Brookfield Reinsurance Ltd. – s. 6.1 of NI 62-104

Headnote

Section 6.1 of NI 62-104 -- Issuer bid -- relief from requirements applicable to issuer bids in Part 2 of NI 62-104 -- issuer proposes to up to 4,000,000 of its exchangeable shares from its paired entity in connection with the establishment of its escrowed stock plan -- the issuer's exchangeable shares are exchangeable into shares of the paired entity -- the consideration that will be paid by the issuer for its exchangeable shares will be the shares of the paired entity into which the exchangeable shares are exchangeable, on a one-for-one basis -- the escrowed stock plan was approved by a majority of the votes cast by holders of exchangeable shares and the issuer's class B limited voting shares at a duly called meeting of shareholders -- the issuer's management information circular in respect of the shareholder meeting disclosed that the issuer had applied for the relief and described the nature of the relief -- requested relief granted, subject to conditions.

Statutes Cited

National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c.S.5, AS AMENDED AND IN THE MATTER OF BROOKFIELD REINSURANCE LTD.

ORDER

(Section 6.1 of National Instrument 62-104)

UPON the application (the "Application") of Brookfield Reinsurance Ltd. (the "Issuer") to the Ontario Securities Commission (the "Commission") for an order pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids ("NI 62-104") exempting the Issuer from the requirements applicable to issuer bids in Part 2 of NI 62-104 (the "Issuer Bid Requirements") in respect of the proposed purchases, from time to time, by the Issuer of up to an aggregate of 4,000,000 Exchanged Shares (as defined below) from Brookfield Corporation ("BN") and related companies (collectively, the "BN Entities") in exchange for BNRE Owned BN Shares (as defined below) on the basis of one BNRE Owned BN Share for each Exchanged Share, in connection with the Escrowed Stock Plan (as defined below) (such purchases, the "Proposed Purchases", and such exemption, the "Requested Relief");

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Issuer having represented to the Commission that:

1. The Issuer is an exempted company limited by shares, established, registered and in good standing under the laws of Bermuda. The Issuer's registered and head office is located at Ideation House, 1st Floor, 94 Pitts Bay Road, Pembroke HM08, Bermuda.

2. The Issuer is a reporting issuer in all of the provinces and territories of Canada 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. The Issuer is not in default of any requirement of securities legislation in the jurisdictions in which it is a reporting issuer.

3. The authorized share capital of the Issuer consists of:

(a) 1,000,000,000 class A exchangeable limited voting shares (the "Class A Exchangeable Shares"), of which there were 16,899,571 Class A Exchangeable Shares issued and outstanding as of June 14, 2024;

(b) 500,000,000 class A-1 exchangeable non-voting shares (the "Class A-1 Exchangeable Shares", and together with Class A Exchangeable Shares, the "Exchangeable Shares"), of which there were 26,505,771 Class A-1 Exchangeable Shares issued and outstanding as of June 14, 2024;

(c) 500,000 class B limited voting shares, of which there were 24,000 class B limited voting shares issued and outstanding as of June 14, 2024;

(d) 1,000,000,000 class C non-voting shares, of which there were 128,643,406 class C non-voting shares issued and outstanding as of May 31, 2024;

(e) 1,000,000,000 class A junior preferred shares (issuable in series), of which there were 98,351,547 class A junior preferred shares, series 1, and 2,108,733 class A junior preferred shares, series 2 issued and outstanding, in each case, as of May 31, 2024;

(f) 1,000,000,000 class B junior preferred shares (issuable in series), of which there were no class B junior preferred shares issued and outstanding as of May 31, 2024;

(g) 100,000,000 class A senior preferred shares (issuable in series), of which there were no class A senior preferred shares issued and outstanding as of May 31, 2024; and

(h) 100,000,000 class B senior preferred shares (issuable in series), of which there were no class B senior preferred shares issued and outstanding as of May 31, 2024.

4. The Class A Exchangeable Shares and the Class A-1 Exchangeable Shares are listed on the New York Stock Exchange ("NYSE") and the Toronto Stock Exchange ("TSX") under the symbols "BNRE" and "BNRE.A", respectively. The Exchangeable Shares are the only securities of the Issuer that are listed for trading on any published market.

5. The class C non-voting shares are the only equity securities of the Issuer (within the meaning of NI 62-104) and are all beneficially owned, directly or indirectly, by BN.

6. BN is a corporation existing and in good standing under the Business Corporations Act (Ontario). BN's registered and head office is located at Suite 100, Brookfield Place, 181 Bay Street, Toronto, Ontario, M5J 2T3.

7. BN is a reporting issuer in all of the provinces and territories of Canada and is not in default of any requirement of securities legislation in the jurisdictions in which it is a reporting issuer.

8. The authorized capital of BN consists of:

(a) an unlimited number of class A limited voting shares (the "BN Class A Shares"), of which there were 1,642,086,272 BN Class A Shares issued and outstanding as of April 18, 2024;

(b) 85,120 class B limited voting shares, of which there were 85,120 class B limited voting shares issued and outstanding as of April 18, 2024; and

(c) an unlimited number of preference shares designated as class A preference shares (issuable in series), of which the following were issued and outstanding as of March 4, 2024:

(i) 10,220,175 Class A Preference Shares, Series 2;

(ii) 3,983,910 Class A Preference Shares, Series 4;

(iii) 8,792,596 Class A Preference Shares, Series 13;

(iv) 7,840,204 Class A Preference Shares, Series 17;

(v) 7,681,088 Class A Preference Shares, Series 18;

(vi) 10,808,027 Class A Preference Shares, Series 24;

(vii) 9,770,928 Class A Preference Shares, Series 26;

(viii) 9,233,927 Class A Preference Shares, Series 28;

(ix) 9,787,090 Class A Preference Shares, Series 30;

(x) 11,750,299 Class A Preference Shares, Series 32;

(xi) 9,876,735 Class A Preference Shares, Series 34;

(xii) 7,842,909 Class A Preference Shares, Series 36;

(xiii) 7,830,091 Class A Preference Shares, Series 37;

(xiv) 7,906,132 Class A Preference Shares, Series 38;

(xv) 11,841,025 Class A Preference Shares, Series 40;

(xvi) 11,887,500 Class A Preference Shares, Series 42;

(xvii) 9,831,929 Class A Preference Shares, Series 44;

(xviii) 11,740,797 Class A Preference Shares, Series 46;

(xix) 11,885,972 Class A Preference Shares, Series 48;

(xx) 3,320,486 Class A Preference Shares, Series 51; and

(xxi) 1,177,580 Class A Preference Shares, Series 52.

9. The BN Class A Shares are listed on the NYSE and the TSX under the symbol "BN".

10. Each Class A-1 Exchangeable Share is convertible into one Class A Exchangeable Share.

11. Each Exchangeable Share is the economic equivalent of a BN Class A Share, and each Exchangeable Share is exchangeable with BN at the option of the holder of the Exchangeable Share for one newly issued BN Class A Share or its cash equivalent (the form of payment to be determined at the election of BN). As of July 22, 2024, all exchanges of Exchangeable Shares have been satisfied through the delivery of BN Class A Shares (each such exchanged Exchangeable Share, an "Exchanged Share").

12. It is not the intention of either the Issuer or BN that BN hold Exchangeable Shares on an ongoing basis. Accordingly, following exchanges of Exchangeable Shares, BN has sought to dispose of Exchanged Shares in a manner that is not disruptive to the share price, volume or liquidity of the Exchangeable Shares, which has resulted in BN: (a) converting Exchanged Shares into the Issuer's class C non-voting shares, resulting in the cancellation of those Exchanged Shares; or (b) transferring the Exchanged Shares pursuant to private sales or to companies established for the purposes of BN's escrowed stock plan ("BN ESPCos"), an equity compensation arrangement for BN's executives.

13. BN is not an "insider" of the Issuer (as such term is defined in the Securities Act (Ontario)) or a "related party" of the Issuer (within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions).

14. The Issuer has determined to establish a new share compensation arrangement (the "Escrowed Stock Plan") for certain designated executives or other persons designated by the Issuer's board of directors (the "Board", and such persons, the "Participants") to further align the interests of the Participants with those of the Issuer's shareholders in a manner that is less dilutive than alternative long term ownership plans.

15. Pursuant to the Escrowed Stock Plan:

(a) from time to time, the Issuer will form one or more private companies (each an "ESPCo") that is capitalized with common shares and preferred shares that are issued by the ESPCo to the Issuer;

(b) the ESPCo will directly or indirectly acquire (i) Exchangeable Shares in the open market pursuant to a normal course issuer bid established by the Issuer, or (ii) Exchanged Shares from BN Entities pursuant to Proposed Purchases;

(c) Participants will be awarded with non-voting shares of an ESPCo (the "Escrowed Shares") or provided an election to contribute Exchangeable Shares or other Escrowed Shares as consideration for the Escrowed Shares;

(d) Escrowed Shares are generally expected to vest as to 20% each year over five (5) years from the grant date, subject to the Participant's continued employment with the Issuer or BN Entities;

(e) following the vesting date of the Escrowed Shares, generally up to a maximum of 10 years following the initial grant date, Participants will be entitled to exchange their respective Escrowed Shares for Exchangeable Shares issued by the Issuer from treasury. The value of the Exchangeable Shares to be issued by the Issuer will be equal to the increase in value of the Exchangeable Shares held by the ESPCo since the grant date of the Escrowed Shares, based on the volume-weighted average price of the Exchangeable Shares on the NYSE on the date of the exchange; and

(f) following the exchange of Escrowed Shares for newly issued Exchangeable Shares, a corresponding number of Exchangeable Shares will be cancelled by the Issuer, resulting in no net dilution to existing shareholders of the Issuer.

16. The Escrowed Stock Plan will result in no net dilution over time because any newly issued Exchangeable Shares under the Escrowed Stock Plan will be fully offset by the cancellation of Exchangeable Shares.

17. Dividends on the Exchangeable Shares held by an ESPCo will be used to pay dividends on the preferred shares of the ESPCo that are held by the Issuer and on certain Escrowed Shares held by Participants who contributed the underlying Exchangeable Shares to the ESPCo in connection with the award of Escrowed Shares.

18. None of the Exchangeable Shares held by an ESPCo will be voted.

19. A maximum of 4,000,000 Exchangeable Shares may be issued under the Escrowed Stock Plan.

20. The Board has determined that:

(a) the establishment of the Escrowed Stock Plan is in the best interests of the Issuer;

(b) the Proposed Purchases are the best way to establish the Escrowed Stock Plan due to the trading volume in the Exchangeable Shares; and

(c) the Proposed Purchases will minimize and/or defer the reduction in the number of Exchangeable Shares resulting from exchanges (if Exchanged Shares are instead converted by BN into the Issuer's class C non-voting shares).

21. Pursuant to the Proposed Purchases, the consideration paid by the Issuer for each Exchanged Share will be one BN Class A Share. The Issuer holds 32,934,574 BN Class A Shares (the "BNRE Owned BN Shares") as a result of an exchange offer (the "Exchange Offer") made by the Issuer to holders of BN Class A Shares pursuant to a short form prospectus dated November 1, 2023 (the "Prospectus"). The Prospectus indicated that, following the completion of the Exchange Offer, it was expected that BNRE Owned BN Shares would be returned by the Issuer to BN by way of a dividend or distribution on the Issuer's class C non-voting shares, or other similar transaction, with such BNRE Owned BN Shares then being cancelled by BN or, subject to applicable law and regulatory requirements, retained by the Issuer. The Issuer wishes to use up to 4,000,000 of the BNRE Owned BN Shares as consideration for the Proposed Purchases.

22. The Proposed Purchases are subject to approval by the Board based on a recommendation by the Compensation Committee of the Board, which consists entirely of independent directors. The Board, based on a recommendation by the Compensation Committee of the Board, approved the adoption of the Escrowed Stock Plan on April 2, 2024.

23. The purchase of Exchanged Shares pursuant to Proposed Purchases will be made by the Issuer in order to establish the Escrowed Stock Plan and accordingly, the Proposed Purchases constitute "issuer bids" by the Issuer for the purposes of NI 62-104 to which the Issuer Bid Requirements would apply.

24. The 4,000,000 Exchanged Shares represent approximately 9.22% of the Exchangeable Shares issued and outstanding as at June 14, 2024.

25. The Proposed Purchases will not adversely affect the Issuer or its shareholders.

26. The Escrowed Stock Plan constitutes a "security-based compensation arrangement" under applicable TSX rules, which require that the Escrowed Stock Plan be approved by a majority of the votes cast by the holders of Class A Exchangeable Shares and the class B limited voting shares, each voting as a separate class. The Escrowed Stock Plan received the requisite shareholder approval at the Issuer's annual general and special meeting of shareholders that was held on July 22, 2024 (the "Meeting").

27. The Issuer's management information circular in respect of the Meeting (the "Circular") disclosed that the Issuer had applied for the Requested Relief and described the nature of the Requested Relief. The Circular also disclosed that BN had applied to the Commission for an exemption from the Issuer Bid Requirements in respect of the up to 4,000,000 BNRE Owned BN Shares that it will receive from the Issuer pursuant to the Proposed Purchases as consideration for an equal number of Exchanged Shares.

28. Given the economic equivalence of the Exchangeable Shares to BN Class A Shares, and the fact that Exchangeable Shares are exchangeable on a one-for-one basis for BN Class A Shares, the adoption of the Escrowed Stock Plan is also conditional on its approval by (i) BN's board of directors, and (ii) BN's shareholders at a duly called meeting of shareholders. The board of directors of BN approved the adoption of the Escrowed Stock Plan on March 25, 2024 and the Escrowed Stock Plan received the requisite shareholder approval at BN's annual general and special meeting of shareholders that was held on June 7, 2024.

29. The Issuer and BN will not complete Proposed Purchases at any time that either of them is aware of any "material change" or "material fact" (each as defined in the Securities Act (Ontario)) in respect of the Issuer, BN, the Exchangeable Shares, or the BN Class A Shares that has not been generally disclosed.

30. Other than the BNRE Owned BN Shares, no fee or other consideration will be paid by the Issuer in connection with the purchase of Exchanged Shares.

31. The Issuer will issue and file a press release announcing receipt of the Requested Relief prior to the completion of the first Proposed Purchase.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to section 6.1 of NI 62-104 that the Issuer be exempt from the Issuer Bid Requirements in connection with the Proposed Purchases, provided that:

(a) at the time of the Proposed Purchases, neither the Issuer nor BN is aware of any "material change" or "material fact" (each as defined in the Securities Act (Ontario)) in respect of the Issuer, BN, the Exchangeable Shares, or the BN Class A Shares that has not been generally disclosed; and

(b) other than the BNRE Owned BN Shares, no fee or other consideration will be paid by the Issuer in connection with the purchase of Exchanged Shares.

DATED at Toronto, Ontario this 22nd day of July, 2024.