Sanofi
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -Application for relief from the prospectus and registration requirements for certain trades made in connection with an employee share offering by a French issuer -- the issuer cannot rely on the employee exemption in section 2.24 of National Instrument 45-106 Prospectus Exemptions as the securities are not being offered to Canadian employees directly by the issuer but rather through special purpose entities -- Canadian participants will receive disclosure documents -- the special purpose entities are subject to the supervision of the local securities regulator -- Canadian employees will not be induced to participate in the offering by expectation of employment or continued employment -- there is no market for the securities of the issuer in Canada -- the number of Canadian participants and their share ownership are de minimis -- relief granted, subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53 and 74(1).
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.
National Instrument 45-106 Prospectus Exemptions.
National Instrument 45-102 Resale of Securities.
Ontario Securities Commission Rule 72-503 Distributions Outside Canada.
June 14, 2022
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the "Jurisdiction") AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATION IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF SANOFI (the "Filer")
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for
1. an exemption from the prospectus requirement (the "Prospectus Relief") so that such requirement does not apply to
(1) trades in:
(i) units (the "Classic Units") of a fonds commun de placement d'entreprise or "FCPE", a form of collective shareholding vehicle commonly used in France for the custody of shares held by employee-investors, named Sanofi Shares (the "Principal Classic FCPE");
(ii) units (the "2022 Classic Units") of a temporary fund (the "2022 FCPE") intended to merge into the Principal Classic FCPE; and
(iii) units of future temporary FCPEs (together with the 2022 Classic Units, the "Temporary Classic Units", and the Temporary Classic Units together with the Classic Units, the "Units"), organized in the same manner as the Principal Classic FCPE (together with the 2022 FCPE, each, a "Temporary Classic FCPE"), which will merge with the Principal Classic FCPE following an Employee Share Offering (as defined below), such transaction being referred to as the "Merger", as further described below (the term "Classic FCPE" used herein means, prior to the Merger, the Temporary Classic FCPE, and following the Merger, the Principal Classic FCPE),
made pursuant to an Employee Share Offering (as defined below) to or with Qualifying Employees (as defined below) resident in the Jurisdictions (as defined below) (collectively, the "Canadian Employees," and Canadian Employees who subscribe for Units, the "Canadian Participants"); and
(2) trades of ordinary shares of the Filer (the "Shares") by the Classic FCPE to or with Canadian Participants upon the redemption of Units as requested by Canadian Participants; and
2. an exemption from the dealer registration requirement (the "Registration Relief", and together with the Prospectus Relief, the "Exemption Sought") so that such requirement does not apply to the Sanofi Group (as defined below and which, for clarity, includes the Filer and the Local Related Entities (as defined below)), the Temporary Classic FCPE, the Principal Classic FCPE and Amundi Asset Management (the "Management Company") in respect of:
(1) trades in Units made pursuant to an Employee Share Offering to or with Canadian Employees; and
(2) trades in Shares by the Classic FCPE to or with Canadian Participants upon the redemption of Units as requested by Canadian Participants.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application),
(1) the Ontario Securities Commission is the principal regulator for this application, and
(2) 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 upon in Québec (together with the Jurisdiction, the "Jurisdictions").
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning as used in this decision, unless otherwise defined.
"Related entity" has the same meaning given to such term in section 2.22 of National Instrument 45-106 Prospectus Exemptions ("NI 45-106").
Representations
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation formed under the laws of France. It is not, and has no current intention of becoming, a reporting issuer under the Legislation or the legislation of any jurisdiction of Canada. The head office of the Filer is located in France and the Shares are listed on Euronext and on the Nasdaq Stock Market (in the form of American Depositary Shares represented by American Depositary Receipts). The Filer is not in default of securities legislation of any jurisdiction of Canada.
2. The Filer carries on business in Canada through certain related entities that employ Canadian Employees, including Sanofi-Aventis Canada Inc., Sanofi Consumer Health Inc., Sanofi Pasteur Limited (collectively, the "Local Related Entities," and together with the Filer and other affiliates of the Filer, the "Sanofi Group"). Each of the Local Related Entities is a direct or indirect controlled subsidiary of the Filer and is not, and has no current intention of becoming, a reporting issuer under securities legislation of any jurisdiction of Canada. The principal office of the Sanofi Group in Canada is located in Ontario, and the greatest number of employees of the Local Related Entities are employed in Ontario as compared to any other jurisdiction in Canada.
3. The Filer has established a global employee share offering for employees of the Sanofi Group for 2022 (the "2022 Employee Offering") and expects to establish subsequent global employee share offerings of the Filer following 2022 for the next four years under similar terms (the "Subsequent Employee Offerings", and together with the 2022 Employee Offering, the "Employee Share Offering").
4. Each Employee Share Offering will be made under the terms as set out herein and for greater certainty, all of the representations will be true for each Employee Share Offering other than paragraphs 2, 12 and 34 which may change (save for references to the 2022 FCPE and the 2022 Employee Offering which will be varied such that they are read as references to the relevant Temporary Classic FCPE and Subsequent Employee Offering, respectively).
5. Each Employee Share Offering involves an offering of Shares to be acquired through a Temporary Classic FCPE, which will be merged with the Principal Classic FCPE after completion of the Employee Share Offering (the "Classic Plan"), subject to the decision of the supervisory boards of the FCPEs and the approval of the French AMF (as defined below).
6. As of the date hereof and after giving effect to any Employee Share Offering, the Filer is and will be a "foreign issuer" as such term is defined in section 2.15(1) of National Instrument 45-102 Resale of Securities ("NI 45-102") and section 2.8(1) of Ontario Securities Commission Rule 72-503 Distributions Outside Canada ("OSC Rule 72-503") and the Filer is not and will not be a reporting issuer in any jurisdiction of Canada.
7. Only persons who are employees of a member of the Sanofi Group during the subscription period for the Employee Share Offering, subject to a minimum employment condition of three months measured at the end of the subscription period, and who meet other employment criteria (the "Qualifying Employees"), will be permitted to participate in an Employee Share Offering.
8. The Principal Classic FCPE and the Temporary Classic FCPE were established for the purposes of implementing employee share offerings and plans of the Filer. There is no current intention for these FCPEs to become reporting issuers under the securities legislation of any jurisdiction of Canada. There is no intention for any Temporary Classic FCPE that will be established for the purpose of implementing Subsequent Employee Offerings to become a reporting issuer under the securities legislation of any jurisdiction of Canada.
9. FCPEs are a form of collective shareholding vehicle commonly used in France for the conservation of shares held by employee-investors. The Principal Classic FCPE and the Temporary Classic FCPE have been registered with the French Autorité des marchés financiers (the "French AMF"). It is expected that each Temporary Classic FCPE established for Subsequent Employee Offerings will be a French FCPE and registered with, and approved by, the French AMF. Only Qualifying Employees will be allowed to hold Units issued pursuant to an Employee Share Offering.
10. All Units acquired in an Employee Share Offering by Canadian Participants will be subject to a hold period of approximately five years (the "Lock-Up Period"), subject to certain exceptions prescribed by French law and adopted under the Classic Plan in Canada (such as a release on death or termination of employment).
11. Under the Classic Plan, Canadian Participants will subscribe for the relevant Temporary Classic Units, and the relevant Temporary Classic FCPE will then subscribe for Shares on behalf of Canadian Participants at the subscription price that is the Canadian dollar equivalent of the average of the opening price of the Shares on Euronext (expressed in Euros) on the 20 trading days preceding the date of the launch of the offering by the board of directors of the Filer (the "Board"), or by the Chief Executive Officer of the Filer if so delegated by the Board, less a 20% discount.
12. For the 2022 Employee Offering, a matching contribution (the "Employer Contribution") in the form of Shares (the "Matching Shares") will be provided by the Filer for the benefit of, and at no cost to, the Canadian Participant, as follows: any subscription for five Shares shall give right to one Matching Share, up to four additional Matching Shares per Qualifying Employee. As a result, subscriptions equal to or higher than twenty Shares shall give right to four Matching Shares as an employer contribution. If a Canadian Participant subscribes for less than four Shares, there will be no Employer Contribution. For each Subsequent Employee Offering, the matching contribution rules may change.
13. The Temporary Classic FCPE will apply the cash received from each Canadian Participant's subscription and the corresponding Employer Contributions to subscribe for Shares from the Filer. The Shares subscribed for will be held in the Temporary Classic FCPE and the Canadian Participant will receive one Unit in the Temporary Classic FCPE for each Share subscribed for, including the Matching Shares.
14. Following the completion of an Employee Share Offering, the Temporary Classic FCPE will be merged with the Principal Classic FCPE (subject to the approval of the supervisory board of the FCPEs and the French AMF). Units of the Temporary Classic FCPE held by Canadian Participants will be replaced with Units of the Principal Classic FCPE on a pro rata basis and the Shares subscribed for under an Employee Share Offering will be held in the Principal Classic FCPE.
15. Any dividends paid on the Shares held in the Classic FCPE will be contributed to the Classic FCPE and used to purchase additional Shares. To reflect this reinvestment, new Units (or fractions thereof) will be issued to Canadian Participants.
16. At the end of the relevant Lock-Up Period, a Canadian Participant may (i) request the redemption of Units in the Classic FCPE in consideration for a cash payment equal to the then market value of the underlying Shares, (ii) continue to hold his or her Units in the Classic FCPE and request the redemption of those Units at a later date in consideration for a cash payment equal to the then market value of the underlying Shares, or (iii) request the redemption of his or her Units in the Classic FCPE in consideration for the underlying Shares (instead of a cash payment).
17. In the event of an early unwind resulting from a Canadian Participant exercising one of the exceptions to the Lock-Up Period and meeting the applicable criteria, the Canadian Participant may request the redemption of Units in the Classic FCPE in consideration for a cash payment equal to the then market value of the Shares held by the Classic FCPE corresponding to such Units.
18. An FCPE is a limited liability entity under French law. The portfolio of the Classic FCPE will consist almost entirely of Shares of the Filer and may, from time to time, also include cash in respect of dividends paid on the Shares which will be reinvested in Shares, and cash or cash equivalents pending investments in Shares and for the purposes of Unit redemptions.
19. The Classic FCPE is managed by the Management Company, which is a portfolio management company governed by the laws of France. The Management Company is registered with the French AMF as an investment manager. The Management Company is not, and has no current intention of becoming, a reporting issuer under the securities legislation of any jurisdiction in Canada.
20. The Management Company's portfolio management activities in connection with an Employee Share Offering and the Classic FCPE is limited to purchasing Shares from the Filer, selling such Shares as necessary in order to fund redemption requests, and investing available cash in cash equivalents.
21. The Management Company is also responsible for preparing accounting documents and publishing periodic informational documents as provided by the rules of the Classic FCPE. The Management Company's activities do not affect the underlying value of the Shares.
22. Shares issued pursuant to an Employee Share Offering will be deposited in the Principal Classic FCPE and/or the Temporary Classic FCPE, as applicable, through CACEIS Bank France (the "Depositary"), a large French commercial bank subject to French banking legislation. The Depositary carries out orders to purchase, trade and sell securities in the portfolio and takes all necessary action to allow each of the Principal Classic FCPE and the Temporary Classic FCPE to exercise the rights relating to the securities held in its respective portfolio.
23. The Management Company and the Depositary are obliged to act exclusively in the best interests of the holders of the Units (including Canadian Participants) and are liable to them under French legislation for any violation of the rules and regulations governing the FCPE, any violation of the rules of the FCPE, or for any self-dealing or negligence.
24. All management charges relating to the Classic FCPE will be paid from the assets of the Classic FCPE or by the Filer, as provided in the regulations of the Classic FCPE.
25. Participation in an Employee Share Offering is voluntary, and the Canadian Employees will not be induced to participate in an Employee Share Offering by expectation of employment or continued employment.
26. The total amount invested by a Canadian Employee in an Employee Share Offering cannot exceed the lesser of (i) 25% of their estimated gross annual remuneration, and (ii) 1,500 Shares. The minimum subscription amount per Canadian Participant will be one Share. The Employer Contribution will not be factored into the maximum amount that a Canadian Employee may contribute.
27. None of the entities forming part of the Sanofi Group, the Classic FCPE, or the Management Company or any of their employees, directors, officers, agents or representatives will provide investment advice to the Canadian Employees with respect to an investment in the Shares or the Units.
28. The Shares and the Units are not currently listed for trading on any stock exchange in Canada and the Filer has no intention to have the Shares or the Units so listed. As there is no market for these securities in Canada, and none is expected to develop, any first trades of Shares by Canadian Participants will be effected through the facilities of, and in accordance with the rules and regulations of, a foreign stock exchange outside of Canada.
29. None of the entities forming part of the Sanofi Group, the Classic FCPE or the Management Company is currently in default of securities legislation of any jurisdiction of Canada.
30. The Unit value of the Classic FCPE will be calculated and reported to the French AMF on a regular basis, based on the net assets of the Classic FCPE divided by the number of Units outstanding. The value of the Units will be based on the value of the underlying Shares.
31. An information package on an Employee Share Offering in the French or English language (according to their preference), will be made available to Canadian Employees through a link that will be emailed to each such individual, which will include a summary of the terms of the relevant Employee Share Offering and a description of Canadian income tax consequences of subscribing for and holding the Units of the Classic FCPE and redeeming the Units at the end of the applicable Lock-Up Period. Physical copies will be provided where delivery by e-mail is not feasible.
32. Canadian Participants will also have access to the Filer's annual report on Form 20-F filed with the United States Securities and Exchange Commission as well as the French Document d'Enregistrement Universel filed with the French AMF in respect of the Shares and a copy of the rules of each FCPE (which are analogous to company by-laws). Canadian Employees will also have access to copies of the continuous disclosure materials relating to the Filer that are furnished to holders of Shares generally.
33. Canadian Participants will receive an initial statement of their holdings under the Classic Plan, together with an updated statement at least once per year.
34. As at April 20, 2022, there were approximately 1,926 Qualifying Employees resident in Canada, with the greatest number resident in Ontario (approximately 1,747) and the remainder in Québec (approximately 179). As at December 31, 2021, there were approximately 95,000 Qualifying Employees in the Sanofi Group, such that Qualifying Employees resident Canada represented, in the aggregate, less than 2.03% of the number of employees in the Sanofi Group worldwide.
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) for the 2022 Employee Offering:
(i) the issuer of the security was a foreign issuer on the distribution date, as such term is defined in section 2.15(1) of NI 45-102 and section 2.8(1) of OSC Rule 72-503; and
(ii) the prospectus requirement will apply to the first trade in any Units or Shares acquired by Canadian Participants pursuant to this decision unless the following conditions are met:
(1) the issuer of the security
(i) was not a reporting issuer in any jurisdiction of Canada at the distribution date, or
(ii) is not a reporting issuer in any jurisdiction of Canada at the date of the trade; and
(2) the first trade is made
(i) through an exchange, or a market, outside of Canada, or
(ii) to a person or company outside of Canada;
(2) for any Subsequent Employee Offering under this decision completed within five years from the date of this decision:
(i) the representations other than those in paragraphs 2, 12 and 34 remain true and correct in respect of that Subsequent Employee Offering; and
(ii) the conditions set out in paragraph (a) above are satisfied as of the date of any distribution of a security under such Subsequent Employee Offering (varied such that any references therein to the 2022 FCPE and the 2022 Employee Offering are read as references to the relevant Temporary Classic FCPE and Subsequent Employee Offering, respectively); and
(3) in the Province of Ontario, the prospectus exemption above, for the first trade in any Units or Shares acquired by Canadian Participants pursuant to this decision, is not available with respect to any transaction or series of transactions that is part of a plan or scheme to avoid the prospectus requirements in connection with a trade to a person or company in Canada.
In respect of the Prospectus Relief:
"Marie-France Bourret"Manager, Corporate FinanceOntario Securities Commission
In respect of the Registration Relief