Order pursuant to subsection 158(1.1) of the Business Corporations Act (Ontario) that an offering corporation is authorized to dispense with its audit committee – Issuer is an indirect wholly-owned subsidiary of a parent company that is subject to audit committee requirements of National Instrument 52-110 Audit Committees (NI 52-110) – Issuer is exempt from audit committee requirements of NI 52-110 – Relief conditional upon issuer continuing to satisfy the subsidiary entity eligibility criteria for exemption from audit committee requirements of NI 52-110 or any successor instrument.
Applicable Legislative Provisions
Business Corporations Act, R.S.O. 1990, c. B.16, ss. 158(1) and (1.1).
National Instrument 52-110 Audit Committees, s. 1.2.
IN THE MATTER OF
THE BUSINESS CORPORATIONS ACT,
R.S.O 1990, CHAPTER B.16, AS AMENDED
IN THE MATTER OF
ENBRIDGE GAS DISTRIBUTION INC.
(Subsection 158(1.1) of the OBCA)
UPON the application of the Applicant to the Ontario Securities Commission (the Commission) for an order pursuant to subsection 158(1.1) of the OBCA for a determination that the Applicant be authorized to dispense with an audit committee;
AND UPON considering the application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Commission that:
1. The Applicant was continued under the OBCA and is a rate-regulated natural gas distribution utility serving residential, commercial and industrial customers primarily in central and eastern Ontario as well as northern New York State.
2. As of December 4, 2017, the capital structure of the Applicant consists of: (a) an unlimited number of common shares (Common Shares), of which 213,337,897 Common Shares are issued and outstanding; (b) a limited number of preference shares (the Preference Shares), of which 4,000,000 Group 3, Series D preference shares (Group 3, Series D Preference Shares) are issued and outstanding; and (c) unsecured non-convertible debt securities (the Debt Securities), of which an aggregate principal amount of $3,780 million was issued and outstanding. The Group 3, Series D Preference Shares are convertible, at the holder’s option, into Group 2, Series D preference shares on a one-for one basis on July 1, 2019 and every five years thereafter. The Group 3, Series D Preference Shares are held by three holders and do not trade on a marketplace.
3. All of the Applicant’s Common Shares are held by its immediate parent, Enbridge Energy Distribution Inc., which is an indirect wholly owned subsidiary of Enbridge Inc. (Enbridge). Enbridge is the Applicant’s ultimate parent and is a Canadian corporation that is a reporting issuer in all of the provinces of Canada. The common shares of Enbridge are listed on the Toronto and New York stock exchanges.
4. The Applicant is a reporting issuer and is subject to securities legislation in each of the provinces in Canada (the Legislation). The Applicant is not in default of any of its obligations as a reporting issuer under the Legislation.
5. National Instrument 52-110 Audit Committees (NI 52-110) prescribes requirements for audit committees of reporting issuers in Canada. The requirements of NI 52-110 do not apply to reporting issuers that are subsidiary entities if they satisfy the criteria set out in section 1.2(e) of NI 52-110 (the Subsidiary Entity Exemption Criteria).
6. The Applicant satisfies the Subsidiary Entity Exemption Criteria of NI 52-110 because (a) the Applicant is a subsidiary entity within the meaning of NI 52-110; (b) the Applicant does not have equity securities trading on a marketplace; and (c) the parent of the Applicant, Enbridge, is an issuer that is subject to the requirements of NI 52-110.
7. As an indirect wholly-owned subsidiary of Enbridge, the function of an audit committee for the Applicant is carried out at the level of Enbridge during a review of Enbridge’s consolidated financial statements. The board of directors of the Applicant will approve the Applicant’s financial statements, as is required by the OBCA.
8. The terms and conditions of the Group 3, Series D Preference Shares are set out in the Applicant’s amended and restated articles of incorporation and the terms and conditions of the Debt Securities are set out in trust indentures. Neither the Preference Shares rights nor the Debt Securities contain restrictions or affirmative or negative covenants requiring the Applicant’s board of directors to have an audit committee.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the Applicant’s shareholders.
IT IS ORDERED, pursuant to subsection 158(1.1) of the OBCA, that the Applicant is authorized to dispense with an audit committee for so long as the Applicant continues to satisfy the Subsidiary Entity Exemption Criteria of NI 52-110 or any successor instrument.
DATED at Toronto, Ontario, this 19th day of December, 2018
Ontario Securities Commission
“Anne Marie Ryan”
Ontario Securities Commission