Bennett Jones Services Trust

MRRS Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted from the requirement to file a prospectus in connection with distributions of units in the Filer to Eligible Investors, subject to certain conditions.

Applicable Legislative Provisions

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

Citation: Bennett Jones Services Trust, Re, 2011 ABASC 582

November 22, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BENNETT JONES SERVICES TRUST

(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from Bennett Jones Trustee Inc. (the Trustee), on its own behalf and on behalf of Bennett Jones Services Trust (the Trust and, together with the Trustee, the Applicants), for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Applicants from the prospectus requirements set out in section 110 of the Securities Act (Alberta) and section 53 of the Securities Act (Ontario) in connection with the distribution, from time to time, by the Trust of trust units (Trust Units) to Eligible Investors (as defined in paragraph 19 below) and in connection with the transfer, from time to time, of Trust Units from Eligible Investors to other Eligible Investors and from Eligible Investors to the Trust itself (collectively, the Exemption Sought).

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

(a) the Alberta Securities Commission is the principal regulator for this application; and

(b) this decision is the decision of the principal regulator and evidences the decision of the Ontario Securities Commission.

Interpretation

Terms defined in National Instrument 14-101 Definitions or Multilateral Instrument 11-102 Passport System (MI 11-102) have the same meanings if used in this decision, unless otherwise defined herein.

Representations

The decision is based on the following facts represented by or on behalf of the Applicants:

1. Bennett Jones LLP (BJ LLP) is a limited liability partnership registered in Alberta on June 12, 2000 and extra-provincially registered in Ontario on March 5, 2001.

2. The partners of BJ LLP (the BJ Partners) are individual lawyers or professional corporations the voting shares of which are held by individual lawyers.

3. As of the date hereof, there were 185 BJ Partners, of whom 108 BJ Partners resided in Alberta, 77 BJ Partners resided in Ontario, and no BJ Partners resided outside of Canada.

4. Bennett Jones Services Limited Partnership (BJ SLP) is a limited partnership registered in Alberta on July 17, 2001 and extra-provincially registered in Ontario on August 1, 2001.

5. BJ SLP provides administrative services to BJ LLP and certain affiliated entities and the business activities of BJ SLP are limited to such administrative services.

6. At the present time, the sole limited partner of BJ SLP is The Canadian Professional Services Trust (TCPST). The Decision Makers have previously granted relief in respect of the issuance by TCPST of trust units (and certain ancillary matters) pursuant to MRRS Decision Documents dated July 27, 2001 (the July 2001 Decision) and January 14, 2011 (the January 2011 Decision) and the Alberta Securities Commission provided additional relief by way of an order dated August 21, 2001.

7. The sole general partner of BJ SLP is Bennett Jones Services Inc. (BJSI), a corporation incorporated under the laws of Alberta on June 15, 2001 and extra-provincially registered in Ontario on July 20, 2001. All of the issued and outstanding shares of BJSI are owned by nominees of BJ LLP.

8. The Trustee is a corporation incorporated under the Business Corporations Act (Alberta) on October 4, 2011 and extra-provincially registered in Ontario on October 6, 2011.

9. The authorized capital of the Trustee consists of an unlimited number of common shares, of which 200 common shares are issued and outstanding. All of the outstanding common shares of the Trustee are held by two BJ Partners who reside in Alberta (both of whom are "accredited investors" for purposes of applicable securities laws and who hold such shares in trust for BJ LLP).

10. The Trustee has been incorporated solely to act as trustee of the Trust.

11. Each director and officer of the Trustee is, and all of the future directors and officers of the Trustee will be, a BJ LLP lawyer or an Officer (as defined in paragraph 19 below).

12. The Trustee is responsible for the administration of the Trust, including the distribution by the Trust of Trust Units and the processing and recording by the Trust of transfers of Trust Units from Eligible Investors to other Eligible Investors or from any Eligible Investor to the Trust itself.

13. BJ LLP, BJ SLP, BJSI and the Trustee have no securities listed on an exchange and have no intention of listing their securities on an exchange.

14. None of BJ LLP, BJ SLP, BJSI or the Trustee is a reporting issuer in any jurisdiction, and none of BJ LLP, BJ SLP, BJSI or the Trustee has any intention of becoming a reporting issuer in any jurisdiction.

15. None of BJ LLP, BJ SLP, BJSI or the Trustee is in default of any securities laws of Alberta or Ontario or any other jurisdiction.

16. A reorganization of the ownership structure of BJ SLP is proposed in light of recent income tax amendments, which potentially give rise to unfavourable tax consequences under the current BJ SLP ownership structure (the Reorganization).

17. The Trust is a unit trust formed pursuant to a trust indenture (the Trust Indenture) entered into between BJSI, as settlor of the Trust, and the Trustee, as trustee of the Trust. BJSI and the Trustee have selected the laws of Alberta as the governing law of the Trust Indenture. As a preliminary step in the Reorganization, 100 units of the Trust will be issued to a member of the partnership board of BJ LLP resident in Alberta, as initial unitholder. Such member of the partnership board of BJ LLP will be an "accredited investor" for purposes of applicable securities laws.

18. In conjunction with the Reorganization, and from time to time thereafter in accordance with the Trust Indenture, the Trust intends to distribute Trust Units to Eligible Investors at an issue price of $1.00 per Trust Unit. Proceeds from the initial distribution of Trust Units to Eligible Investors in connection with the Reorganization will be used by the Trust to acquire a limited partnership interest in BJ SLP and certain loans owing to TCPST by BJ SLP and BJ LLP.

19. The Trust cannot issue Trust Units to any person who is not a BJ Partner or closely related to or affiliated with a BJ Partner. In particular, under the Trust Indenture, the Trust cannot issue Trust Units to any person who is not an "Eligible Investor" as defined in the Trust Indenture. Eligible Investors, as defined in the Trust Indenture, are limited to the following persons: (i) an individual who is a BJ Partner; (ii) a professional corporation that is a BJ Partner; (iii) an individual who owns all of the voting shares of a professional corporation that is a BJ Partner; (iv) an officer of BJSI (an Officer); (v) the spouse, common-law partner (as defined in the Income Tax Act (Canada) (the Tax Act)) or adult child of an individual referred to in (i), (iii) or (iv) above in this paragraph 19; and (vi) a trust the beneficiaries of which include one or more of (A) an individual referred to in (i), (iii) or (iv) above in this paragraph 19; (B) the spouse or common-law partner (as defined in the Tax Act) of an individual referred to in (vi)(A) above in this paragraph 19; or (C) a child or issue, parent, grandparent, sibling, aunt, uncle, cousin, niece or nephew of an individual referred to in (vi)(A) or (B) above in this paragraph 19 (the foregoing persons being collectively referred to in this Decision Document as the Eligible Investors and each individually as an Eligible Investor).

20. The Trust will not have any securities listed on an exchange at the time of completion of the Reorganization and there is no intention to list any securities of the Trust on an exchange at any time subsequent to completion of the Reorganization.

21. The Trust will not be a reporting issuer in any jurisdiction at the time of completion of the Reorganization and there is no intention to cause the Trust to become a reporting issuer at any time subsequent to completion of the Reorganization.

22. In general terms, the Reorganization contemplates the following steps:

(a) the return to investors in TCPST of their investment in TCPST. In this regard, on June 29, 2011 TCPST redeemed all of its issued and outstanding trust units (except for 200 trust units held by two members of the partnership board of BJ LLP);

(b) the assignment by TCPST to the Trust of certain capital loans made by TCPST to BJ SLP and BJ LLP (the TCPST Loans);

(c) the redemption of TCPST's limited partnership interest in BJ SLP, and the acquisition of a limited partnership interest in BJ SLP by the Trust; and

(d) the issuance to Eligible Investors of Trust Units (with the proceeds of such sales of Trust Units to be used by the Trust to pay for the loans acquired by it from TCPST and its limited partnership interest in BJ SLP).

23. Following the Reorganization all of the Trust Units will be held by Eligible Investors, and the Trust will be the sole limited partner of BJ SLP and will own the TCPST Loans previously owned by TCPST.

24. In connection with the Reorganization informational memoranda have been made available to BJ Partners, informational sessions for BJ Partners have been held to provide information with respect to the Reorganization and the BJ Partners who have been involved in the structuring of the Reorganization and the Chief Financial Officer of BJ LLP have responded to inquiries with respect to the Reorganization received from various BJ Partners. Prior to completion of the Reorganization, additional informational memoranda may be prepared and made available to BJ Partners, additional information sessions for BJ Partners may be held to provide information with respect to the Reorganization and the BJ Partners who have been involved in the structuring of the Reorganization and the Chief Financial Officer of BJ LLP will continue to be available to respond to additional inquiries with respect to the Reorganization received from BJ Partners. The informational memoranda provided to date have advised BJ Partners to obtain advice with respect to their particular circumstances from their respective professional advisors and similar advice has been provided during the informational sessions held with respect to the Reorganization and in responses to inquiries received by BJ Partners. It is anticipated that any further informational memoranda distributed to BJ Partners in relation to the Reorganization will advise BJ Partners to obtain advice with respect to their particular circumstances from their respective professional advisors and that similar advice will be provided at any further informational session held with respect to the Reorganization and in response to further inquiries made to BJ Partners who have been involved in the structuring of the Reorganization or the Chief Financial Officer of BJ LLP.

25. In connection with the Reorganization, the Trust will distribute Trust Units to Eligible Investors, the proceeds of which are to be used to permit the Trust to fund the acquisition cost of its limited partnership interest in BJ SLP and to acquire the TCPST Loans from TCPST.

26. In addition, the Trust may, from time to time in connection with future additions or departures of BJ Partners or adjustments to the capital allocations or requirements of BJ LLP or BJ SLP, distribute additional Trust Units to Eligible Investors.

27. In each case, the issue price for Trust Units will be $1.00 per Trust Unit.

28. The Trust Indenture provides that the Trust will redeem any Trust Units held by an investor that ceases to be an Eligible Investor. The redemption amount payable on the redemption of any Trust Unit will be $1.00 per Trust Unit (i.e., the same as the issue price), together with any unpaid distributions on the Trust Unit.

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:

(a) the Exemption Sought is granted provided that:

(i) before the issuance of Trust Units to any Eligible Investor who does not already hold Trust Units, the Trust will:

A. provide such Eligible Investor with a copy of this Decision Document; and

B. obtain a written statement from such Eligible Investor acknowledging receipt of a copy of this Decision Document and further acknowledging the Eligible Investor's understanding that the right to receive continuous disclosure is not available to the Eligible Investor in respect of the Trust Units;

(ii) the Trust shall provide to each holder of Trust Units audited annual financial statements consisting of a statement of net assets, a statement of operations and a statement of change in assets, together with notes to such audited annual financial statements, for each financial year of the Trust within 120 days of the end of such financial year;

(iii) the Trust shall provide to each holder of Trust Units unaudited interim financial statements consisting of a statement of net assets, a statement of operations and a statement of change in assets for each interim period of the Trust within 60 days of the end of such interim period;

(iv) a report in Form 45-106F1 or the equivalent is prepared and filed within 10 days of the end of each calendar quarter in which Trust Units are distributed by the Trust with the securities authority in the Jurisdiction of residence of each applicable purchaser of Trust Units, together with the filing fees payable in such Jurisdiction as if such form were a Form 45-106F1 filed in accordance with National Instrument 45-106 Prospectus and Registration Exemptions; and

(v) any subsequent trade of a Trust Unit will be a distribution under the Legislation of the Jurisdiction in which the trade takes place, unless such trade:

A. is made to another Eligible Investor;

B. is a redemption, retraction or cancellation of the Trust Unit in accordance with its terms; or

C. is made for the purposes of giving collateral for a bona fide debt;

(b) the July 2001 Decision is revoked, except insofar as such decision directed that the applications filed under the Legislation in connection with the July 2001 Decision will not be placed in the public files of the Decision Makers; and

(c) the January 2011 Decision is revoked, except insofar as such decision directed that any offering memorandum delivered to the securities regulatory authority in Alberta or Ontario in accordance with the January 2011 Decision be kept confidential.

For the Commission:

"Glenda Campbell, QC"
Vice-Chair
 
"Stephen Murison"
Vice-Chair