Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Dual application -- Application for relief from take-over bid and early warning requirements so that the applicable thresholds be triggered on a combined basis rather than on a per class basis -- Relief to address foreign investment concerns -- Dual class structure implemented solely for compliance with foreign ownership requirements in the transportation industry -- Both classes of securities are freely tradable, have identical economic attributes and are automatically and mandatorily inter-convertible based on the holder's Canadian or non-Canadian status.

Applicable Legislative Provisions

Securities Act (Québec), s. 263.

Securities Act (Ontario), Part XX.

Regulation 51-102 respecting Continuous Disclosure Obligations.

Regulation 62-103 respecting the Early Warning System and Related Take-Over Bid and Insider Reporting Issues.

Regulation 62-104 respecting Take-Over Bids and Issuer Bids.

April 29, 2016

IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (the "Jurisdictions") AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF HNZ GROUP INC. (the "Filer")

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each a "Decision Maker") has received an application (the "Application") from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") that:

(i) an offeror that makes an offer to acquire outstanding variable voting shares of the Filer (the "Variable Voting Shares") or outstanding common shares of the Filer (the "Common Shares", and collectively with the Variable Voting Shares, the "Shares"), which would constitute a take-over bid under the Legislation as a result of the securities subject to the offer to acquire, together with the offeror's securities of that class, constituting in the aggregate 20% or more of the outstanding Variable Voting Shares or Common Shares, as the case may be, at the date of the offer to acquire, be exempted from the take-over bid requirements contained in Regulation 62-104 respecting Take-Over Bids and Issuer Bids ("Regulation 62-104") and Part XX of the Securities Act (Ontario) (collectively, the "TOB Rules") (the "TOB Relief");

(ii) an acquiror who acquires beneficial ownership of, or the power to exercise control or direction over, Variable Voting Shares or Common Shares, or securities convertible into such Shares, that, together with the acquiror's securities of that class, would constitute 10% or more of the outstanding Variable Voting Shares or Common Shares, as the case may be, be exempted from the early warning requirements contained in the Legislation (the "Early Warning Relief");

(iii) an eligible institutional investor subject to the early warning requirements of the Legislation be entitled to rely on alternative eligibility criteria from those set forth in Section 4.5 of Regulation 62-103 respecting the Early Warning System and Related Take-Over Bid and Insider Reporting Issues ("Regulation 62-103") in order to benefit from the exemption contained in Section 4.1 of Regulation 62-103 (the "Alternative Monthly Reporting Criteria"); and

(iv) the Filer be entitled to rely on alternative disclosure requirements from those set forth in Item 6.5 of Form 51-102F5 -- Information Circular ("Form 51-102F5") of Regulation 51-102 respecting Continuous Disclosure Obligations ("Regulation 51-102") (the "Alternative Disclosure Requirements" and, collectively with the TOB Relief, the Early Warning Relief and the Alternative Monthly Reporting Criteria, the "Exemption Sought").

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

(a) the Autorité des marchés financiers is the principal regulator for this Application;

(b) the Filer has provided notice that Subsection 4.7(1) of Regulation 11-102 respecting Passport System ("Regulation 11-102") is intended to be relied upon by the Filer in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions, Regulation 62-103, Regulation 62-104 and Regulation 11-102, including without limitation, "offeror", "offeror's securities", "offer to acquire", "acquiror", "acquiror's securities", "early warning requirements", "eligible institutional investor" and "securityholding percentage", have the same meaning if used in this decision, unless otherwise defined herein.

Representations

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

1. The Filer is a corporation governed by the Canada Business Corporations Act.

2. The head office and registered office of the Filer are located at 1215 Montée Pilon, Les Cèdres, Québec.

3. The Filer is a reporting issuer in all of the provinces and territories of Canada and is not in default of any requirement of the securities legislation in the jurisdictions in which it is a reporting issuer.

4. The Filer is the largest helicopter operator in Canada and is one of the largest helicopter providers in the world.

5. The Filer is subject to the Canada Transportation Act (the "CTA") which requires that any person operating a "domestic service" (as defined in the CTA), as the Filer does, be controlled in fact by Canadians, within the meaning of Section 55(1) of the CTA ("Canadians"). As such, at least 75% of the Filer's voting interests must be owned and controlled by Canadians such that non-Canadians cannot hold or control more than 25% of the voting interests of the Filer.

6. The authorized share capital of the Filer is comprised of an unlimited number of Variable Voting Shares, an unlimited number of Common Shares and an unlimited number of preferred shares issuable in series. As of March 31, 2016, 111,024 Variable Voting Shares, 12,916,979 Common Shares and no preferred shares were outstanding.

7. The Common Shares may only be held, beneficially owned and controlled, directly or indirectly, by Canadians. An outstanding Common Share is converted into one Variable Voting Share, automatically and without any further act of the Filer or the holder, if such Common Share becomes held, beneficially owned or controlled, directly or indirectly, otherwise than by way of security only, by a person who is not a Canadian.

8. The Variable Voting Shares may only be held, beneficially owned or controlled, directly or indirectly, by persons who are not Canadians. An outstanding Variable Voting Share is converted into one Common Share, automatically and without any further act of the Filer or the holder, if such Variable Voting Share becomes held, beneficially owned and controlled, directly or indirectly, otherwise than by way of security only, by a Canadian.

9. Each Common Share confers the right to one vote. Each Variable Voting Share also confers the right to one vote unless: (i) the number of Variable Voting Shares outstanding, as a percentage of the total number of Shares outstanding of the Filer, exceeds 25% (or any higher percentage that the Governor in Council may by regulation specify); or (ii) the total number of votes cast by or on behalf of holders of Variable Voting Shares at any meeting exceeds 25% (or any higher percentage that the Governor in Council may by regulation specify) of the total number of votes that may be cast at such meeting. If either of the above noted thresholds would otherwise be surpassed at any time, the vote attached to each Variable Voting Share decreases proportionately such that: (i) the Variable Voting Shares as a class do not carry more than 25% (or any higher percentage that the Governor in Council may by regulation specify) of the aggregate votes attached to all outstanding Shares of the Filer; and (ii) the total number of votes cast by or on behalf of holders of Variable Voting Shares at any meeting does not exceed 25% (or any higher percentage that the Governor in Council may by regulation specify) of the votes that may be cast at such meeting.

10. Aside from the differences in voting rights stated above, the rights attached to the Variable Voting Shares and Common Shares are the same in all other respects, including with regard to the right to receive dividends, if any, as well as the right to receive the property and assets of the Filer in the event of a dissolution, liquidation, or winding up of the Filer.

11. The articles of the Filer contain coattail provisions pursuant to which: (i) Variable Voting Shares may be converted into Common Shares in the event of a formal take-over bid for the Common Shares which is not also made to the holders of Variable Voting Shares; and (ii) Common Shares may be converted into Variable Voting Shares in the event of a formal take-over bid for the Variable Voting Shares which is not also made to the holders of Common Shares (the "Coattail Provisions"). The Coattail Provisions do not need to be amended as a result of the decision to grant the Exemption Sought.

12. The Common Shares and the Variable Voting Shares are listed on the Toronto Stock Exchange and have historically traded within a narrow price range, demonstrating that the market essentially assigns the same value to Common Shares and Variable Voting Shares.

13. The Filer's dual class structure was implemented solely to ensure compliance with the requirements of the CTA.

14. On December 31, 2010, the Filer adopted a shareholders rights plan which was ratified by the holders of Shares at the Filer's annual and special shareholder meeting held on June 10, 2011 and reconfirmed on May 14, 2014 (the "Shareholders Rights Plan"). The Shareholders Rights Plan does not need to be amended as a result of the decision to grant the Exemption Sought.

15. An investor does not control or choose which class of Shares it acquires and holds. There are no unique features of either class of Shares which an existing or potential investor can choose to acquire, exercise or dispose of. The class of Shares that an investor can acquire ultimately depends on the investor's Canadian or non-Canadian status only. Moreover, if after having acquired Shares a holder's Canadian or non-Canadian status changes, the Shares will convert accordingly and automatically, without formality or regard to any other consideration.

16. The Variable Voting Shares are not considered "restricted voting securities" for the purposes of the Legislation.

17. The TOB Rules and early warning requirements apply to the acquisition of securities of a class. Because of the current significantly smaller public float of Variable Voting Shares (compared to the public float of Common Shares), it is more difficult for non-Canadian investors to acquire Variable Voting Shares in the ordinary course without the apprehension of inadvertently triggering the TOB Rules and early warning requirements, thus restricting the interest of non-Canadian investors in the Variable Voting Shares because of reasons unrelated to their investment objectives. Aggregating Variable Voting Shares and Common Shares for the purpose of the TOB Rules and early warning requirements would aim at facilitating an investment in Variable Voting Shares.

18. To the extent that the Variable Voting Shares and Common Shares are aggregated for the purposes of the TOB Rules, the early warning requirements and the alternative monthly reporting requirements, the Filer should not be required to disclose the number of Variable Voting Shares and Common Shares on a per-class basis in its management information circular.

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 the Exemption Sought is granted provided that:

(a) the Filer shall publicly disclose the terms of the Exemption Sought in a news release filed on SEDAR promptly following the issuance of this decision document;

(b) the Filer shall disclose the terms and conditions of the Exemption Sought in all of its annual information forms and management proxy circulars filed on SEDAR following the issuance of this decision document;

(c) with respect only to the TOB Relief, the Variable Voting Shares or the Common Shares, as the case may be, subject to the offer to acquire of an offeror, together with the Variable Voting Shares and Common Shares beneficially owned, or over which control or direction is exercised, on the date of the offer to acquire, by the offeror or by any person acting jointly or in concert with the offeror, would not constitute, in the aggregate 20% or more of the outstanding Variable Voting Shares and Common Shares on a combined basis on the date of the offer to acquire;

(d) with respect only to the Early Warning Relief, the Variable Voting Shares or Common Shares, or securities convertible into such Shares, as the case may be, over which the acquiror acquires beneficial ownership of, or the power to exercise control or direction over, together with the securities of the Filer beneficially owned, or over which control or direction is exercised, by the acquiror or any person acting jointly or in concert with the acquiror, would not constitute 10% or more of the outstanding Variable Voting Shares and Common Shares on a combined basis;

(e) with respect only to the Alternative Monthly Reporting Criteria, the eligible institutional investor meet any of the eligibility criteria contained in Section 4.5 of Regulation 62-103 by calculating its securityholding percentage using (i) a denominator comprised of all of the outstanding Variable Voting Shares and Common Shares on a combined basis; and (ii) a numerator including all of the Variable Voting Shares and Common Shares, as the case may be, beneficially owned or over which control or direction is exercised by the eligible institutional investor; and

(f) with respect only to the Alternative Disclosure Requirements, the Filer meet the disclosure requirements contained in Item 6.5 of Form 51-102F5 by calculating the securityholding percentage using (i) a denominator comprised of all of the outstanding Variable Voting Shares and Common Shares on a combined basis; and (ii) a numerator including all of the Variable Voting Shares and Common Shares, as the case may be, beneficially, or over which control or direction is exercised, directly or indirectly, by any person who, to the knowledge of the Filer's directors or executive officers, beneficially owns, controls or directs, directly or indirectly, voting securities carrying 10% or more of the voting rights attached to the outstanding Variable Voting Shares and Common Shares on a combined basis.

"Gilles Leclerc"
Superintendent Securities Market
Autorité des marches financiers