Securities Law & Instruments

Headnote

OSC Rule 56-501 Restricted Shares -- Issuer granted exemption from requirements of section 3.2 of OSC Rule 56-501 in respect of stock distributions of restricted shares -- relief granted subject to conditions -- Director determination that shares are restricted shares and appropriate restricted share terms for the purpose of OSC Rule 56-501.

Applicable Legislative Provisions

OSC Rule 56-501 Restricted Shares, ss. 4.1(2) and 4.2.


IN THE MATTER OF
THE SECURITIES ACT,
4R.S.O. 1990, c.S.5, AS AMENDED

AND

IN THE MATTER OF
INFORMATION SERVICES CORPORATION

ORDER
(Subsection 4.1(2) and
Section 4.2 of Rule 56-501)



WHEREAS the Crown Investments Corporation of Saskatchewan (the "Filer") has applied to the Director pursuant to subsection 4.1(2) of Rule 56-501 Restricted Shares (the "Rule 56-501") for a determination that the appropriate restricted share term to be used to designate the Class A Limited Voting Shares of its wholly-owned subsidiary Information Services Corporation (the "Issuer") be "Class A Limited Voting Shares" or, when used as a defined term for the Class A Limited Voting Shares, "Class A Shares";

AND WHEREAS the Filer has further applied to the Director pursuant to section 4.2 of the Rule 56-501 for an exemption from the requirements of section 3.2 of the Rule 56-501 in connection with any stock distribution of Class A Limited Voting Shares of the Issuer in the Province of Ontario at any time from time to time;

AND UPON considering the Filer's application and the recommendation of staff of the Ontario Securities Commission (the "Commission");

AND UPON the Filer having represented to the Commission that:

1. The head office of the Issuer is located at 300 -- 10 Research Drive, Regina, Saskatchewan, S4S 7J7.

2. The head office of the Filer is located at 400 -- 2400 College Avenue, Regina, Saskatchewan, S4P 1C8.

3. The Issuer was incorporated as Information Services Corporation of Saskatchewan, a Saskatchewan provincial Crown corporation on January 1, 2000, pursuant to The Crown Corporations Act, 1993 (Saskatchewan). In the autumn of 2012, the Government of Saskatchewan announced its intention to privatize Information Services Corporation of Saskatchewan and introduced The Information Services Corporation Act (Saskatchewan) (the "ISC Act") into the Saskatchewan Legislature on November, 19, 2012. Upon the proclamation of the ISC Act on May 30, 2013, Information Services Corporation of Saskatchewan was continued pursuant to The Business Corporations Act (Saskatchewan) as Information Services Corporation and became subject to that Act, resulting in The Crown Corporations Act, 1993 (Saskatchewan) ceasing to apply to the Issuer. The Articles of Continuance of the Issuer do not contain private issuer restrictions due to the Issuer's intention to conduct an initial public offering.

4. The Issuer is not currently a reporting issuer and is not listed on a recognized stock exchange.

5. The Filer is an agent of the Crown in right of Saskatchewan and is a wholly-owned provincial Crown corporation. The Filer is the agency utilized for making and administering, on behalf of the Government of Saskatchewan, the investments authorized by The Crown Corporations Act, 1993 (Saskatchewan) and acts as a holding company for a number of wholly-owned Crown corporations and certain other entities in which the Crown in right of Saskatchewan has an interest.

6. The Issuer intends to complete an initial public offering ("IPO") of its Class A Limited Voting Shares by way of a secondary distribution of Class A Limited Voting Shares held by the Filer.

7. At the time of the IPO, the Issuer's authorized share capital will consist of an unlimited number of Class A Limited Voting Shares, one Class B Golden Share (the "Golden Share") and an unlimited number of Preferred Shares, issuable in series (the "Preferred Shares"). The following is a summary of the rights, privileges restrictions and conditions that are attached to these securities under the Issuer's Articles of Continuance:

(a) Class A Limited Voting Shares -- Subject to the restrictions described in paragraph 8 below, the holders of the Class A Limited Voting Shares are entitled to one vote per Class A Limited Voting Share on all matters to be voted on by the shareholders at any meetings of shareholders, other than at meetings at which only the holders of another class or series of shares are entitled to vote separately as a class or series. The holders of the Class A Limited Voting Shares are entitled to receive any dividends declared by the Issuer in respect of the Class A Limited Voting Shares, subject to the rights of the holders of other classes of shares. The holders of the Class A Limited Voting Shares will be entitled to receive, subject to the rights of the holders of other classes of shares, the remaining property and assets of the Issuer available for distribution, after payment of liabilities, upon the liquidation, dissolution or winding-up of the Issuer, whether voluntary or involuntary.

(b) Golden Share -- As the holder of the sole Golden Share, the Filer, an agent of the Crown in Right of Saskatchewan and a wholly-owned provincial Crown corporation, is entitled to receive notice of and to attend all meetings of shareholders including meetings of any class or series thereof, but does not have the right to vote at any such meeting other than a meeting of the holder of the Golden Share as a class. The holder of the Golden Share does not have the right to vote separately as a class, except: (i) to veto a transfer of the Issuer's registered office outside of Saskatchewan; (ii) to veto a transfer of all or any part of the Issuer's head office operations, or all or any part of the functions constituting the Issuer's head office operations, outside of Saskatchewan; (iii) to veto the sale, lease or exchange of all or substantially all of the Issuer's property; (iv) on any proposal to apply for a continuance in a jurisdiction outside of Saskatchewan; (v) on any proposal to amend the Issuer's Articles of Continuance; or (vi) as otherwise provided by law. The holder of the Golden Share does not have the right to receive any dividends declared by the Issuer or to participate in the distribution of the remaining property and assets of the Issuer available for distribution, after payment of liabilities, upon the liquidation, dissolution or winding-up of the Issuer, whether voluntary or involuntary. The holder of the Golden Share has no pre-emptive, redemption, purchase or conversion rights in respect of such share. The Golden Share may be transferred to a Crown corporation existing under The Crown Corporations Act, 1993 (Saskatchewan), a department, ministry or agency of the Government of Saskatchewan or any other agent of the Crown in right of the Province of Saskatchewan, but is otherwise non-transferable.

(c) Preferred Shares -- The Preferred Shares will be issuable at any time from time to time in one or more series. The board of directors of the Issuer (the "Board") will be authorized to fix before issue the number of, the consideration per share of, the designation of, and the provisions attaching to, the Preferred Shares of each series, which may include voting rights and other provisions attaching to the Preferred Shares or shares of the series. Notwithstanding the forgoing, no series of Preferred Shares shall provide for the right to vote in connection with any election of directors of the Issuer. The Preferred Shares of each series will rank on parity with the Preferred Shares of every other series and will be entitled to preference over the Class A Limited Voting Shares, the Golden Share and any other share ranking junior to the Preferred Shares with respect to the distribution of any property or assets in the event of the Issuer's liquidation, dissolution or winding-up, whether voluntary or involuntary.

8. The Issuer's Articles of Continuance are fully subject to the ISC Act which imposes a few limitations on the rights and privileges of the Class A Limited Voting Shares, as follows:

(a) Appointment of Directors by Province of Saskatchewan -- The ISC Act provides that, in lieu of voting the Class A Limited Voting Shares of the Issuer held by the Filer on any resolution electing directors to the Board, the Lieutenant Governor in Council of the Province of Saskatchewan (the "Lieutenant Governor") has the right to appoint that number of members to the Board equal to the Filer's pro rata share of the issued and outstanding voting securities (rounded to the nearest whole number) (the "Proportional Board Appointment Right"), but always subject to a minimum of two directors (the "Minimum Board Appointment Right").

(b) Limit on Amount of Holdings -- The ISC Act contains provisions imposing limits on ownership, including joint ownership, of the Class A Limited Voting Shares and any other voting securities which might subsequently be issued. Specifically, except the Province of Saskatchewan or an agent of the Province of Saskatchewan, no person, alone or together with associates (associates being determined according to specific rules in the ISC Act), may hold, beneficially own or control, directly or indirectly, other than by way of security only or for purposes of distribution by an underwriter, voting securities to which are attached more than 15% of the votes attached to the issued and outstanding voting shares (the "Ownership Restriction"). Preferred Shares, if any, will not qualify as voting shares for the purposes of the ISC Act by virtue of not being entitled to vote in connection with the election of directors of the Issuer. In order to give effect to the Ownership Restriction, the ISC Act and the Regulations thereunder contain provisions for the enforcement of the Ownership Restriction, including provisions for suspension of voting rights, forfeiture of rights to dividends and recovery of dividends paid to shareholders holding more than 15% of the votes attached to the issued and outstanding voting shares (i.e. the Class A Limited Voting Shares).

(c) Other -- The Issuer's Articles of Continuance and the ISC Act place certain other restrictions on ISC, including a prohibition against transferring head office operations, or all or any part of head office operations (generally all executive, corporate planning, senior administrative and general management functions) outside of Saskatchewan and a prohibition against the Issuer's articles or by-laws containing provisions inconsistent with the provisions included in the ISC Act. Further, all of the Issuer's executive officers and substantially all of the Issuer's senior officers must be ordinarily resident in Saskatchewan.

9. Upon closing of the IPO, there will be the Class A Limited Voting Shares issued and outstanding, one Golden Share issued and outstanding, and no Preferred Shares. The Filer will own a minimum of 31% of the issued and outstanding Class A Limited Voting Shares and the sole Golden Share.

10. Pursuant to the Articles of Continuance, the Issuer will have a minimum of 6 directors and maximum of 12 directors on its Board.

11. Rule 56-501 imposes certain disclosure requirements on issuers distributing securities that are considered to be restricted shares, prohibits the reference to a share that includes the word "common" if such share is not a "common share", and removes the availability of prospectus exemptions under Ontario securities law for distributions of securities that are considered to be restricted shares unless the distribution has received the approval of certain security holders of the issuer or the creation of the restricted security was properly authorized by certain security holders of the issuer (the "Shareholder Approval Requirement").

12. As a result of the Ownership Restriction and the Minimum Board Appointment Right described above, the Class A Limited Voting Shares may be considered to be "restricted shares" for the purposes of Rule 56-501.

13. Paragraph 1.2(c) of Rule 56-501 provides that Rule 56-501 does not apply to shares that are subject to a restriction, imposed by any law governing the issuer, on the level of ownership of the shares by a person, company or combination of persons or companies, but only to the extent of the restriction.

14. By virtue of paragraph 1.2(c) of Rule 56-501, Rule 56-501 does not apply to the Class A Limited Voting Shares as a result of the Ownership Restriction attribute (to the extent of such restriction) since the Ownership Restriction is imposed by the ISC Act, the law governing the Issuer.

15. Aside from the Ownership Restriction, each holder of Class A Limited Voting Shares may vote their shares on all matters coming before them and their voting interest is at least equal to their equity interest except in limited circumstances where the Lieutenant Governor exercises the Minimum Board Appointment Right.

16. Pursuant to Rule 56-501, "common shares" means equity shares to which are attached voting rights exercisable in all circumstances, irrespective of the number or percentage of shares owned, that are not less, on a per share basis, than the voting rights attached to any other shares of an outstanding class of shares of the issuer, unless the Director makes a determination under section 4.1 that the shares are restricted shares.

17. Rule 56-501 provides that restricted shares must be referred to using a specified "restricted share term", namely "non-voting share", "restricted voting share", "subordinate voting share" or a term designated by the Director. None of the terms "non-voting share", "restricted voting share" or "subordinate voting share" accurately describes the Class A Limited Voting Shares.

18. In accordance with Part 4 of Rule 56-501, if the Director determines that the Class A Limited Voting Shares are restricted shares, the Director may also determine the appropriate restricted share term to be used to designate such shares, taking into account the voting attributes attached to the shares and the term that will best describe the attributes.

19. Section 3.2 of Rule 56-501 sets out the Shareholder Approval Requirement for a stock distribution of restricted shares. Pursuant to subsection 3.2(3) of Rule 56-501, the Shareholder Approval Requirement does not apply to a stock distribution of securities of an issuer that was a private company immediately before completion of the stock distribution.

20. The Issuer is currently, and until closing of the IPO will remain, a wholly-owned subsidiary of the Filer. The application exemption in subsection 3.2(3) of Rule 56-501 from the Shareholder Approval Requirement is not available because the Articles of Continuance of the Issuer do not contain private company restrictions due to the Issuer's intention to conduct the IPO.

AND UPON the Director being satisfied that it would not be prejudicial to the public interest to grant the exemption requested;

IT IS ORDERED pursuant to section 4.1 of Rule 56-501 that the Class A Limited Voting Shares are restricted shares for the purposes of Rule 56-501 and that the appropriate restricted share terms to be used to designate such shares are either "Class A Limited Voting Shares" or, when used as a defined term for the Class A Limited Voting Shares, "Class A Shares";

IT IS ALSO ORDERED pursuant to subsection 4.2 of Rule 56-501 that the Issuer be and is hereby exempted from the requirements of section 3.2 of Rule 56-501 in connection with any stock distribution of Class A Limited Voting Shares so long as any future reorganization, if any, carried out by the Issuer related to the Class A Limited Voting Shares complies with the provisions of section 3.2 of Rule 56-501.

DATED at Toronto this 31st day of May, 2013

"Naizam Kanji"
Deputy Director, Corporate Finance Branch
Ontario Securities Commission