Tobias Lütke

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for relief from the prospectus requirement for trades by a control person of an issuer under automatic securities disposition plans -- Applicant intends to annually establish an automatic securities disposition plan (ASDP) in accordance with the guidance provided under OSC Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plan or any successor notice relating to ASDPs in effective at the time of establishing an ASDP and make orderly sales of securities of the issuer under the ASDP -- Trades by the applicant as a control person under the ASDP deemed to be a distribution attracting the prospectus requirement -- Applicant cannot rely on the prospectus exemption for a trade by a control person in s.2.8 of NI 45-102 because the seven-day waiting period requirement in paragraph 2.8(3)(b) and the 30-day expiry provision in paragraph 2.8(4)(a) of NI 45-102 would prevent continued or successive dispositions under the ASDP by requiring the applicant to refile a Form 45-102F1 every 30 days and wait at least seven days before making the first trade after each filing of a Form 45-102F1 -- Compliance with all conditions of s.2.8 of NI 45-102 would impede applicant's ability to establish, and effect orderly trades under, an ASDP -- Relief granted from the prospectus requirement for trades effected by the control person under the ASDP subject to conditions consistent with the policy rationale underlying section 2.8 of NI 45-102 -- Relief granted to maintain confidentiality of application and decision for a period of up to 60 days -- Relief expires on January 1, 2022.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53(1), 74(1) and 147.

National Instrument 45-102 Resale of Securities, s. 2.8.

December 1, 2020

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 TOBIAS LÜTKE (the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the "Application") from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the"Legislation") granting an exemption from the prospectus requirement under the Legislation in connection with the sale of Class A Shares (as defined below) of Shopify Inc. (the Issuer) by the Filer under a Filer ASDP (as defined below) (the Exemption Sought).

Furthermore, the principal regulator in the Jurisdiction has also received a request from the Filer for a decision that the Application and this decision be kept confidential and not be made public until the earlier of (i) the public disclosure by the Filer of the establishment of a new Filer ASDP, and (ii) 60 days from the date of this decision (the "Confidentiality 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 this application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Northwest Territories, Yukon and Nunavut (together with the Jurisdiction, the "Jurisdictions").

Interpretation

Terms defined in National Instrument 14-101 Definitions 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 Issuer is a corporation incorporated under the Canada Business Corporations Act.

2. The Issuer's authorized share capital consists of: (i) an unlimited number of Class A subordinate voting shares (the "Class A Shares"), (ii) an unlimited number of Class B multiple voting shares (the "Class B Shares", and together with the Class A Shares, the "Shares"), and (iii) an unlimited number of preferred shares, issuable in series (the "Preferred Shares").

3. Holders of Class A Shares have one vote for every Class A Share. Holders of Class B Shares have ten votes for every Class B Share. The Class B Shares are convertible into Class A Shares on a one-for-one basis at any time at the option of the holders thereof and automatically in certain other circumstances.

4. As of September 30, 2020, 110,044,179 Class A Shares, 11,868,020 Class B Shares and no Preferred Shares were issued and outstanding. The Class A Shares represented 48.11% of the aggregate voting rights attached to all of the Issuer's outstanding Shares and the Class B Shares represented 51.89% of the aggregate voting rights attached to all of the Issuer's outstanding Shares.

5. The Class A Shares are listed on the New York Stock Exchange and on the Toronto Stock Exchange under the symbol "SHOP".

6. The Issuer issued US$920,000,000 aggregate principal amount of 0.125% senior convertible notes (the "Senior Notes") in each of the provinces and territories in Canada, other than Quebec, by way of prospectus supplement dated September 15, 2020 to the Issuer's short form base shelf prospectus dated August 6, 2020. The Senior Notes are convertible into Class A Shares, at an initial conversion rate of 0.6944 Class A Shares per $1,000 aggregate principal amount of Senior Notes and mature on November 1, 2025 unless redeemed, repurchased, or converted prior to maturity.

7. The Issuer is a reporting issuer in each of the Jurisdictions and is not in default of the securities legislation in any Jurisdiction.

8. The Filer is the Chief Executive Officer and Chair of the Board of the Issuer.

9. On August 26, 2015, the Filer established an automatic securities disposition plan (the "Filer's Original ASDP") which terminated on December 31, 2016.

10. Pursuant to a decision of the OSC dated November 15, 2016 (the "Original Exemption for Tobias Lütke"), the Filer was granted exemptive relief to establish new automatic securities disposition plans, annually, in order to continue to allow the Filer to make orderly sales of Class A Shares from the Filer's holdings over time (each, a "Annual Filer ASDP") following termination of the Filer's Original ASDP on December 31, 2016, and subsequently once each Annual Filer ASDP terminated, on December 31 of each year. The Original Exemption for Tobias Lütke expired on January 1, 2020.

11. Pursuant to a decision of the OSC dated December 6, 2019 (the "2019 Exemption for Tobias Lütke"), the Filer was granted exemptive relief to establish an Annual Filer ASDP following termination of the Filer's Original ASDP on December 31, 2016. The 2019 Exemption for Tobias Lütke expires on December 31, 2020.

12. The Filer intends to continue to annually establish automatic securities disposition plans ("ASDPs") in order to be able to continue to make orderly sales of Class A Shares from the Filer's holdings from time-to-time (each a "Filer ASDP"), once the Filer's current ASDP terminates on December 31, 2020, and subsequently once each Filer ASDP is terminated, as is currently intended, on December 31 of each year.

13. As of September 30, 2020, the Filer directly or indirectly owned, in aggregate, 80,103 Class A Shares (the "Filer Class A Shares") and 7,648,504 Class B Shares (the "Filer Class B Shares"). The Filer Class A Shares represent approximately 0.07% of the outstanding Class A Shares, the Filer Class B Shares represent approximately 64.45% of the outstanding Class B Shares, and together, the Filer Class A Shares and Filer Class B Shares represent, in the aggregate, approximately 33.47% of the votes attaching to all of the Issuer's outstanding Shares. In addition, the Filer has been granted 10,916 restricted stock units ("RSUs"), that entitle the Filer to 10,916 Class A Shares upon vesting, subject to the conditions thereof.

14. The Filer may currently be deemed to be a control person of the Issuer under the Legislation and the securities legislation of the other Jurisdictions in which the Issuer is a reporting issuer.

15. A Filer ASDP will be established in accordance with the law and guidance in effect at the relevant time that the Filer enters into any Filer ASDP, specifically,

(a) the requirements of the applicable securities legislation of the Jurisdictions including the insider trading legislation, and

(b) the guidance and (other) best practices set out in the securities regulatory staff guidance; specifically, OSC Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plans ("Staff Notice 55-701"), or any successor notice relating to ASDPs, including that:

i. a Filer ASDP will include written trading parameters and other instructions in the form of a written plan document;

ii. a Filer ASDP will include meaningful restrictions on the ability of the Filer to vary, suspend, or terminate such Filer ASDP;

iii. a Filer ASDP will include provisions restricting a broker from consulting with the Filer regarding any sales under the Filer ASDP and the Filer from disclosing information to the broker concerning the Issuer that might influence the execution of the Filer ASDP;

iv. at the time the Filer enters into a Filer ASDP, the Filer will not possess any knowledge of a material fact or material change with respect to the Issuer that has not been generally disclosed ("Material Undisclosed Information"); and

v. a Filer ASDP will be entered into in good faith.

16. It is anticipated that pursuant to the terms of a Filer ASDP, among other things:

i. all sales of Class A Shares will be conducted by a broker on behalf of the Filer;

ii. all sales of Class A Shares will be conducted over a period (the "Sales Period") that is specified in the corresponding Form 45-102F1 Notice of Intention to Distribute Securities under Section 2.8 of NI 45-102 Resale of Securities (a "Form 45-102F1") filed when the Filer ASDP is entered into; and

iii. all sales of Class A Shares will be made by a broker with no participation by or direction or advice from the Filer.

17. It is the intention of the Filer and the Issuer that all sales under any Filer ASDP be exempt from the insider trading restriction and related liability under the Legislation in reliance on the available exemption in the Legislation and corresponding law and regulation in the Jurisdictions for trades conducted under automatic plans.

18. Under the Filer ASDP intended to be effective January 1, 2021, it is currently the intention of the Filer to sell up to approximately 371,346 Class A Shares, which may include Class A Shares currently, directly or indirectly, held by Filer, Class A Shares issued to the Filer upon conversion of Class B Shares, Class A Shares issued to the Filer upon the vesting of RSUs of the Issuer, and/or Class A Shares owned by holding entities or charitable foundations over which the Filer may be considered to have, or share in the exercise of, control or direction.

19. If the Filer is deemed to be a control person of the Issuer, any sale of the Filer Class A Shares would be considered a "control distribution" (as such term is defined in NI 45-102 Resale of Securities (NI 45-102)), and would either have to comply with the prospectus requirement or satisfy the conditions of the exemption from the prospectus requirement for trades by a control person in section 2.8 of NI 45-102 (the Prospectus Exemption for Control Trades).

20. The Filer's compliance with each of the conditions of the Prospectus Exemption for Control Trades would impede the implementation and operation of a Filer ASDP because the seven-day waiting period requirement in paragraph 2.8(3)(b) and the 30-day expiry provision in paragraph 2.8(4)(a) of NI 45-102 would prevent continued or successive dispositions under the Filer ASDP by requiring that the Filer refile a Form 45-102F1 respecting the proposed sales of Class A Shares every 30 days over the course of the duration of a Filer ASDP and that the Filer wait at least seven days before making the first trade after each filing of a Form 45-102F1. Compliance with these requirements would effectively limit the Filer's trades under a Filer ASDP to successive 23-day windows, separated by seven-day waiting periods, which would reduce the number of trading days and have a detrimental impact on the Filer's ability to implement a Filer ASDP.

21. In absence of the Filer's compliance with each of the conditions of the Prospectus Exemption for Control Trades, the Filer requests the Exemption Sought in order to relieve the Filer from the prospectus requirement in connection with each disposition of Filer Class A Shares under a Filer ASDP and enable the establishment of a Filer ASDP in accordance with Staff Notice 55-701, or any successor notice relating to ASDPs applicable at the time of entering into any Filer ASDP, while still providing timely and meaningful public disclosure of the intended and completed sales by the Filer of Class A Shares consistent with the policy rationale underlying section 2.8 of NI 45-102.

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.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) each Filer ASDP includes meaningful restrictions on the ability of the Filer to vary, suspend, or terminate the Filer ASDP;

(b) all sales of Class A Shares under a Filer ASDP are conducted by a broker with no participation by or direction or advice from the Filer;

(c) at the time the Filer enters into a Filer ASDP, the Filer does not possess any Material Undisclosed Information;

(d) the total number of the Class A Shares sold under a Filer ASDP in any calendar year does not exceed 2% of the total number of outstanding Class A Shares as of the commencement of the Filer ASDP under which Class A Shares are first sold during the calendar year;

(e) the Filer files or causes to be filed one completed and signed notice (a "Notice") in the form of Form 45-102F1 at least seven days prior to the first trade of Class A Shares under any Filer ASDP that discloses the aggregate number of Class A Shares intended to be sold under the Filer ASDP, and the Sales Period for the sale of Class A Shares under the Filer ASDP;

(f) the Filer files, or causes to be filed, insider reports within three days of the completion of each sale under a Filer ASDP in accordance with the insider reporting obligation applicable to trades by a control person in paragraph 2.8(3)(c) of NI 45-102;

(g) the Sales Period under any Filer ASDP does not exceed one calendar year;

(h) the Notice for a Filer ASDP is signed no earlier than one business day before it is filed;

(i) the Notice filed in connection with trades under any Filer ASDP expires on the earlier of:

i. the end of the applicable Sales Period; and

ii. the date that the Filer files the last of the insider reports reflecting the sale of all Class A Shares referred to in the Notice;

(j) the Filer does not conduct further sales of Class A Shares under a Filer ASDP following the expiry of the Notice for that Filer ASDP;

(k) the Filer does not conduct sales of Class A Shares under a Filer ASDP prior to the expiry of the Notice for any previously commenced Filer ASDP;

(l) the Issuer is and has been a reporting issuer in the jurisdiction of Canada for the four months immediately preceding each trade under any Filer ASDP;

(m) the Filer has held any Class A Shares, or securities that were converted into such Class A Shares, sold under a Filer ASDP for at least four months prior to the trade of such Class A Shares;

(n) no unusual effort is made to prepare the market or to create a demand for the Class A Shares;

(o) no extraordinary commission or consideration is paid to a person or company in respect of the trade; and

(p) the Filer has no reasonable grounds to believe that the Issuer is in default of securities legislation; and

(q) the Exemption Sought shall terminate on January 1, 2022.

Furthermore, the decision of the principal regulator in the Jurisdiction is that the Confidentiality Relief is granted.

"Garnet Fenn"

Commissioner

Ontario Securities Commission

"Cathy Singer"

Commissioner

Ontario Securities Commission