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GE Capital Canada Funding Company and General Electric Company
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Issuer does not satisfy conditions of exemption in section 13.4 of NI 51-102 -- Credit supporter's accounting systems will not allow it to compile consolidated summary financial information for non-credit supporter subsidiaries that represent more than 3% of consolidated operations -- Issuer exempt from certain continuous disclosure, certification, audit committee, and corporate governance requirements, subject to conditions.
Applicable Legislative Provisions
National Instrument 51-102 Continuous Disclosure Obligations, ss. 13.1 and 13.4.
National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, s. 8.6.
National Instrument 52-110 Audit Committees, s. 8.1.
National Instrument 58-101 Corporate Governance Practices, s. 3.1.
January 6, 2021
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF GE CAPITAL CANADA FUNDING COMPANY (GE Canada) AND GENERAL ELECTRIC COMPANY (GE and together with GE Canada, the Filers)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption from the following requirements contained in the Legislation:
(a) the requirement under the Legislation that GE Canada comply with the requirements of National Instrument 51-102 -- Continuous Disclosure Obligations (NI 51-102) (the Continuous Disclosure Relief);
(b) the requirement under the Legislation that GE Canada comply with the requirements of National Instrument 52-109 --Certification of Disclosure in Issuers' Annual and Interim Filings (the Certification Relief);
(c) the requirements under the Legislation that GE Canada comply with requirements of National Instrument 52-110 -- Audit Committees (the Audit Committee Relief); and
(d) the requirement under the Legislation that GE Canada comply with requirements of National Instrument 58-101 -- Disclosure of Corporate Governance Practices (the Corporate Governance Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for the Application (the Principal Regulator); and
(b) the Filers have 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, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Québec, and Saskatchewan.
Interpretation
Defined terms contained in National Instrument 14-101 -- Definitions have the same meaning in this decision unless otherwise set forth herein.
Representations
The decision is based on the following facts represented by the Filers:
1. GE is a company governed by the State of New York.
2. GE's principal executive offices are located at 5 Necco Street, Boston, Massachusetts, USA, 02210.
3. GE is the indirect beneficial owner of all of the outstanding voting securities of GE Canada and GE Capital International Holdings Limited (GE Holdings).
4. GE is a high-tech industrial company that operates worldwide through its four industrial segments, Power, Renewable Energy, Aviation and Healthcare, and its financial services segment, Capital. GE serves customers in approximately 170 countries and employs approximately 205,000 people worldwide.
5. The common shares of GE are registered under Section 12(b) of the United States Securities Exchange Act of 1934 (the 1934 Act) and are listed on the New York Stock Exchange (which is its principal market), the Nasdaq OMX BX (formerly the Boston Stock Exchange) and certain non-U.S. exchanges including the London Stock Exchange and the EuroNext.
6. GE has filed with the United States Securities and Exchange Commission (the SEC) all filings required to be made with the SEC under the 1934 Act, including without limitation, any required during the last 12 calendar months.
7. GE complies with U.S. laws and the requirements of any U.S. marketplace on which its securities are listed or quoted in respect of making public disclosure of material information on a timely basis.
8. GE immediately issues in Canada and files any news release that discloses a material change in its affairs.
9. GE is not a reporting issuer or equivalent in any of the Provinces or Territories.
10. GE and GE Holdings have, jointly and severally, fully and unconditionally guaranteed GE Canada's obligations under the non-convertible medium term notes (the Notes) issued by GE Canada and no other person or company has provided such a guarantee or alternative credit support for the Notes.
11. GE Canada is an unlimited liability company incorporated under the laws of the Province of Nova Scotia. The head office of GE Canada is located at 1919 Minnesota Court, Suite 100, Mississauga, Ontario, L5N 0C9. The registered office of the GE Canada is 1741 Lower Water Street, Suite 600, Halifax, Nova Scotia, B3J 0J2.
12. GE Canada is primarily engaged in funding the operations of its Canadian affiliates, which it financed primarily by borrowing in the public markets until 2013 and has since financed primarily from its other affiliates.
13. The last tranche of Notes was issued by GE Canada on May 31, 2013 and the last short form base shelf prospectus was filed by GE Canada on September 10, 2013. As of the date of this decision, there are four tranches of Notes which remain outstanding with an aggregate principal amount of $1,453,939,000. The Notes are not listed on any exchange or marketplace. GE Canada has no current intention to issue any additional Notes.
14. GE Canada is a reporting issuer or equivalent in each of the Provinces.
15. GE Canada is not in default of any applicable requirements of the Legislation.
16. GE Canada does not have any securities outstanding other than the types of securities listed in Section 13.4(2)(c) of NI 51-102.
17. GE Canada files in electronic format with the Principal Regulator copies of all documents that GE is required to file with the SEC under the 1934 Act, at the same time or as soon as practicable after the filing by GE of those documents with the SEC.
18. GE Canada will issue in Canada a news release and will file a material change report in accordance with Part 7 of NI 51-102 for all material changes in respect of the affairs of GE Canada that are not also material changes in the affairs of GE.
19. GE Canada meets the eligibility requirement of Section 13.4(2.2)(b) of NI 51-102 as it has minimal assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the Notes and the other securities referred to in securities listed in Section 13.4(2)(c) of NI 51-102.
20. GE Canada is a "finance subsidiary" as defined in Rule 3-10(b) of Regulation S-X promulgated by the SEC and as defined in Item 13.1(c) of Form 44-101F1.
21. GE Canada meets the eligibility requirements set out in Section 13.4 (2) of NI 51-102 except that it is unable to prepare the table required by Section 13.4(2.1)(c)(iii). As a result of a recent SEC rule change, GE is no longer required to prepare such disclosure and continuing to do so would create an undue burden for GE, which is particularly onerous given the large size of GE's global corporate group with approximately 2,500 subsidiaries worldwide. The eligibility requirement set out in Section 13.4(2.2)(a) of NI 51-102 for combining the information of such other subsidiaries with the information of GE are not met.
22. GE Holdings is a "subsidiary credit supporter" as defined in Item 13.4 of NI 51-102.
23. GE Holdings is not a reporting issuer or equivalent in any of the Provinces or Territories.
24. GE Canada needs the Requested Relief because the Filers cannot satisfy the condition in paragraph 13.4(2.1)(c) of NI 51-102. Specifically, the presentation of the tabular disclosure required by these paragraphs does not align with how GE manages its business or reports its financial statement information and would require significant additional and manual effort not otherwise required beyond what is needed to prepare consolidated financial statements for GE and its subsidiaries.
Decision
The Principal Regulator is satisfied that the decision meets the test set out in the Legislation for the Principal Regulator to make the decision.
Continuous Disclosure Relief
THE DECISION of the Principal Regulator under the Legislation is that the Continuous Disclosure Relief is granted provided that:
(a) GE Canada and GE continue to satisfy all the conditions set forth in Section 13.4(2) of NI 51-102, other than Section 13.4(2.1)(c), unless otherwise exempted therefrom;
(b) GE discloses in each of its quarterly reports on Form 10-Q and each of its annual reports on Form 10-K filed with the SEC and the Principal Regulator, any significant restrictions on the ability of GE to obtain funds from its subsidiaries by dividend or loan;
(c) GE discloses in each of its quarterly reports on Form 10-Q and each of its annual reports on Form 10-K filed with the SEC and the Principal Regulator: (i) the nature of any restrictions on the ability of consolidated subsidiaries and unconsolidated subsidiaries of GE to transfer funds to GE in the form of cash dividends, loans or advances (i.e., borrowing arrangements, regulatory constraints, foreign government, etc.) and (ii) the amount of "restricted net assets" (calculated in the manner specified in paragraph (d) below) for unconsolidated subsidiaries and consolidated subsidiaries of GE as of the end of its most recently completed fiscal year (with such amounts for unconsolidated subsidiaries and consolidated subsidiaries disclosed separately), provided that, the disclosure contemplated in paragraphs (c)(i) and (c)(ii) above are only required to be provided when the "restricted net assets" of consolidated and unconsolidated subsidiaries of GE, and GE's equity in undistributed earnings of 50% or less owned persons accounted for by the equity method, together exceed 25% of the consolidated net assets of GE as of the end of its most recently completed fiscal year;
(d) "Restricted net assets" shall be calculated in the manner specified in this paragraph (d). "Restricted net assets" of subsidiaries shall mean that amount of GE's proportionate share of net assets (after intercompany eliminations) reflected in the balance sheets of its consolidated and unconsolidated subsidiaries as of the end of the most recent fiscal year which may not be transferred to GE in the form of loans, advances or cash dividends by the subsidiaries without the consent of a third party (i.e., lender, regulatory agency, foreign government, etc.). Not all limitations on transferability of assets are considered to be restrictions for purposes of calculating "restricted net assets", which considers only specific third party restrictions on the ability of subsidiaries to transfer funds outside of the entity. For example, the presence of subsidiary debt which is secured by certain of the subsidiary's assets does not constitute a restriction for purposes of calculating "restricted net assets". However, if there are any loan provisions prohibiting dividend payments, loans or advances to GE by a subsidiary, these are considered restrictions for purposes of computing "restricted net assets". When a loan agreement requires that a subsidiary maintain certain working capital, net tangible asset, or net asset levels, or where formal compensating arrangements exist, there is considered to be a restriction because the lender's intent is normally to preclude the transfer by dividend or otherwise of funds to GE. Similarly, a provision which requires that a subsidiary reinvest all of its earnings is a restriction, since this precludes loans, advances or dividends in the amount of such undistributed earnings by the entity. Where restrictions on the amount of funds which may be loaned or advanced differ from the amount restricted as to transfer in the form of cash dividends, the amount least restrictive to the subsidiary shall be used. Redeemable preferred stocks and minority interests shall be deducted in computing net assets for purposes of these calculations.
(e) GE Canada continues to have minimal or no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the Notes and the other securities referred to in securities listed in Section 13.4(2)(c) of NI 51-102; and
(f) GE includes in each quarterly report on Form 10-Q and each annual report on Form 10-K, a statement that its financial statements consolidate all of its affiliates. GE Canada is an affiliate of GE and therefore the results of GE Canada are included in the consolidated financial results of GE.
Certification Relief
THE FURTHER DECISION of the Principal Regulator under the Legislation is that the Certification Relief is granted provided that the Filers continue to satisfy the conditions of the Continuous Disclosure Relief, above.
Audit Committee Relief
THE FURTHER DECISION of the Principal Regulator under the Legislation is that the Audit Committee Relief is granted provided that the Filers continue to satisfy the conditions of the Continuous Disclosure Relief, above.
Corporate Governance Relief
THE FURTHER DECISION of the Principal Regulator under the Legislation is that the Corporate Governance Relief is granted provided that the Filers continue to satisfy the conditions of the Continuous Disclosure Relief, above.
"Michael Balter"
Manager
Corporate Finance