Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from prospectus requirements to allow South African company to distribute shares of another South African entity to shareholders of the company on a pro rata basis and by way of a dividend in specie -- distribution not covered by legislative exemptions -- company is a public company in South Africa but is not a reporting issuer in Canada -- company has a de minimis presence in Canada -- no investment decision required from Canadian shareholders in order to receive distributions.

Applicable Legislative Provisions

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

June 5, 2020

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 RMB HOLDINGS LIMITED (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 (the Legislation) for an exemption (the Exemption Sought) from the prospectus requirement of section 53 of the Securities Act (Ontario) in connection with the proposed distribution (the Distribution) by the Filer of all of the ordinary shares of FirstRand Limited (FirstRand) held by the Filer (the FirstRand Shares) by way of a dividend in specie on a pro rata basis to holders (the Filer Shareholders) of ordinary shares of the Filer (the Filer Shares) resident in Canada (the Filer Canadian Shareholders).

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 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 each of the other provinces and territories of Canada (together with the Jurisdiction, the Jurisdictions).

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.

Representations

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

1. The Filer was incorporated under the laws of the Republic of South Africa on October 19, 1987. The Filer is a diversified financial services holding company. The Filer's head and registered office is located at 2 Merchant Place, 3rd Floor, 1 Fredman Drive, Sandton, Johannesburg, Republic of South Africa, 2196.

2. The Filer's authorized capital consists of 2,000,000,000 ordinary shares with a par value of one cent per share, 100,000,000 redeemable cumulative preference shares with a par value of one cent per share and 200,000,000 redeemable cumulative preference shares with no par value per share. As of May 7, 2020, 1,411,703,218 ordinary shares were issued.

3. The ordinary shares of the Filer (but not the preferred shares) are listed on the Johannesburg Stock Exchange (JSE). Other than the foregoing listing on the JSE, no securities of the Filer are listed or posted for trading on any other exchange or market in Canada or outside of Canada. The Filer is not a reporting issuer, and has no intention of becoming a reporting issuer, in any jurisdiction of Canada.

4. The Filer is subject to, inter alia, the listings requirements of the JSE, the South African Companies Act 71 of 2008 (Companies Act), the Financial Markets Act 19 of 2012 (Financial Markets Act) and to regular filing and reporting requirements in South Africa, including, but not limited to, the publication of interim and annual audited financial statements, the announcement of any material transactions, the announcement of dividend declarations, the announcement of changes in the Filer's board of directors and the announcement of dealings in Filer Shares by its directors.

5. According to a geographic breakdown of shareholders prepared for the Filer by Orient Capital, as at May 8, 2020, there were eleven (11) beneficial Filer Canadian Shareholders holding 2,224,591 ordinary shares in aggregate, representing 3.28% of the beneficial shareholders of the Filer worldwide and 0.158% of the outstanding ordinary shares of the Filer. No preferred shares of the Filer are held by Canadians.

6. Based on representation 5, the number of Filer Canadian Shareholders and the proportion of Filer Shares held by such shareholders, is de minimis.

7. Subject to applicable law and certain exceptions with respect to fractional shares, as described below, and any jurisdictions where the distribution is illegal, the Filer proposes to distribute all of the FirstRand Shares owned by it on a pro rata basis and by way of a special dividend in specie, to the Filer Shareholders as of a final record date currently assumed to be on or about June 26, 2020. The Distribution is expected to occur on or about June 29, 2020.

8. On November 19, 2019, January 7, 2020, February 18, 2020 and March 31, 2020 respectively, the Filer released announcements on the Stock Exchange News Service of the JSE (SENS) of its intention to implement the Distribution. The salient details of the Distribution and final dates were published by the Filer in a further SENS announcement on April 14, 2020. The Filer issued a further SENS announcement regarding final dates and the delivery of the circular to Filer Shareholders to inform them of the Distribution (Circular) on April 30, 2020.

9. FirstRand was incorporated under the laws of the Republic of South Africa on November 11, 1966. FirstRand is a registered bank controlling company and is the holding company of the FirstRand group of companies, which includes a range of financial service providers. FirstRand's head and registered office is located at 4 Merchant Place, 3rd Floor, 1 Fredman Drive, Sandton, Johannesburg, South Africa, 2196.

10. FirstRand's authorized capital consists of 6,001,688,450 FirstRand Shares with a par value of one cent per share and collectively 498,311,550 preference shares of varying classes with a par value of one cent per share. As of May 7, 2020, 5,609,488,001 FirstRand Shares were issued and outstanding and 45,000,000 preference shares were issued and outstanding.

11. The FirstRand Shares are listed on the JSE as well as on the Namibian Stock Exchange and the Botswana Stock Exchange. Other than the foregoing listings, no securities of FirstRand are listed or posted for trading on any other exchange or market in Canada or outside of Canada. FirstRand is not a reporting issuer, and has no intention of becoming a reporting issuer, in any jurisdiction of Canada.

12. FirstRand is subject to, inter alia, the listings requirements of the JSE, the Companies Act, the Financial Markets Act and to regular filing and reporting requirements in South Africa, including, without limitation, the publication of interim and annual audited financial statements, the announcement of any material transactions, the announcement of dividend declarations, the announcement of changes in its board of directors and the announcement of dealings in its shares by its directors.

13. As of the date hereof, a wholly-owned subsidiary of the Filer (Filer Subco) holds 1,851,996,287 FirstRand Shares, representing 33.02% of the issued and outstanding FirstRand Shares. On the final record date of the Distribution, the Filer will hold 1,851,996,287 FirstRand Shares, representing approximately 33.02% of the issued and outstanding FirstRand Shares.

14. Shortly prior to the Distribution, Filer Subco shall transfer all of the FirstRand Shares held by it to the Filer as part of an internal reorganization.

15. Pursuant to South African law, the Filer will be required to obtain shareholder approval for the Distribution. In connection with the Distribution, the Filer issued the Circular to its shareholders to inform them of the Distribution on April 30, 2020. The Circular is publicly available and has been delivered to the shareholders of the Filer, including the Filer Canadian Shareholders.

16. The Filer Canadian Shareholders who receive FirstRand Shares pursuant to the Distribution will, by virtue of the Circular, receive the same information as other Filer Shareholders about the ratio that the Filer will use in order to compute the number of FirstRand Shares distributed per Filer Share and this information will include how any fractional shares will be treated and the expected tax consequences of the Distribution. The Filer Canadian Shareholders will also have access to all disclosure documents of the Filer and FirstRand (the Disclosure Documents) via the Filer's website, including the Circular, as such documents are available to any other Filer Shareholders.

17. Filer Canadian Shareholders who receive FirstRand Shares pursuant to the Distribution will have the benefit of the same rights and remedies in respect of the Disclosure Documents that are available to Filer Shareholders resident in South Africa.

18. The Filer Shareholders will not be required to pay any cash, deliver any other consideration or surrender or exchange their Filer Shares, or take any other action in order to receive the FirstRand Shares in connection with the Distribution. The Distribution will not cancel or affect the number of outstanding Filer Shares and the Filer Shareholders will retain their Filer Share certificates, if any. The Distribution will, subject to the approval of the shareholders of the Filer, occur automatically and without any investment decision on the part of the Filer Shareholders.

19. No fractional FirstRand Shares will be distributed in connection with the Distribution. Instead, as soon as practicable after the Distribution, the distribution agent for the Distribution will aggregate all fractional shares into whole FirstRand Shares, sell the whole FirstRand Shares in the open market at prevailing market prices and distribute the net cash proceeds from the sales pro rata to each Filer Shareholder who otherwise would have been entitled to receive a fractional share in the Distribution.

20. Remgro Limited, a significant shareholder of the Filer who owns 35.50% of the issued and outstanding Filer Shares, has announced that it will, prior to the Distribution, distribute the shares it holds in the Filer to its shareholders, including shareholders in Canada, by way of a dividend in specie (the Remgro Distribution).

21. Accordingly, after the Remgro Distribution and immediately prior to the Distribution, it is anticipated that there will be 13 (thirteen) beneficial Filer Canadian Shareholders holding 3,359,861 Filer Shares in aggregate, representing 3.55% of the beneficial shareholders of the Filer worldwide and 0.238% of the outstanding Filer Shares.

22. Based on representation 21, after the Remgro Distribution and immediately prior to the Distribution, the number of Filer Canadian Shareholders and the proportion of Filer Shares held by such shareholders, will remain de minimis.

23. According to a geographic breakdown of FirstRand shareholders prepared by Orient Capital, as at May 8, 2020, there were eleven (11) beneficial shareholders of FirstRand resident in Canada holding 8,996,545 FirstRand Shares in aggregate, representing 3.03% of the beneficial shareholders of FirstRand worldwide and 0.160% of the total outstanding FirstRand Shares. These shareholdings will remain the same following the Remgro Distribution.

24. After the Distribution, there will be approximately fifteen (15) beneficial shareholders of FirstRand resident in Canada holding 13,402,822 FirstRand Shares in aggregate, representing 2.93% of the beneficial shareholders of FirstRand worldwide and 0.239% of the total outstanding FirstRand Shares.

25. Following the completion of the Distribution, Filer Canadian Shareholders who receive FirstRand Shares pursuant to the Distribution, to the extent they continue to hold such shares, will be treated as any other FirstRand Shareholder and will be concurrently sent the same disclosure materials required to be sent under applicable South African laws that FirstRand sends to its shareholders in South Africa.

26. There will be no active trading market for the FirstRand Shares in Canada following the Distribution and none is expected to develop. Consequently, it is expected that any resale of FirstRand Shares distributed in the Distribution will occur through the facilities of the JSE or any other exchange or market outside of Canada on which the FirstRand Shares may be quoted or listed at the time that the trade occurs or to a person or company outside of Canada.

27. The Distribution to Filer Canadian Shareholders would be exempt from the prospectus requirement pursuant to subsection 2.31(2) of National Instrument 45-106 Prospectus Exemptions but for the fact that FirstRand is not a reporting issuer under the securities legislation in any jurisdiction of Canada.

28. Neither the Filer nor FirstRand is in default of any of its obligations under the securities legislation of any jurisdiction in Canada.

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 on the condition that the first trade in FirstRand Shares acquired pursuant to the Distribution will be deemed to be a distribution unless the conditions in subsection 2.15(2) of National Instrument 45-102 Resale of Securities or subsection 2.8 of OSC Rule 72-503 Distributions Outside Canada are satisfied.

"Craig Hayman"
Commissioner
Ontario Securities Commission
"Lawrence Haber"
Commissioner
Ontario Securities Commission