Securities Law & Instruments


Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Application for relief from the prospectus and registration requirements for certain trades made in connection with an employee share offering by a French issuer – The issuer cannot rely on the employee exemption in section 2.24 of National Instrument 45-106 Prospectus Exemptions as the securities are not being offered to Canadian employees directly by the issuer but rather through special purpose entities – Canadian participants will receive disclosure documents – The special purpose entities are subject to the supervision of the local securities regulator – Canadian employees will not be induced to participate in the offering by expectation of employment or continued employment – There is no market for the securities of the issuer in Canada – Units not transferable and redeemable only for case – Relief granted without conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss, 25, 53, 74.
National Instrument 45-106 Prospectus Exemptions, s. 2.24.
National Instrument 45-102 Resale of Securities, s. 2.14.
National Instrument 31-103 Registration Requirements and Exemptions, s. 8.16.

Translation

August 24, 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
UBISOFT ENTERTAINMENT S.A
(the “Filer”)

DECISION

Background

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

1.             an exemption from the prospectus requirement of the Legislation (“Prospectus Relief”) so that such requirements do not apply to:

(a)           trades in units (the “2016 Units”) of UBI SHARE OWNERSHIP 2016 FCPE (the “2016 UBI FCPE”), a fonds commun de placement d’entreprise (“FCPE”), pursuant to the global employee share acquisition offer by the Filer (the “Employee Offering”), which are intended to be made by the 2016 UBI FCPE to or with Qualifying Employees (as defined below) resident in the Jurisdictions and in Nova Scotia who elect to participate in the Employee Offering (the “Canadian Participants”);

(b)           trades in units (“Second FCPE Units”, together with the 2016 Units, the “Units” and each a “Unit”) of another FCPE established by the Filer (the “Second FCPE”, together with the 2016 UBI FCPE, the “UBI FCPEs”) made by the UBI FCPEs pursuant to subscriptions made by the Canadian Participants using proceeds from the redemption of the 2016 Units (the “Redemption Subscription”) or the default redemption of 2016 Units by the 2016 UBI FCPE prior to its winding up shortly after the expiry of the Lock-Up Period (as defined below) (the “Default Windup Redemption”) to or with Canadian Participants;

2.             an exemption from the dealer registration requirements of the Legislation (“Registration Relief”, together with the Prospectus Relief, the “Exemptive Relief Sought”) so that such requirements do not apply to the Filer and the Canadian affiliates of the Filer including, Ubisoft Divertissements Inc., Hybride Technologies Inc. and Ubisoft Toronto Inc. (the “Canadian Affiliates”, and together with the Filer and other affiliates of the Filer, the “Ubisoft Group”), the 2016 UBI FCPE, the Second FCPE and Amundi Asset Management (“Amundi”, or the “Manager”) in respect of:

(a)           trades in 2016 Units made pursuant to the Employee Offering to or with Canadian Participants;

(b)           trades in Second FCPE Units made pursuant to the Redemption Subscription or the Default Windup Redemption to or with Canadian Participants.

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

(a)           the Autorité des marches financiers is the principal regulator for this application;

(b)           the Filer has provided notice that section 4.7(1) of Regulation 11-102 respecting Passport System (“Regulation 11-102”) is intended to be relied upon in Nova Scotia; and

(c)           this 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 or in Regulation 11-102 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 formed under the laws of France.

2.             The ordinary shares of the Filer (“Shares”) are listed on the Euronext Paris stock exchange (the “Exchange”).

3.             The Filer is not and does not intend on becoming a reporting issuer (or equivalent) under the securities legislation in any of the jurisdictions of Canada.

4.             Each of the Canadian Affiliates is a direct or an indirect controlled subsidiary of the Filer and is not, and does not intend on becoming, a reporting issuer under the securities legislation in any of the jurisdictions of Canada.

5.             The Employee Offering is reserved for employees of the Filer’s affiliates in France and elsewhere, including the Canadian Affiliates, in which the Filer directly or indirectly holds at least 80% of the share capital or voting rights, provided that such affiliate companies participate in the Ubisoft Group International Savings Plan (“PEGI”).

6.             The Employee Offering is reserved for employees of the Ubisoft Group who belong to the PEGI, who have at least three month’s seniority, continuous or not, between January 1, 2015 and the last day of the Acquisition/Withdrawal Period (as defined below) (the “Qualifying Employees”).

7.             Qualifying Employees will be invited to participate in the Employee Offering under the terms of the 2016 UBI FCPE, which is intended to provide Qualifying Employees with an opportunity to indirectly hold an investment in Shares.

8.             Only participants in the Employee Offering are allowed to hold 2016 Units.

9.             For purposes of the Employee Offering in Canada, there are currently approximately 3,587 Qualifying Employees resident in Canada, in the provinces of Québec (approximately 3,145), Ontario (approximately 403) and Nova Scotia (approximately 39). The Qualifying Employees residing in Canada represent approximately 40 % of the Qualifying Employees worldwide.

10.          Qualifying Employees will not be induced to participate in the Employee Offering by expectation of employment or continued employment. Participation in the Employee Offering is optional and voluntary. The total amount invested by a Qualifying Employee in the Employee Offering cannot exceed a specified percentage of his or her estimated gross annual compensation for the calendar year (currently, 2.5%) in which the Employee Offering occurs (i.e. 2016). During the Acquisition/Withdrawal Period (as defined below), the ceiling is reduced to 0.25% of the Qualifying Employee’s estimated 2016 gross annual compensation.

11.          Qualifying Employees can indicate their intent to subscribe to an amount under an Employee Offering and make a reservation by filling out a reservation form during a prescribed reservation period (the “Reservation Period”). After the expiration of the Reservation Period, the subscription price is set and the acquisition period and withdrawal period commences (the “Acquisition/Withdrawal Period”). During the Acquisition/Withdrawal Period, an employee who has made a reservation may withdraw his or her subscription of 2016 Units under the Employee Offering. However, an employee who has not made a reservation may still subscribe.

12.          The UBI FCPEs are or will be collective shareholding vehicles of a type commonly used in France for investing in shares of an issuer by employee-investors.

13.          Each UBI FCPE must be registered and approved by the French Autorité des marchés financiers (“AMF France”) at the time of its creation.

14.          The UBI FCPEs are not and do not intend on becomeing reporting issuers under the securities legislation in any of the jurisdictions in Canada.

15.          The Second FCPE is or will be an FCPE especially established by the Filer to invest in Shares. At the end of the Lock-Up Period, Canadian Participants may, in lieu of a cash payment at the end of the Lock-Up Period, elect to transfer the corresponding cash equivalent (the Initial Investment and the amount of the Performance (as defined below)) of their 2016 Units to the Second FCPE in exchange for Second FCPE Units (the Redemption Subscription). In the case that the Canadian Participants do not make any election, prior to its winding-up, the 2016 UBI FCPE will, under the default option, transfer the cash redemption value (the Initial Investment plus the amount of the Performance) of the 2016 Units to the Second FCPE to subscribe for, on behalf of the respective Canadian Participants, Second FCPE Units (the Default Windup Redemption).

16.          After the Employee Offering, the 2016 UBI FCPE will invest in Shares.

17.          The Employee Offering is comprised of an offering of 2016 Units, to fund the acquisition of Shares by the 2016 UBI FCPE, to be subscribed as follows:

(a)           Canadian Participants will subscribe for 2016 Units for an amount per 2016 Unit equivalent to the Purchase Price (as defined below) paid by the 2016 UBI FCPE to acquire Shares. The minimum investment amount per Canadian Participant is EUR 25. Canadian Participants will acquire 2016 Units in Canadian dollars, with the exchange rate to be determined at the same time as the Purchase Price. Canadian Participants can indicate their intent to subscribe to an amount and make a reservation by filling out a reservation form during the Reservation Period. The value of a 2016 Unit is tied to the market price of the Shares. The value of 2016 Units will be adjusted on the basis of the market price of the Shares and other assets (for example, cash) held by the 2016 UBI FCPE, effective from the first date on which the net asset value is calculated and whenever Shares or other assets are contributed to the 2016 UBI FCPE, as applicable.

(b)           For each cash investment made by a Canadian Participant in the Employee Offering (the “Employee’s Personal Payment”), the Filer will make a matching (100%) cash contribution capped at an amount in Canadian dollars equivalent to EUR 1,000 net per Canadian Participant (the “Ubisoft Contribution”, together with the Employee’s Personal Payment, the “Initial Investment”). The net amount of the Ubisoft Contribution will be fully invested on behalf of the Canadian Participant to acquire additional 2016 Units.

(c)           The 2016 UBI FCPE will apply the cash received from (i) the Initial Investments and (ii) the Bank Upfront Payment (as defined below), to acquire Shares at the Purchase Price. The purchase price for a 2016 Unit will be equal to the Reference Price (as defined below), minus a 15% discount (the “Discount”), rounded up to the nearest euro cent (the “Purchase Price”). The reference price will be the volume weighted average prices of the Shares on the twenty days preceding the date on which the Filer’s board of directors (or its CEO acting by delegation) determines the Employee Offering period as well as the Purchase Price (the “Reference Price”).

(d)           Pursuant to the operation of a five year swap agreement (the “Swap”), entered into between the 2016 UBI FCPE (represented by the Manager), and the Crédit Agricole CIB (the “Bank”), whereby on the day of settlement and delivery of the Shares, the Bank provides to the 2016 UBI FCPE a cash amount (the “Bank Upfront Payment”) equal to nine times the sum of the Initial Investments, to be used by the 2016 UBI FCPE to acquire additional Shares from the Filer at the Purchase Price.

(e)           Under the Swap, dividends and any other financial rights on the Shares received by the 2016 UBI FCPE during the five-year period will be paid by the 2016 UBI FCPE to the Bank as and when received. Canadian Participants will not receive additional 2016 Units on account of dividends paid on Shares held in the 2016 UBI FCPE.

(f)            Canadian Participants will be subject to a five year lock-up period (the “Lock-Up Period”) and will be prohibited from disposing or requesting repurchase of 2016 Units during the Lock-Up Period unless one of the following cases of early release occurs with respect to the Canadian Participant: (i) disability; (ii) termination of the employment; or (iii) death (the “Case of Early Release”).

(g)           At the end of the Lock-Up Period, or earlier if a Case of Early Release occurs and the Canadian Participant requests the repurchase of his or her 2016 Units: (i) the 2016 UBI FCPE will sell the corresponding number of Shares on the Exchange (the “Sale”) and pay the total proceeds from the Sale to the Bank; (ii) the Bank will pay to the 2016 UBI FCPE an amount corresponding to the sum of (a) the Initial Investment and (b) an amount equal to a multiple (under the Employee Offering, the multiple will be five) of the Protected Average Performance (as defined below) of the Shares corresponding to the employee's Initial Investment (the “Performance”); and (iii) the Canadian Participant will receive a cash amount equal to (a) the repayment of his or her Initial Investment, it being specified that only the euro amount of the Initial Investment is guaranteed and Canadian Participants will carry the risk of any fluctuations in the Canadian dollar/Euro exchange rate between the investment date and the date of redemption and (b) the amount of the Performance.

(h)           The Protected Average Performance represents the difference between (i) the average reference price, i.e. the average of the monthly market reference prices of the Shares over a 60-month period (with the 60-month period scheduled to commence on September 30, 2016, subject to Bank confirmation) (the “Average Reference Price”) and (ii) the Reference Price (the “Protected Average Performance”). The monthly market reference price is fixed on a pre-agreed business day of the month. The monthly market reference price shall be, for each month, the higher of (i) the market price of the Shares on that business day of the month in question and (ii) the Reference Price. If a Case of Early Release occurs and the Canadian Participant asks for the repurchase of his or her 2016 Units, in order to calculate the monthly market reference price for the remaining period between the month where the Case of Early Release occurs and the end of the 5 year period, the last monthly market reference price of the Shares for the month when the Case of Early Release occurs shall be used for the month of the Case of Early Release and every subsequent month up until the end of the 5 year period (to have 60 monthly market reference prices in order to determine the Average Reference Price).

(i)            The Canadian Participant may, in lieu of a cash payment at the end of the Lock-Up Period, elect to transfer the corresponding cash equivalent of the Initial Investment and the amount of the Performance of his or her 2016 Units to the Second FCPE in exchange for Second FCPE Units (the Redemption Subscription). The number of Second FCPE Units received will correspond to the Initial Investment and the amount of the Performance divided by the par value of the Second FCPE Units. The par value of a Second FCPE will be based on the net assets of the Second FCPE divided by the number of Second FCPE Units outstanding. The Canadian Participant may redeem Second FCPE Units at any time, and upon redemption will only be entitled to the corresponding cash equivalent of the liquidation value of the Second FCPE Units (i.e. the market value of the assets within the Second FCPE divided by the number of Second FCPE Units). The investments made in the Second FCPE will not be guaranteed.

(j)            The Units held by a Canadian Participant are not transferable, except on the redemption of the Units held by the Canadian Participant (as described in paragraph 17(g), (i) and (l)). Canadian Participants at the end of the Lock-Up Period (or in the Case of Early Release) are not entitled to Shares upon the redemption of Units.

(k)           The Units will not be listed on any stock exchange. The initial par value of a 2016 Unit will be equivalent to the Purchase Price. The value of the Units will be calculated and reported to the French AMF on a regular basis, based on the net assets of the UBI FCPEs divided by the number of Units outstanding.

(l)            The 2016 UBI FCPE will be wound up shortly after the expiry of the Lock-Up Period (the “Wound Up FCPE”), with Shares held by the Wound Up FCPE being sold (as described in paragraph 17(g) above) and the cash redemption value (the Initial Investment plus the amount of the Performance) of those 2016 Units not redeemed by Canadian Participants, being automatically transferred by the Wound Up FCPE to the Second FCPE to subscribe, on behalf of the respective Canadian Participants, for Second FCPE Units at the same value as set out in paragraph 17(i) (the Default Windup Redemption).

18.          Shares issued under the Employee Offering will be deposited in the UBI FCPEs through a custodian (the “Custodian”). The Custodian will carry out orders to purchase and sell securities, and take all necessary action to allow the UBI FCPEs to exercise the rights relating to the Shares held. The Custodian must carry out its activities in accordance with French law. The current Custodian is CACEIS Bank France, a large French commercial bank.

19.          The UBI FCPEs are or will be established by the Manager and the Filer. The Manager will be a portfolio management company governed by the laws of France. The Manager will be registered with AMF France to manage French investment funds and will comply with the rules of AMF France. At present, the Manager of the 2016 UBI FCPE is Amundi, a limited liability company registered in the Paris Trade and Companies Register. It is not and has no current intention of becoming a reporting issuer under the securities legislation in any of the jurisdictions of Canada, nor is it registered as an adviser or a dealer under the securities legislation in any of the jurisdictions of Canada.

20.          The Manager’s portfolio management activities in connection with Employee Offering and the Redemption Subscription will be limited to acquiring Shares and selling such Shares as necessary in order to fund redemption requests. The Manager will be responsible for the daily operation of the UBI FCPEs and preparing the annual statement of the number of Units each Canadian Participant holds in the UBI FCPEs (a “Statement of Account”). The Manager’s activities will in no way affect the value of the Shares, or the Units.

21.          The management of the UBI FCPEs will be overseen by a separate supervisory board (the “Supervisory Board”) comprised of employee unitholders and management representatives of the Filer. The Supervisory Board’s duties will include, among other things, examining the UBI FCPEs’ management reports and annual accounts and reviewing major changes with respect to the UBI FCPEs.

22.          Administrative, accounting, audit, financial management and other expenses incurred by the UBI FCPEs, including transaction fees relating to the acquisition and sale of Shares, will be borne by the UBI FCPEs and paid from its assets.

23.          Qualifying Employees will receive an information package in French or English which will include a summary of the terms of the Employee Offering and a description of relevant Canadian income tax consequences. The information package will also include a risk statement which will describe certain risks associated with an investment in 2016 Units.

24.          Canadian Participants will not receive any dividends declared by the Filer on the Shares held by the UBI FCPEs. Furthermore, the French AMF expressly requires the Manager to state in the information package provided to Qualifying Employees that employees will not receive any dividends from the Shares held by the UBI FCPEs. In light of this, the Filer’s position is that there should be no tax implications to Canadian Participants flowing from the declaration of dividends, if any, on the Shares of the Filer.

25.          The difference between the fair value of the Canadian Participants interest in the Shares attributable to the Canadian Participant, represented by the Canadian Participants Units at the time of his or her participation in the Employee Offering, and the amount of the Employee’s Personal Payment should be subject to tax and (subject to applicable limits) social security contributions, which will be withheld by the Canadian Participants employer.

26.          Upon the redemption of Units held by the Canadian Participant, 50% of the capital gain (if any), equal to the excess of the proceeds of disposition (i.e. the amount the Canadian Participant received on redemption of the Units) over the fair value of the Canadian Participant’s interest in the underlying Shares determined at the time of his or her participation by the valuation report, will be included in his or her taxable income and taxed at ordinary rate.

27.          Qualifying Employees will have access, through the Filer’s website, to the Filer’s continuous disclosure furnished by the Filer to its shareholders generally.

28.          A copy of the rules of the 2016 UBI FCPE will be made available to Qualifying Employees when they receive their application to subscribe for Units of the 2016 UBI FCPE. A copy of the rules of the Second FCPE will be made available to Canadian Participants if and when they choose to redeem their 2016 Units for the Second FCPE Units.

29.          Each Canadian Participant will receive, at least annually, a Statement of Account.

30.          There are no circumstances under which a Canadian Participant would be required to contribute amounts in addition to their Employee Personal Payment other than certain tax and social security amounts payable pursuant to the Employee Offering.

31.          As of the date hereof and after giving effect to the Employee Offering, Canadian residents do not and will not beneficially own (which term, for the purposes of this paragraph, is deemed to include all Shares held by the UBI FCPEs on behalf of Canadian Participants) more than 10% of the Shares issued and outstanding and do not and will not represent in number more than 10% of the total number of holders of Shares as shown on the books of the Filer.

32.          None of the Filer, the Manager, the Canadian Affiliates or any of their directors, officers, employees, agents or representatives will provide investment advice to the Qualifying Employees with respect to investments in the Units.

33.          The UBI FCPEs will pay fees to the Manager to cover the cost of running the UBI FCPEs, including the distribution costs of the Units. These fees are disclosed in the information package provided to Qualifying Employees as well as in the rules (which are analogous to company by-laws) of the UBI FCPEs.

34.          The 2016 UBI FCPE may, through the Manager, cancel the Swap at any time provided that it is in the best interests of all the participants, including the Canadian Participants, to do so. If the 2016 UBI FCPE, through the Manager, cancels the Swap, Canadian Participants may, based on the market value of the Shares, receive an amount which is different (higher, or lower) than the guaranteed amount to be paid at the end of the Lock-Up Period.

35.          Any dividends paid on the Shares held in the Second FCPE will be paid to the Second FCPE and the Second FCPE may either retain the cash proceeds in the Second FCPE or use them to purchase additional Shares on the Exchange. If the Second FCPE retains the cash proceeds in the Second FCPE, the par value of the Second FCPE Units will increase accordingly. If the Second FCPE purchases additional Shares on the Exchange with the cash proceeds, the Second FCPE may (i) issue additional Second FCPE Units to Canadian Participants, in which case the par value of the Second FCPE Units will not be adjusted accordingly or (ii) not issue any additional Second FCPE Units to Canadian Participants, in which case the par value of the Second FCPE Units will be adjusted accordingly.

36.          The UBI FCPEs will hold no other securities aside from the Shares, and cash-equivalents or money-market securities representing up to 10% of the value of the assets of the UBI FCPEs to be used to pay redemptions pursuant to Cases of Early Release.

37.          Except in respect of the distribution of 2016 Units to Canadian Participants under the Employee Offering during the Reservation Period (as defined below) from June 27, 2016 to July 8, 2016 notwithstanding the fact that the Filer had not yet obtained the Exemption Relief Sought, neither the Filer, the UBI FCPEs nor any of its Canadian Affiliates is in default of any securities legislation of any jurisdiction of Canada.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemptive Relief Sought is granted.

“Lucie J. Roy”
Directrice principale du financement des sociétés