McDonald-s Restaurants of Canada Limited et al.

Headnote

NP 11-203 -- Exemption from prospectus and dealer registration requirements for trades in securities to franchisees in connection with national and regional advertising programs of franchisor -- Trades to more than 50 franchisees.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5., as am. ss. 25, 53, 74(1).

January 23, 2009

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

MCDONALD'S RESTAURANTS OF CANADA LIMITED

(MRCL), NATIONAL MARKETING FORUM INC.

FORUM DE MARKETING NATIONAL INC. (NMF) AND

REGIONAL MARKETING FORUM OF ONTARIO INC.

(RMF ONTARIO) (THE FILERS)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers (the Application) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from the prospectus requirement and dealer registration requirement in connection with certain distributions to Franchisees (as defined below) of NMF Class A Shares (as defined below) and RMF Ontario Class A Shares (as defined below) (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 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 each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Yukon Territory and the Northwest Territories.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

"Franchisee" means franchisees of MRCL owning or operating one or more McDonald's restaurants in Canada and Ontario.

"Private Issuer Exemption" means the "private issuer" exemption contained in section 2.4 of National Instrument 45-106 Prospectus and Registration Exemptions.

Representations

This decision is based on the following facts represented by the Filers:

1. NMF was incorporated under the federal laws of Canada on November 28, 2008. NMF's head office is located in Toronto, Ontario.

2. RMF Ontario was incorporated under the federal laws of Canada on November 28, 2008. RMF Ontario's head office is located in Toronto, Ontario.

3. The authorized capital of the NMF consists of an unlimited number of voting common shares (NMF Common Shares) and an unlimited number of voting Class A special shares (NMF Class A Shares). As at November 28, 2008, one (1) NMF Common Share and one (1) NMF Class A Share are issued and outstanding. The articles of incorporation of the NMF (NMF Articles) restrict the transfer of both the NMF Common Shares and the NMF Class A Shares. No NMF Common Shares may be transferred without the consent of 75% of the holders of the NMF Common Shares. No NMF Class A Shares may be transferred.

4. The authorized capital of RMF Ontario consists of an unlimited number of voting common shares (RMF Ontario Common Shares) and an unlimited number of voting Class A special shares (RMF Ontario Class A Shares). As at November 28, 2008, one (1) RMF Ontario Common Share and one (1) RMF Ontario Class A Share are issued and outstanding. The articles of incorporation of RMF Ontario (RMF Ontario Articles) restrict the transfer of both the RMF Ontario Common Shares and the RMF Ontario Class A Shares. No RMF Ontario Common Shares may be transferred without the consent of 75% of the holders of the RMF Ontario Common Shares. No RMF Ontario Class A Shares may be transferred.

5. Neither NMF nor RMF Ontario is a reporting issuer in any jurisdiction of Canada.

6. None of NMF, RMF Ontario or MRCL is in default of securities legislation in any jurisdiction of Canada.

7. The issued and outstanding NMF Common Share and RMF Ontario Common Share are held by MRCL.

8. The issued and outstanding NMF Class A Share and RMF Ontario Class A Share are each held by a Franchisee operating one or more McDonald's restaurants in Canada and Ontario, respectively.

9. As of November 28, 2008, NMF has two (2) security holders, consisting of MRCL and one (1) Franchisee.

10. As of November 28, 2008, RMF Ontario has two (2) security holders, consisting of MRCL and one (1) Franchisee.

11. The issued and outstanding shares of NMF and RMF Ontario as of November 28, 2008 were all issued in reliance upon the Private Issuer Exemption.

12. As of November 28, 2008, MRCL has a total of approximately two hundred and seventy (270) Franchisees, ninety-seven (97) of whom are Franchisees owning or operating MRCL restaurants in Ontario.

13. MRCL and each Franchisee contribute a specified percentage of their respective revenues from the restaurants they own or operate to (i) a national fund established for the purposes of advertising, marketing and promotion nationally in Canada to benefit McDonald's restaurants, and (ii) one or more of eight regional funds established for the purposes of advertising, marketing and promotion of McDonald's restaurants regionally in the province or territory wherein the restaurants are located. The specified percentage is set out in a pledge agreement (Pledge Agreement) which is signed by each holder of a NMF Common Share and NMF Class A Share and each holder of an RMF Ontario Common Share and RMF Ontario Class A Share, which contribution satisfies the obligations of the Franchisee to contribute a percentage of gross sales under the Franchisee's franchise agreement with MRCL.

14. NMF was established by MRCL and its Franchisees for the purpose of administering the funds contributed by Franchisees and MRCL for national advertising and promotion and the revenues of NMF are used primarily for national advertising and promotional purposes.

15. MRCL and its Franchisees have further established eight regional marketing funds (each, an RMF and collectively, the RMFs), of which RMF Ontario is one, and each RMF receives and administers funds contributed from MRCL and Franchisees in the respective region in which the MRCL and Franchisees' restaurants are located to be applied to regional advertising and promotion for the benefit of the McDonald's restaurants in the region.

16. RMF Ontario is the RMF for MRCL and Franchisees owning or operating MRCL restaurants in Ontario.

17. The by-laws of each of NMF and RMF Ontario provide that each Franchisee that executes a Pledge Agreement with respect to the contributions of funds that the Franchisee makes to the NMF and RMF Ontario, respectively, is entitled to become a holder of a NMF Class A Share and a RMF Ontario Class A Share, respectively. Only one (1) NMF Class A Share is issued to a Franchisee regardless of the number of restaurants owned or operated by the Franchisee. Similarly, only one (1) RMF Ontario Class A Share is issued to a Franchisee regardless of the number of restaurants owned or operated by the Franchisee in the Province of Ontario. Since the Pledge Agreement is only provided to MRCL and to Franchisees, and since entitlement to a NMF Class A Share and a RMF Ontario Class A Share respectively is only upon a Franchisee signing and delivering a Pledge Agreement, no NMF Class A Shares nor RMF Ontario Class A Shares respectively may be issued to non-Franchisees. The holders of NMF Class A Shares and RMF Ontario Class A Shares respectively are entitled to elect a majority of the members of the board of directors of the NMF and RMF Ontario respectively and it is these boards which administer the affairs of the NMF and RMF Ontario respectively, including the approval of their respective annual marketing plans, annual budgets and expenditures to be made by the NMF and RMF Ontario respectively within the approved respective annual budgets.

18. Each of the NMF Articles and RMF Ontario Articles contain restrictions on transfer of each issuer's common shares and prohibit the transfer of each issuer's Class A Shares (the Share Restrictions). In the event that Franchisees cease to be Franchisees, ownership of NMF Class A Shares and a RMF Ontario Class A Shares, respectively, will be redeemed by the NMF and RMF Ontario.

19. NMF and RMF Ontario wish to issue NMF Class A Shares and RMF Ontario Class A Shares, respectively, to additional Franchisees, such that the total number of security holders of each of NMF and RMF Ontario will, at some point, exceed fifty (50) persons.

20. Once the total number of security holders exceeds fifty (50) persons, neither NMF nor RMF Ontario will be able to rely upon the Private Issuer Exemption to effect such future distributions of the NMF Class A Shares and RMF Ontario Class A Shares, as the case may be, to Franchisees and such distributions will be subject to the prospectus requirement and dealer registration requirement in the Legislation.

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:

(a) at the time of a specific distribution of NMF Class A Shares or RMF Ontario Class A Shares, the NMF Articles and the RMF Ontario Articles respectively contain the Share Restrictions;

(b) at the time of a specific distribution of NMF Class A Shares or RMF Ontario Class A Shares, neither NMF nor RMF Ontario is a reporting issuer in any jurisdiction of Canada;

(c) any certificates respecting the NMF Common Shares, NMF Class A Shares, RMF Ontario Common Shares and RMF Ontario Class A Shares issued subsequent to the date of this decision shall have a legend describing the Share Restrictions;

(d) prior to any issuance of a NMF Class A Share or a RMF Ontario Class A Share, NMF and RMF Ontario shall deliver to each prospective purchaser:

(i) a copy of the NMF Articles or RMF Ontario Articles and by-laws of NMF and RMF Ontario, as applicable;

(ii) a copy of this decision document; and

(iii) a statement that as a result of this decision, certain protections, rights and remedies provided by the Legislation, including statutory rights of rescission or damages, will not be available to purchasers of such shares and that certain restrictions are imposed on the disposition of such shares;

and

(e) except for a trade to NMF (in the case of NMF Class A Shares) or RMF Ontario (in the case of RMF Ontario Class A Shares), the first trade in a NMF Class A Share or RMF Ontario Class A Share by a person who acquires such share under this decision in a jurisdiction is a distribution unless the conditions set out in subsection 2.6(3) of National Instrument 45-102 Resale of Securities are satisfied.