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).

May 22, 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 REMGRO 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 (the RMBH Shares) of RMB Holdings Limited (RMBH) held by the Filer by way of a dividend in specie on a pro rata basis to holders (Filer Shareholders) of ordinary shares and Class B ordinary shares of the Filer (collectively, Filer Shares) resident in Canada (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 subsection 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 June 12, 1968. The Filer is a diversified investment holding company with investments in, amongst others, the banking, healthcare, consumer products, insurance, industrial, infrastructure and media and sport industries. The Filer's head and registered office is located at Millennia Park, 16 Stellentia Avenue, Stellenbosch, South Africa 7600.

2. The authorized capital of the Filer consists of 1,000,000,000 ordinary shares with no par value per share and 100,000,000 Class B ordinary shares with no par value per share. As of May 7, 2020, there were 529,217,007 ordinary shares issued and outstanding and 39,056,987 Class B ordinary shares issued and outstanding. The only difference between the ordinary shares and the Class B ordinary shares is that the Class B ordinary shares have ten (10) times the voting rights of the ordinary shares. The ordinary shares and the Class B ordinary shares rank pari passu in all other respects, including in respect of dividends. All of the Class B ordinary shares are held by Rupert Beleggings Proprietary Limited.

3. All the ordinary shares of the Filer (but not the Class B ordinary 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. Pursuant to the listings requirements of the JSE, the South African Companies Act No. 71 of 2008 and the Financial Markets Act No. 19 of 2012, the Filer is subject to regular filing and reporting requirements in South Africa, including 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 dealing 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 no registered Filer Canadian Shareholders and ten (10) beneficial Filer Canadian Shareholders holding 1,623,229 ordinary shares, representing approximately 0.307% of the outstanding ordinary shares of the Filer.

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

7. On November 19, 2019, the Filer announced that its board of directors had agreed in principle to pursue the Distribution.

8. On April 14, 2020, the Filer announced that, 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 intended to distribute all of the RMBH 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 record date anticipated to be June 5, 2020. The Distribution is expected to occur on or about June 8, 2020.

9. RMBH was incorporated under the laws of the Republic of South Africa on October 19, 1987. RMBH is a diversified financial services holdings company. RMBH's head and registered office is located at 2 Merchant Place, 3rd Floor, Sandton, South Africa, 2196.

10. RMBH's authorized capital consists of 2,000,000,000 RMBH Shares with a par value of one cent per share and 100,000,000 preferred shares with a par value of one cent per share. As of May 7, 2020, 1,411,703,218 RMBH Shares were issued and outstanding.

11. The RMBH Shares are listed on the JSE. Other than the foregoing listing on the JSE, no securities of RMBH are listed or posted for trading on any other exchange or market in Canada or outside of Canada. RMBH is not a reporting issuer, and has no intention of becoming a reporting issuer, in any jurisdiction of Canada.

12. Pursuant to the listings requirements of the JSE, the South African Companies Act No. 71 of 2008 and the Financial Markets Act No. 19 of 2012, RMBH is subject to regular filing and reporting requirements in South Africa, including 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 dealing in its shares by its directors.

13. As of the date hereof, a wholly-owned subsidiary of the Filer holds 397,447,747 RMBH Shares, representing 28.2% of the issued and outstanding RMBH Shares. As of the date hereof, the Filer does not directly or indirectly hold any RMBH Shares, other than those held by its wholly-owned subsidiary.

14. In order to facilitate the Distribution, the Filer's wholly owned subsidiary will, prior to the Distribution, distribute all of its RMBH Shares to the Filer (the Internal Distribution). Following the Internal Distribution, the Filer shall hold 397,447,747 RMBH Shares, representing 28.2% of the issued and outstanding RMBH Shares.

15. Pursuant to South African law, the Filer will not be required to obtain shareholder approval for the Internal Distribution or the Distribution. The Filer will, however, pursuant to the listings requirements of the JSE, be required to publish an announcement to its shareholders (the Filer Announcement).

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

17. Filer Canadian Shareholders who receive RMBH 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 RMBH 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 occur automatically and without any investment decision on the part of the Filer Shareholders.

19. No fractional RMBH 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 RMBH Shares, sell the whole RMBH 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. According to a geographic breakdown of RMBH shareholders prepared by Orient Capital, as at May 8, 2020, there were eleven (11) beneficial shareholders of RMBH resident in Canada holding 2,224,591 RMBH Shares in aggregate, representing 3.28% of the beneficial shareholders of RMBH worldwide and 0.158% of the total outstanding RMBH Shares.

21. After the Distribution, there will be approximately thirteen (13) beneficial shareholders of RMBH resident in Canada holding 3,359,861 RMBH Shares in aggregate, representing 3.55% of the beneficial shareholders of RMBH worldwide and 0.238% of the total outstanding RMBH Shares.

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

23. There will be no active trading market for the RMBH Shares in Canada following the Distribution and none is expected to develop. Consequently, it is expected that any resale of RMBH 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 RMBH Shares may be quoted or listed at the time that the trade occurs or to a person or company outside of Canada.

24. 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 RMBH is not a reporting issuer under the securities legislation in any jurisdiction of Canada.

25. Neither the Filer nor RMBH 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 RMBH 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.

"Mary Anne De Monte-Whelan"
Commissioner
Ontario Securities Commission
"Heather Zordel"
Commissioner
Ontario Securities Commission