Citation: 2017 BCSECCOM 122 Headnote Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions 1996 Securities Act s,76 Prospectus Requirements - An issuer that is not a reporting issuer in Canada is seeking first trade relief for securities that it will issue or has issued to Canadian residents - The issuer meets all of the conditions of section 2.14 of National Instrument 45-102 Resale of Securities except that residents of Canada will own more than 10% of the securities of the class and will represent more than 10% of the total number of holders of the securities of the class; the issuer has a de minimis connection to Canada once certain angel, founding or institutional investors are excluded; the issuer is not seeking to create a market for its securities in Canada by offering its securities to new investors; the issuer will provide security holders who are resident in Canada with the same continuous disclosure materials that are provided to foreign shareholders. Applicable Legislative Provisions Securities Act, R.S.B.C. 1996, c.418, s.76 March 30, 2017 In the Matter of the Securities Legislation of British Columbia and Ontario (the Jurisdictions) and In the Matter of the Process for Exemptive Relief Applications in Multiple Jurisdictions and In the Matter of Enstar Group Limited (the Filer) Decision Background 1 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 an exemption from the prospectus requirement for the first trades of securities distributed under the Filer s Employee Stock ESPP (ESPP) to Canadian Employees (defined below) (the Exemption Sought). DM 1938094
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application): (a) the British Columbia Securities Commission is the principal regulator for this application, (b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories, and the Nunavut Territory, 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 2 Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined. Representations 3 This decision is based on the following facts represented by the Filer: 1. the Filer is validly existing under the laws of Bermuda and has its registered office and its principal executive office in Hamilton, Bermuda; 2. the Filer is a multi-faceted insurance group established to acquire and manage insurance and reinsurance companies in run-off and to provide management, consulting and other services to the insurance and reinsurance industry; 3. the Filer is not a reporting issuer in any jurisdiction of Canada, nor are any of its securities listed or posted for trading on any exchange or market located in Canada; 4. the Filer is a reporting issuer in the United States and is regulated by the SEC under the 1934 Act; its securities are publicly listed and posted for trading on the NASDAQ Global Select Market (NASDAQ); 5. the Filer is not in default of securities legislation in any jurisdiction; 6. the authorized share capital of the Filer consists of (i) 90,000,000 voting ordinary shares, par value $1.00 per share (Ordinary Shares), (ii) 21,000,000 non-voting convertible ordinary shares, par value $1.00 per share, and (iii) 45,000,000 preference shares, par value $1.00 per share; as at December 31, 2016, 16,227,104 Ordinary Shares were issued and outstanding, 2,792,157 Series C Non-Voting Shares were issued and outstanding, and 404,771 Series E Non-Voting Shares were issued and outstanding; 7. the Ordinary Shares are posted and listed for trading on NASDAQ under the symbol ESGR ; the Filer is in compliance with all securities laws of the United States and is in good standing with the rules of NASDAQ;
8. holders of Ordinary Shares in a jurisdiction of Canada are entitled to all relevant disclosure that is required to be provided to holders of Ordinary Shares generally under various provisions in U.S. securities laws; 9. the ESPP is an all-employee plan and all individuals who are employees of the Filer or subsidiaries of the Filer may be invited to participate (except for any employee that (i) holds at least 5% of the Ordinary Shares or (ii) is subject to the reporting requirements of section 16(a) of the 1934 Act with respect to the Company); an employee may participate in the ESPP by authorizing his or her employer company to make payroll deductions during a set period prior to one of the two offering periods during the year; the maximum fair market value of Ordinary Shares that can be subscribed for is US$25,000 per calendar year; 10. the maximum number of Ordinary Shares reserved for issuance under the ESPP is 200,000 (representing approximately 1.2% of the total Ordinary Shares currently outstanding); 11. a participating employee may agree to direct up to 15% of his or her base salary each month to acquire Ordinary Shares under the ESPP, subject to the limit that the maximum fair market value of Ordinary Shares that can be subscribed for is US$25,000 per calendar year; the account is non-transferable; 12. through their participation in the ESPP, certain Canadian resident individuals who are or will be employees, officers, and directors (or their equivalent) of the Filer or its related entities (Canadian Employees) may acquire Ordinary Shares; as at December 31, 2016, there are four Canadian Employees eligible to participate in the ESPP; 13. the Ordinary Shares will be acquired by Canadian Employees under the exemption from the prospectus requirement in section 2.24 of NI 45-106 Prospectus Exemptions; 14. the Canadian Employees wish to have the option of selling their Ordinary Shares through the facilities of NASDAQ; 15. the Canada Pension Plan Investment Board (CPPIB) is a global investment management organization, resident in Canada, that invests the assets of the Canada Pension Plan; CPPIB Epsilon Ontario Limited Partnership (CPPIB LP, and together with CPPIB, the CPPIB Entities) is a limited partnership for which CPPIB is the sole limited partner and CPPIB Epsilon Ontario Trust (CPPIB Trust) is the general partner; Poul Winslow (a director of Enstar), R. Scott Lawrence and Eric M. Wetlaufer are the trustees for CPPIB Trust (collectively, the Trustees); 16. as of December 31, 2016, the CPPIB Entities directly and indirectly (including beneficially through the Trustees) owned 2,242,946 Ordinary Shares, representing 13.8% of the total number of shares within that class, 1,192,941 Series C Non-Voting Shares representing 42.7% of the total number of shares within that series and 404,771 Series E Non-Voting Shares, representing 100% of the total number of shares within that series;
17. as of October 31, 2016, based on the reasonable enquires of the Filer for purposes of determining its global shareholder base, excluding Ordinary Shares held directly or indirectly by the CPPIB Entities, the 36 other holders of Ordinary Shares resident in Canada held 112,169 Ordinary Shares, representing approximately 0.8% of the total number of issued and outstanding Ordinary Shares, and represented less than 0.3% of the total number of holders of Ordinary Shares; 18. the Filer has not conducted any prospectus-exempt offerings in Canada since October 31, 2016, except for distributions to CPPIB entities and Canadian Employees under the ESPP; 19. the first trade in the Ordinary Shares held by Canadian residents in reliance upon a prospectus exemption would be deemed a distribution under National Instrument 45-102 Resale of Securities (NI 45-102) unless, among other things, the Filer has been a reporting issuer for the four months immediately preceding the trade in a jurisdiction of Canada; since the Filer is not a reporting issuer or its equivalent in a jurisdiction of Canada and has no intention of becoming one, the Ordinary Shares acquired in reliance upon certain prospectus exemptions would be subject to an indefinite hold period; 20. subsection 2.14(1) of NI 45-102 provides an exemption from the prospectus requirement for the first trade in securities of a non-reporting issuer distributed under a prospectus exemption; specifically, subsection 2.14(1) states that the prospectus requirement does not apply to the first trade of a security distributed under an exemption from the prospectus requirement if: (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 percent of the outstanding securities of the class or series; and (ii) did not represent in number more than 10 percent of the total number of owners directly or indirectly of securities of the class or series; and (c) the trade is made: (i) through an exchange, or a market, outside of Canada; or (ii) to a person or company outside of Canada;
21. the Filer meets all eligibility criteria for the exemption in section 2.14 of NI 45-102 except that residents of Canada (including the CPPIB Entities) hold more than 10% of outstanding Ordinary Shares; 22. as of December 31, 2016, excluding the Ordinary Shares indirectly and directly owned by the CPPIB Entities and assuming the issuance of all of the Ordinary Shares reserved for issuance under the ESPP to the current Canadian Employees, residents of Canada would not own, directly or indirectly, more than 10% of issued and outstanding Ordinary Shares, and would not represent in number more than 10% of the total number of owners, directly or indirectly, of Ordinary Shares; 23. any resale of the Ordinary Shares by Canadian residents would be made through the facilities of NASDAQ or such foreign market as may develop, as there is no market for the Ordinary Shares in Canada and none is expected to develop; and 24. the Filer has no intention to file a prospectus in Canada; absent an exemption, the Ordinary Shares held by Canadian Employees are or will be subject to resale restrictions that may never expire. Decision 4 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 i. was not a reporting issuer in any jurisdiction of Canada at the distribution date of the Ordinary Shares under the ESPP to Canadian Employees, or ii. is not a reporting issuer in any jurisdiction of Canada at the date of the first trade; (b) the first trade of Ordinary Shares held by Canadian Employees is executed through the facilities of NASDAQ or on another exchange or a market outside of Canada, or to a person or company outside of Canada; and (c) at the distribution date of Ordinary Shares under the ESPP to Canadian Employees, Canadian residents, other than the CPPIB Entities, do not i. own, directly or indirectly, more than 10% of the outstanding Ordinary Shares, and ii. represent in number more than 10% of the total number of owners, directly or indirectly, of Ordinary Shares.
Christina Wolf Acting Executive Director British Columbia Securities Commission