the fact that they do not have voting rights in respect of New BIPC.
46. The Issuer satisfies the requirements of section 13.3(2) of NI 51-102 in all respects, other than the fact that (a) BIP, rather than New BIPC (the parent issuer), is the beneficial owner of all the issued and outstanding voting securities of the exchangeable security issuer as required by section 13.3(2)(a) of NI 51-102, and (b) the Exchangeable Units do not have voting rights in respect of New BIPC.
47. The Exemption Sought is required in order for the provisions of sections 13.3(2) and 13.3(3) of NI 51-102 to apply to New BIPC and the Issuer, and the relationship between New BIPC and the Issuer.
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 Previous Decision is revoked and the Exemption Sought is granted provided that:
1. in respect of the Continuous Disclosure Requirements, the Issuer and the Filers continue to satisfy the conditions set out in section 13.3(2) of NI 51-102, except as modified as follows:
(a) notwithstanding that the Exchangeable Units do not provide their holders with voting rights, any reference to designated exchangeable security in section 13.3 of NI 51-102 shall be deemed to include the Exchangeable Units which are, as nearly as possible except for tax implications, equivalent to New Exchangeable Shares, and
(b) the Filers do not have to comply with the condition in section 13.3(2)(a) if:
(i) all of the voting securities of the Issuer are owned, directly or indirectly, by BIP; and
(ii) there are no material changes to the Exchangeable Unit Provisions and the New Exchangeable Share Provisions, as described above,
2. in respect of the Certification Requirements, the Audit Committee Requirements and the Corporate Governance Requirements, the Filers and the Issuer continue to satisfy the conditions for relief from the Continuous Disclosure Requirements set forth above,
3. in respect of the Insider Reporting Requirements, an insider of the Issuer (an Issuer Insider) can only rely on the Exemption Sought so long as:
(a) the Issuer Insider complies with the conditions in sections 13.3(3)(a) and (c) of NI 51-102, and
(b) the Filers and the Issuer continue to satisfy the conditions for relief from the Continuous Disclosure Requirements set forth above.
OSC File #: 2024/0536