Securities Law & Instruments

Headnote

 

Dual 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 offering involves the use of collective employee shareholding vehicles, each a fonds communs de placement d’entreprise (FCPE) – The issuer cannot rely on the employee exemption in section 2.24 of Regulation 45-106 respecting prospectus and registration 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 – The number of Canadian participants and their share ownership are de minimis – Canadian employees will receive disclosure documents – The FCPEs are subject to the supervision of the French Autorité des marchés financiers – Relief granted, subject to conditions.

 

Applicable Legislative Provisions

 

Securities Act (Ontario), ss. 53, 74.

National Instrument 45-106 Prospectus and Registration Exemptions, s. 2.24.

National Instrument 31-103 Registration Requirements and Exemptions, s. 8.16.

National Instrument 45-102 Resale of Securities, s. 2.14.

 

TRANSLATION

 

March 18, 2014

 

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

(the “Filing Jurisdictions”)

 

AND

 

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS

IN MULTIPLE JURISDICTIONS

 

AND

 

IN THE MATTER OF

ARKEMA S.A.

(the “Filer”)

 

DECISION

 

Background

 

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

 

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

 

(a)           trades in:

 

(i)            units (the “Principal Classic Units”) of an FCPE named Arkema Actionnariat International (the “Principal Classic FCPE”), which is a fonds commun de placement d’entreprise or “FCPE,” a form of collective shareholding vehicle commonly used in France for the conservation of shares held by employee-investors; and

 

(ii)           units (together with the Principal Classic Units and Matching Units (as defined below), each and collectively, the “Units”) of a temporary FCPE named Arkema Actionnariat International Relais 2014 (the “Temporary Classic FCPE”), which will merge with the Principal Classic FCPE following completion of the Employee Share Offering (as defined below), as further described in paragraph 16 of the Representations;

 

made pursuant to the Employee Share Offering to or with Qualifying Employees (as defined below) resident in the Filing Jurisdictions (collectively, the “Canadian Employees”, and Canadian Employees who subscribe for Units, the “Canadian Participants”); and

 

(b)           trades of ordinary shares of the Filer (the “Shares”) by the Principal Classic FCPE and/or the Temporary Classic FCPE to or with Canadian Participants (as defined below) upon the redemption of their Units as requested by Canadian Participants;

 

2.             an exemption from the dealer registration requirements of the legislation (the “Registration Relief”) so that such requirements do not apply to the Filer and the Canadian Affiliate (as defined below), the Temporary Classic FCPE, the Principal Classic FCPE and Amundi (the “Management Company”) in respect of:

 

(a)           trades in Units made pursuant to the Employee Share Offering to or with Canadian Employees; and

 

(b)           trades in Shares by the Temporary Classic FCPE and/or the Principal Classic FCPE to or with Canadian Participants upon the redemption of their Units;

 

(the Prospectus Relief and the Registration Relief being collectively referred to as the “Offering Relief”).

 

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, and

 

(b)           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 45-102 respecting resale of securities, Regulation 45-106 respecting Prospectus and Registration Exemptions and Regulation 11-102 respecting Passport System 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 is a corporation formed under the laws of France. It is not, and has no current intention of becoming, a reporting issuer under the Legislation or under the securities legislation of any other jurisdiction of Canada. The head office of the Filer is located in France and the Shares are listed on NYSE Euronext Paris. The Filer is not in default under the Legislation or under the securities legislation of any other jurisdiction of Canada.

 

2.             The Filer carries on business in Canada through Arkema Canada Inc. (the “Canadian Affiliate” and, collectively with the Filer and other affiliates of the Filer, the “Arkema Group”). The Canadian Affiliate is not in default under the Legislation or under the securities legislation of any other jurisdiction of Canada.

 

3.             The Canadian Affiliate is an indirect subsidiary of the Filer and is not, and has no current intention of becoming, a reporting issuer under the Legislation or under the securities legislation of any other jurisdiction of Canada. The majority of the senior management of the Canadian Affiliate resides in Québec and the greatest number of Qualifying Employees of the Arkema Group in Canada resides in Québec.

 

4.             As of the date hereof and after giving effect to the Employee Share 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 Principal Classic FCPE and the Temporary Classic FCPE on behalf of Canadian Participants) more than 10% of the Shares and do not and will not represent in number more than 10% of the total number of holders of the Shares as shown on the books of the Filer.

 

5.             The Filer has established a global employee share offering for employees of the Arkema Group (the “Employee Share Offering”). The Employee Share Offering involves an offering of Shares to be subscribed through the Principal Classic FCPE via the Temporary Classic FCPE (the “Classic Plan”).

 

6.             Only persons who are employees of a member of the Arkema Group during the subscription period for the Employee Share Offering and who meet other employment criteria (the “Qualifying Employees”) will be allowed to participate in the Employee Share Offering.

 

7.             The Principal Classic FCPE and the Temporary Classic FCPE have been established for the purpose of implementing the Employee Share Offering. There is no current intention for either the Principal Classic FCPE or the Temporary Classic FCPE to become a reporting issuer under the Legislation or the securities legislation of any other jurisdiction of Canada.

 

8.             As set forth above, each of the Temporary Classic FCPE and the Principal Classic FCPE is an FCPE (a fonds commun de placement d’entreprise), a shareholding vehicle commonly used in France for the conservation or custodianship of shares held by employee investors. A FCPE is a limited liability entity under French law. The Principal Classic FCPE and the Temporary Classic FCPE have been registered with the French Autorité des marchés financiers (the “French AMF”) and approved by it.

 

9.             Units (other than Matching Units as defined below) acquired in the Employee Share Offering by Canadian Participants will be subject to a hold period of approximately five years (the “Lock-Up Period”), subject to certain exceptions prescribed by French law and adopted under the Classic Plan in Canada (such as death, long-term disability, involuntary termination of employment or retirement).

 

10.          The subscription price for Units under the Classic Plan will be the Canadian dollar equivalent equal to the average of the opening price of the Shares on NYSE Euronext Paris (expressed in Euros) on the 20 trading days preceding the date of fixing of the subscription price by the board of Directors of the Filer, less a 20% discount.

 

11.          Subject to the approval of the board of directors of the Filer, for every five Shares purchased by a Canadian Participant under the Classic Plan (each, an “Employee-Purchased Share”), the Filer will issue, at no cost to a Canadian Participant, but subject to the vesting requirements described below, one additional Share (each a “Matching Share”) up to a maximum of 20 Matching Shares per Canadian Participant.

 

12.          The Temporary Classic FCPE will apply the cash received in respect of the Units to subscribe for Shares and Canadian Participants will receive Units in the Temporary Classic FCPE representing the subscription of such Shares. Any corresponding Matching Shares will be issued and delivered by the Filer to the Classic FCPE on behalf of the Canadian Participant once such Matching Shares vest as described below. In order to reflect this, new Units (“Matching Units”) of the Classic FCPE (defined below) will be issued to the Canadian Participants.

 

13.          The term “Classic FCPE” used herein means, prior to the Merger, the Temporary Classic FCPE and, following the Merger, the Principal Classic FCPE.

 

14.          Matching Shares will vest once a Canadian Participant remains employed (subject to certain exceptions, such as death, permanent disability, retirement, termination without cause or if the Canadian Affiliate or its business is no longer part of the Arkema Group) within the Arkema Group for a continuous period of four years from the date that the Shares and Units pursuant to the Employee Share Offering are issued to the Temporary Classic FCPE and the Canadian Participants, respectively.

 

15.          In the event of an early unwind resulting from the Canadian Participant exercising one of the exceptions to the Lock-Up Period and meeting the applicable criteria, a Canadian Participant may request the redemption of Units in the Classic FCPE in consideration for a cash payment equal to the then market value of the underlying Shares.

 

16.          Initially, the Shares will be held in the Temporary Classic FCPE and the Canadian Participant will receive Units in the Temporary Classic FCPE. Following the completion of the Employee Share Offering, the Temporary Classic FCPE will be merged with the Principal Classic FCPE (subject to the approval of the supervisory board of the FCPEs and the French AMF). Units of the Temporary Classic FCPE held by Canadian Participants will be replaced with Units of the Principal Classic FCPE on a pro rata basis and the Shares subscribed for under the Employee Share Offering will be held in the Principal Classic FCPE (the “Merger”).

 

17.          Under the Classic Plan, at the end of the Lock-Up Period a Canadian Participant may:

 

(a)           request the redemption of Units in the Classic FCPE in consideration for the underlying Shares or a cash payment equal to the then market value of the Shares, or

 

(b)           continue to hold Units in the Classic FCPE and request the redemption of those Units at a later date in consideration for the underlying Shares or a cash payment equal to the then market value of the Shares.

 

18.          Matching Units are not subject to the Lock-Up Period. Following the issuance of Matching Units, a Canadian Participant may (i) request the redemption of Matching Units in consideration for the underlying shares or a cash payment equal to the then market value of the Matching Shares, or (ii) hold the Matching Units in the Classic FCPE and request the redemption of the Matching Units at a later date in consideration for the underlying Matching Shares or a cash payment equal to the then market value of the Matching Shares.

 

19.          Dividends paid on the Shares held in the Classic FCPE will be contributed to the Classic FCPE and used to purchase additional Shares. To reflect this reinvestment, new Units (or fractions thereof) will be issued.

 

20.          The portfolio of each of the Principal Classic FCPE and the Temporary Classic FCPE will consist almost entirely of Shares, but may, from time to time, include cash in respect of dividends paid on the Shares. From time to time, each portfolio may also include cash or cash equivalents that the Principal Classic FCPE and the Temporary Classic FCPE may hold pending investments in Shares or for the purpose of funding redemptions.

 

21.          The Management Company is a portfolio management company governed by the laws of France. The Management Company is registered with the French AMF as an investment manager and complies with the rules of the French AMF. To the best of the Filer’s knowledge, the Management Company is not, and has no current intention of becoming, a reporting issuer under the Legislation or the securities legislation of any other jurisdiction of Canada.

 

22.          The Management Company’s portfolio management activities in connection with the Employee Share Offering, the Principal Classic FCPE and the Temporary Classic FCPE are limited to subscribing for Shares and selling such Shares as necessary in order to fund redemption requests and investing available cash in cash equivalents.

 

23.          The Management Company is also responsible for preparing accounting documents and publishing periodic informational documents as provided by the rules of each of the Principal Classic FCPE and the Temporary Classic FCPE. The Management Company’s activities do not affect the underlying value of the Shares. To the best of the Filer’s knowledge, the Management Company is not in default of the Legislation or the securities legislation of any other jurisdiction of Canada.

 

24.          Shares issued in the Employee Share Offering will be deposited in the Classic FCPE through CACEIS Bank (the “Depositary”), a large French commercial bank subject to French banking legislation.

 

25.          All management charges relating to the Classic FCPE will be paid from the assets of the Classic FCPE or by the Filer, as provided in the regulations of the Classic FCPE. The Management Company is obliged to act in the best interests of the Canadian Participants and is liable to them, jointly and severally with the Depositary, for any violation of the rules and regulations governing the Classic FCPE, any violation of the rules of the Classic FCPE, or for any self-dealing or negligence.

 

26.          Participation in the Employee Share Offering is voluntary, and the Canadian Employees will not be induced to participate in the Employee Share Offering by expectation of employment or continued employment.

 

27.          The total amount invested by a Canadian Employee in the Employee Share Offering cannot exceed 25% of his or her gross compensation for the 2013 calendar year. Amounts contributed by the Filer in respect of Matching Shares will not be factored into the maximum amount that a Canadian Employee may contribute. Furthermore, under the Employee Share Offering a Canadian Participant may not make a subscription for Units that represent more than 1,000 Shares.

 

28.          None of the Filer, the Management Company, the Canadian Affiliate or any of their directors, officers, employees, agents or representatives will provide investment advice to the Canadian Employees with respect to an investment in the Shares or the Units.

 

29.          The Canadian Employees will receive an information package in the French or English language, according to their preference, which will include a summary of the terms of the Employee Share Offering and a description of Canadian income tax consequences of subscribing to and holding Units of the Classic FCPE and requesting the redemption of such Units for cash or Shares at the end of the Lock-Up Period.

 

30.          Canadian Employees may access the Filer’s French Document de référence filed with the French AMF in respect of the Shares by visiting the website www.ake.com. Canadian Employees will also have access, through this website, to the continuous disclosure materials relating to the Filer that are furnished to holders of the Shares. Furthermore, Canadian Employees may also obtain a copy of the rules of the Temporary Classic FCPE and the Principal Classic FCPE (which are analogous to company by-laws) by visiting the website www.ake2014.com.

 

31.          Canadian Participants will receive an initial statement of their holdings under the Classic Plan, together with an updated statement at least once per year.


32.          There are approximately 68 Canadian Employees resident in the provinces of Ontario and Québec, who represent, in the aggregate, less than 1% of the total number of employees in the Arkema Group worldwide.

 

33.          The Units will not be listed on any exchange.

 

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 Offering Relief is granted provided that the prospectus requirements of the Legislation will apply to the first trade in any Units or Shares acquired by Canadian Participants pursuant to this Decision, unless the following conditions are met:

 

(a)           the issuer of the security:

 

(i)            was not a reporting issuer in any jurisdiction of Canada at the distribution date, or

 

(ii)           is not a reporting issuer in any jurisdiction of Canada at the date of the trade;

 

(b)           at the distribution date, after giving effect to the issue of the security and any other securities of the same class or series that were issued at the same time as or as part of the same distribution as the security, residents of Canada:

 

(i)            did not own directly or indirectly more than 10% of the outstanding securities of the class or series, and

 

(ii)           did not represent in number more than 10% of the total number of owners directly or indirectly of securities of the class or series; and

 

(c)           the first trade is made:

 

(i)            through an exchange, or a market, outside of Canada, or

 

(ii)           to a person or company outside of Canada.

 

“Gilles Leclerc”

Superintendent, Securities Markets