Securities Law & Instruments

Headnote

OSC Rule 13-502 Fees -- subsidiary entity applied for relief from requirement to pay participation fees because subsidiary entities could not avail themselves of statutory exemptions in section 2.6 of OSC Rule 13-502 Fees due to timing difference between subsidiary entities' reference fiscal year and parent's reference fiscal year -- relief granted subject to conditions

Applicable Legislative Provisions

OSC Rule 13-502 Fees, ss. 2.2, 2.6, 6.1.

IN THE MATTER OF ONTARIO SECURITIES COMMISSION RULE 13-502 FEES

AND

IN THE MATTER OF BELL ALIANT REGIONAL COMMUNICATIONS, LIMITED PARTNERSHIP AND BELL ALIANT PREFERRED EQUITY INC.

ORDER

WHEREAS the Ontario Securities Commission (the Commission) has received an application from Bell Aliant Regional Communications, Limited Partnership (Bell Aliant LP) and Bell Aliant Preferred Equity Inc. (Prefco and, together with Bell Aliant LP, the Filers), for an order by the Commission, under section 6.1 of Ontario Securities Commission Rule 13-502 -- Fees (OSC Rule 13-502) that the requirement under section 2.2 of OSC Rule 13-502 to pay an annual participation fee for each of its fiscal years shall not apply to the Filers;

AND WHEREAS terms defined in National Instrument 14-101 Definitions have the same meaning if used in this Order, unless otherwise defined; provided that the terms "parent" and "subsidiary entity" have the same meaning as defined in OSC Rule 13-502;

AND WHEREAS the Filers have represented to the Commission that:

Bell Aliant Regional Communications Income Fund and the Conversion Transaction

1. In July 2006, Bell Aliant Regional Communications Income Fund (the Fund) was formed under a plan of arrangement involving the former Aliant Inc., its shareholders and Bell Canada. The principal operating entity of the Fund was Bell Aliant LP.

2. On October 31, 2006, the Minister of Finance (Canada) announced proposals to change the Canadian federal income tax rules governing "specified investment flow-through" entities, including income trusts such as the Fund, which changes became effective beginning in 2011.

3. As a result, the Fund and certain of its subsidiaries implemented a transaction to convert the Fund's income trust structure into a corporation, Bell Aliant Inc. (the Conversion Transaction), by way of a court-approved plan of arrangement pursuant to Section 192 of the Canada Business Corporations Act (the CBCA). The Conversion Transaction was completed on January 1, 2011.

4. As part of the Conversion Transaction, certain of the Fund's direct and indirect subsidiaries were wound up to simplify the corporate structure. Bell Aliant Regional Communications Holdings, Limited Partnership, a holding entity in the Fund structure which had been a reporting issuer until this time, transferred its assets to a subsidiary which amalgamated with Bell Aliant Regional Communications Holdings Inc. and the "pre-Conversion Transaction" Bell Aliant Regional Communications Inc. to form the corporation now known as Bell Aliant Regional Communications Inc. (Bell Aliant GP).

Bell Aliant Regional Communications, Limited Partnership

5. Bell Aliant LP is a limited partnership established under the laws of the Province of Manitoba. The general partner of Bell Aliant LP is Bell Aliant GP, and its limited partners are Bell Aliant GP and 6583458 Canada Inc. (a wholly-owned subsidiary of Bell Aliant GP).

6. Bell Aliant LP is the principal operating entity through which Bell Aliant Inc. provides a wide range of voice and data communications services as well as technology services and value-added business solutions to customers across Atlantic Canada, Ontario and Québec, and is the issuer of medium term notes to the public under shelf prospectuses filed in all of the provinces of Canada. Bell Aliant GP guarantees Bell Aliant LP's obligations under the medium term notes.

7. Bell Aliant LP is a reporting issuer in Ontario and each of the other provinces of Canada. Bell Aliant LP currently is a "Class 2 reporting issuer" under OSC Rule 13-502.

Bell Aliant Preferred Equity Inc.

8. Prefco is a wholly-owned subsidiary of Bell Aliant GP and was incorporated under the CBCA on January 31, 2011 for the sole purpose of being the issuer of preferred shares (Prefco Preferred Shares) to the public.

9. Bell Aliant GP guarantees Prefco's obligations arising under the Prefco Preferred Shares. The proceeds from issuing Prefco Preferred Shares are loaned to Bell Aliant GP and Prefco earns interest on these loans. Other than the loans, Prefco has no significant assets and does not have any ongoing business operations of its own.

10. Prefco is a reporting issuer in Ontario and each of the other provinces and territories of Canada. Prefco currently is a "Class 1 reporting issuer" under OSC Rule 13-502.

Bell Aliant GP

11. Bell Aliant GP is a corporation amalgamated pursuant to the CBCA on January 1, 2011.

12. Bell Aliant GP is the parent of the Filers and the financial results of the Filers are consolidated into the financial statements of Bell Aliant GP (the Bell Aliant Financial Statements). Bell Aliant LP and Prefco obtained exemptive relief from, among other things, the continuous disclosure requirements under National Instrument 51-102 -- Continuous Disclosure Obligations under decisions dated December 24, 2010 and February 18, 2011 entitled In the Matter of Bell Aliant Regional Communications, Limited Partnership and In the Matter of Bell Aliant Inc. and Bell Aliant Regional Communications Inc., respectively.

13. Upon completion of the Conversion Transaction, Bell Aliant GP became a reporting issuer in each of the provinces of Canada other than Ontario (collectively, the Other Jurisdictions). Bell Aliant GP did not become a reporting issuer in Ontario upon completion of the Conversion Transaction, although it was a successor to a reporting issuer, as it did not meet the definition of a reporting issuer under the securities legislation of Ontario, since none of the predecessor reporting issuers was a "company".

14. Pursuant to an order under clause 1(11)(b) of the Securities Act (Ontario) dated January 24, 2012 entitled In the Matter of Bell Aliant Regional Communications Inc., Bell Aliant GP became a reporting issuer in Ontario.

OSC Rule 13-502

15. At the time of filing Bell Aliant Financial Statements for the year ended December 31, 2013, Bell Aliant GP will be required to pay a participation fee under OSC Rule 13-502 as a "Class 2 reporting issuer" calculated pursuant to section 2.8 of OSC Rule 13-502, based on applicable balance sheet items as at December 31, 2013.

16. The Filers were reporting issuers on December 31, 2011. As such, under the current version of OSC Rule 13-502, which came into force on April 1, 2013, the Filers will have a "reference fiscal year" that is their last fiscal year ended before May 1, 2012, which is the year ended December 31, 2011. Therefore, under the current version of OSC Rule 13-502, Bell Aliant LP would be required to calculate and pay a participation fee as a "Class 2 reporting issuer", pursuant to section 2.8 of OSC Rule 13-502, based on the applicable balance sheet items as at December 31, 2011, and Prefco would be required to calculate and pay a participation fee as a "Class 1 reporting issuer" pursuant to section 2.7 of OSC Rule 13-502, in each case unless an exemption is available.

17. Under the current version of OSC Rule 13-502, Bell Aliant GP will have a "reference fiscal year" of the year ended December 31, 2013, since it did not become a reporting issuer until January 24, 2012. Accordingly, the Filers have a different "reference fiscal year" than their parent Bell Aliant GP.

18. The Filers do not meet the requirements for exemption under section 2.6(1)(a), (d) or (e) of OSC Rule 13-502. The Filers do not meet the requirements for exemption under section 2.6(2)(a) or (d) of OSC Rule 13-502 since, at the end of their "reference fiscal year," they did not have a parent that was a reporting issuer; and their capitalization for their reference fiscal year was not included in the capitalization of the parent for the parent's reference fiscal year.

19. However, the Filers, as subsidiary entities of Bell Aliant GP, would satisfy the requirements of section 2.6(2) of OSC Rule 13-502 with respect to their most recently completed fiscal year (which is their parent's reference fiscal year), since (a) at the end of their most recently completed fiscal year, the Filers had a parent that was a reporting issuer, (b) applicable accounting standards require the consolidation of the parent and the Filers, (c) the Filers' parent will pay a participation fee under section 2.2 of OSC Rule 13-502 determined with reference to the parent's capitalization for the parent's reference fiscal year, (d) the capitalization of the Filers for their most recently completed fiscal year was included in the capitalization of their parent for the parent's reference fiscal year, and (e) the Filers relied on an exemption from continuous disclosure for each of their reference fiscal year and their most recently completed fiscal year.

20. Under the previous version of OSC Rule 13-502, in force prior to April 1, 2013, the exemption under section 2.6 of OSC Rule 13-502 was based on the previous fiscal year for both the parent and the subsidiary entity reporting issuer, and the Filers would have qualified for exemption from annual participation fees.

21. For the year ended December 31, 2012 and prior years, annual participation fees were paid to the Commission by Bell Aliant GP and/or the Filers, as applicable, with reference to their respective capitalizations, in accordance with the previous version of OSC Rule 13-502.

THE ORDER of the Commission is that the requirement under section 2.2 of OSC Rule 13-502 to pay an annual participation fee for each of its fiscal years shall not apply to the Filers, provided that:

(a) the Filers are subsidiary entities in respect of a participation fee determined with reference to the Filers' capitalization for the reference fiscal year of a parent of the Filers,

(b) at the end of the Filers' most recently completed fiscal year, a parent of the Filers was a reporting issuer,

(c) the accounting standards pursuant to which the parent's financial statements are prepared under Ontario securities law require the consolidation of the parent and the Filers,

(d) the parent has paid a participation fee applicable to the parent under section 2.2 of OSC Rule 13-502 determined with reference to the parent's capitalization for the parent's reference fiscal year,

(e) the capitalization of the Filers for their most recently completed fiscal year was included in the capitalization of the parent for the parent's reference fiscal year,

(f) throughout the reference fiscal year of the parent, the Filers were entitled to rely on an exemption, waiver or approval from the requirements in subsections 4.1(1), 4.3(1) and 5.1(1) and sections 5.2 and 6.1 of National Instrument 51-102 Continuous Disclosure Obligations,

(g) each of the Filers files a notice titled "Subsidiary Entity Exemption Notice" at the time it would be required to pay a participation fee under section 2.3 of OSC Rule 13-502 identifying the Filer, the parent, the parent's reference fiscal year and stating that the Filer meets each of conditions (a) through (f) of this Order, and

(h) this Order shall immediately expire upon the earlier of:

(i) three years from the date of this Order; and

(ii) the effective date of any amendments to OSC Rule 13-502, other than any amendments that have already been adopted prior to the date of this Order.

DATED this 4th day of March, 2014.

"Huston Loke"
Director, Corporate Finance