Industrial Alliance Insurance and Financial Services Inc.

Dual application for Exemptive Relief Application – Policy Statement 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Exemptive relief under subsection 11.1(1) of Regulation 44-102 – Exemption from subparagraph 2.2(3)(b)(iii) of Regulation 44-102 – Effective period of the receipt for base shelf prospectus – Relief granted on terms and conditions set out in decision document – Decision will terminate 25 months after the issuance of a receipt for the base shelf prospectus.

Applicable Legislative Provisions

Regulation 44-102 respecting Shelf Distributions, ss. 2.2(3)(b)(iii), 11.1(1).
Policy Statement 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions, ss. 3.1(c), 3.6(s)(b).
Regulation 11-102 respecting Passport System, ss. 4.2(b), 4.7(1).

December 27, 2018

TRANSLATION

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
(the Jurisdictions)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for granting exemptive relief for the Filer from subparagraph 2.2(3)(b)(iii) of Regulation 44-102 respecting Shelf Distributions (Regulation 44-102) with respect to the effective period of the receipt issued for the Filer’s short form base shelf prospectus dated June 22, 2017 (the Current Base Shelf Prospectus) pursuant to subsection 11.1(1) of Regulation 44-102 (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a)           the Autorité des marchés financiers is the principal regulator for this application;

(b)           the Filer has provided notice that Subsection 4.7(1) of Regulation 11-102 respecting Passport System (Regulation 11-102) is intended to be relied upon in each of the provinces of Canada other than Ontario; and

(c)           the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions, Regulation 44-101 respecting Short Form Prospectus Distributions (Regulation 44-101) and Regulation 11-102 have the same meaning if used in this decision, unless otherwise defined herein.

Representations

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

The Filer

1              The Filer is a life insurance company governed by the Act respecting Industrial-Alliance Life Insurance Company (Québec), by an Act to amend the Act respecting Industrial-Alliance Life Insurance Company (Québec), by the Act respecting insurance (Québec), by certain provisions of the Companies Act (Québec) and by certain provisions of the Business Corporations Act (Québec), in each case, as amended.

2              The head office of the Filer is located in Québec City, Québec.

3              The Filer is a reporting issuer under the securities legislation of each of the provinces of Canada and not in default of securities legislation in any jurisdiction.

4              The authorized share capital of the Filer, as of the date hereof, consists of (i) an unlimited number of Common Shares without par value (the Common Shares), (ii) 10,000,000 Preferred Shares with par value of $25 per share issuable in series, and (iii) an unlimited number of Class A Preferred Shares without par value, issuable in series (the Class A Preferred Shares).

5              As of the date hereof, only Common Shares, Class A Preferred Shares Series B, Class A Preferred Shares Series G and Class A Preferred Shares Series I are issued and outstanding and are listed for trading on the Toronto Stock Exchange (TSX).

6              As of the date hereof, the Filer also has issued and outstanding non-convertible subordinated debentures (the Debentures).

7              The Class A Preferred Shares and the Debentures are rated by independent rating agencies.

8              Pursuant to the Filer’s articles, certain series of Class A Preferred Shares are convertible into Class A Preferred Shares of another series (the Resulting Class A Preferred Shares).

Plan of Arrangement

9              On February 5, 2018, the Filer announced that it planned to create a holding company that will comprise all of the Filer’s activities.

10           On February 26, 2018, the Filer entered into an arrangement agreement (the Arrangement Agreement) with a newly created entity under the Business Corporations Act (Quebec), iA Financial Corporation Inc. (iAFC).

11           Upon completion of the steps of the court-approved arrangement under the Companies Act (Quebec) and the Business Corporations Act (Québec) provided in the Arrangement Agreement (the Arrangement), all issued and outstanding Common Shares will be transferred to iAFC in exchange for common shares of iAFC (iAFC Common Shares) on the basis of one (1) iAFC Common Share for each Common Share.

12           iAFC’s initial authorized share capital shall consist of two (2) classes of shares, namely iAFC Common Shares and Class A preferred shares issuable in series, the rights and share conditions of which shall be essentially identical to those of the Filer.

13           iAFC has received conditional acceptance for the listing of the iAFC Common Shares on the TSX, subject to the fulfillment of customary requirements of the TSX.

14           Pursuant to the Arrangement, holders of the Filer’s Class A Preferred Shares will remain holders of the Filer’s Class A Preferred Shares, and holders of the Filer’s Debentures will remain holders of the Filer’s Debentures.

15           Following the Arrangement, the outstanding Common Shares will no longer be listed on the TSX, but the outstanding Class A Preferred Shares will continue to be listed on the TSX.

16           Following the Arrangement, the Filer will continue to be a reporting issuer under the securities legislation of each of the provinces of Canada.

17           Immediately after the Arrangement, on a consolidated basis, iAFC will hold, directly or indirectly, the same assets and be subject to the same liabilities as the Filer immediately before the Arrangement.

18           The Arrangement provides as a condition, among others, that iAFC must sign and deliver unconditional and irrevocable guarantees with respect to the Filer’s payment obligations on the outstanding Class A Preferred Shares and Debentures.

19           The initial directors of iAFC shall be the same as the directors of the Filer immediately prior to completion of the Arrangement and such directors shall continue in office until the close of the first annual meeting of the shareholders of iAFC or until their respective successors have been duly elected or appointed.

20           On March 28, 2018, the Filer filed a management information circular with respect to, among other things, the Arrangement. At the special meeting of shareholders held on May 10, 2018, 97.11% of the holders of Common Shares voted in favour of the Arrangement.

21           On May 17, 2018, the Superior Court of Quebec issued a final order sanctioning and approving the Arrangement and declaring that it is fair and reasonable.

22           On June 18, 2018, the Legislative Assembly of Quebec adopted private member’s bill 235, An Act to amend the Act respecting Industrial-Alliance Life Insurance Company, allowing the Filer to change its corporate structure through the creation of a holding company as contemplated by the Arrangement.

23           On December 12, 2018, the Minister of Finance authorized the Filer to register the transfer of all its shares with voting rights to iAFC.

24           The Filer is expected to complete all conditions with respect to the Arrangement prior to January 1, 2019 (the Effective Date) and the Arrangement is expected to become effective on the Effective Date.

Current Base Shelf Prospectus

25           On June 22, 2017 the Filer filed the Current Base Shelf Prospectus providing that the Filer may from time to time offer and issue, pursuant to an accompanying shelf prospectus supplement and subject to the terms and conditions contained therein, certain securities, including senior and subordinated unsecured debt securities (collectively, the Debt Securities), Class A Preferred Shares and Common Shares (collectively, the Base Shelf Securities).

26           The Filer complied with all applicable requirements set forth in Regulation 44-102 when the Current Base Shelf Prospectus was filed.

27           The Current Base Shelf Prospectus will be effective until July 22, 2019 pursuant to paragraph 2.2(3)(a) of Regulation 44-102. However, without the requested relief, it will cease to be effective on the Effective Date as the Filer will no longer have any equity securities listed and posted for trading on a short form eligible exchange.

28           After the Effective Date, the Filer would satisfy the qualification criteria in Part 2 of Regulation 44-101 to file a short form base shelf prospectus substantially similar to the Current Base Shelf Prospectus with respect to the Debentures and the Class A Preferred Shares, but for the fact that certain series of Class A Preferred Shares are convertible into Resulting Class A Preferred Shares rather than non-convertible.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that, as of and from the Effective Date, the following conditions are met:

(a)           the Filer continues to be a reporting issuer under the securities legislation of each of the provinces of Canada;

(b)           all of the outstanding and issued Common Shares of the Filer are held by iAFC;

(c)           the Filer does not file a shelf prospectus supplement to the Current Base Shelf Prospectus to distribute Common Shares or securities in respect of which Common Shares may be issued or transferred;

(d)           any Class A Preferred Shares distributed pursuant to a shelf prospectus supplement to the Current Base Shelf Prospectus are non-convertible or only convertible into Resulting Class A Preferred Shares;

(e)           any Debentures distributed pursuant to a shelf prospectus supplement to the Current Base Shelf Prospectus are non-convertible; and

(f)            any Base Shelf Securities distributed pursuant to shelf prospectus supplement to the Current Base Shelf Prospectus are Debentures or Class A Preferred Shares and have received a final designated rating.

“Patrick Théorêt”
Director, Corporate Finance
Autorité des marchés financiers