Canada: BC Securities Commission Rejects "Pulse Data" and "Neo Materials" and Cease Trades Lions Gate Entertainment's Poison Pill

On May 6, 2010, the British Columbia Securities Commission ("BCSC") released summary reasons for its April 27, 2010 decision to invalidate the shareholder rights plan ("SRP") or "poison pill" that had been adopted by Lions Gate Entertainment Corp. in response to the unsolicited take-over bid made by Icahn Partners LP and its related funds ("Icahn"). The summary reasons were released to facilitate Lions Gate's appeal of the BCSC decision. That appeal was heard and dismissed by the British Columbia Court of Appeal on May 7, 2010.

No "Just Say No"

The principal basis for the decision cited in the majority's reasons1 was the view that shareholders rights plans should not deprive shareholders of the opportunity to respond to a bid by tendering into it. The commission also stated the following principles regarding the public interest as it relates to the adoption of SRPs by target companies as a defensive strategy:

  • It is in the public interest that each shareholder of the target company be allowed to decide whether or not to accept or reject the bid.
  • The reluctance of regulators to interfere with the target directors' discharge of their fiduciary duty is tempered by the need to ensure that the shareholder ultimately has the opportunity to decide whether or not to tender into the bid.
  • SRPs are not contrary to the public interest when used to buy time for the target to respond to the bid. However, SRPs are acceptable only as a temporary defence.
  • Whether the time has come for a SRP to go is assessed in terms of what the SRP has accomplished, or is likely to accomplish, in terms of providing alternatives to the bid for shareholders to consider before deciding whether to tender.

The decision signals a departure by the BCSC from two recent decisions on poison pills by rejecting the proposition that shareholders may exercise their right to accept or reject a take-over bid by way of a vote on a shareholder rights plan that effectively prevents the bid from proceeding.


Lions Gate had adopted the SRP in response to a partial take-over bid commenced by Icahn on March 1, 2010. Under the initial terms of the bid, Icahn sought to increase its shareholding from 19% to 29.9% of the outstanding shares. The SRP prevented any person from exceeding 20% share ownership other than through a "Permitted Bid". In order to qualify as a Permitted Bid under the SRP, a bid was required to include typical terms including (i) a non-waivable minimum tender condition of more than 50% of the shares not already owned by the bidder, (ii) an irrevocable commitment to extend the offer for ten business days in the event that the bid is successful, and (iii) a deposit period of at least 60 days. Icahn's bid did not satisfy any of these requirements of a Permitted Bid. In addition, the SRP did not permit partial bids (i.e., a bid for less than all outstanding shares).

The Lions Gate board adopted the SRP on March 11, 2010 and the next day sent notice of a shareholders meeting to be held on May 4 to consider the SRP. Following adoption of the SRP, Icahn amended its bid to make it an offer to purchase up to all outstanding Lions Gate shares and to extend the expiry date to April 30, 2010, prior to the Lions Gate shareholders meeting.

In response to Icahn's application to cease trade the SRP, the BCSC scheduled its hearing for April 26, 2010, prior to the expiration of Icahn's bid and one week ahead of the Lions Gate shareholders meeting to consider the SRP. At the hearing, Lions Gate argued that Icahn was likely to extend its offer and that accordingly the BCSC should delay its decision until it had the benefit of knowing to what extent Lions Gate shareholders supported the SRP. However, the BCSC decided that, on the facts before it, it could not conclude with enough confidence that Icahn was likely to extend its bid to risk denying shareholders the ability to accept Icahn's offer.

Not Coercive

Lions Gate argued that the SRP was designed to protect Lions Gate shareholders from coercive elements of Icahn's bid and that shareholders should be given an opportunity to decide at the shareholders meeting if they wished to keep the SRP in place to prevent a bid that is not a Permitted Bid. However, the BCSC rejected the characterization of Icahn's bid as coercive. The BCSC noted that if Icahn waived the minimum tender condition, under U.S. securities law which also governed the bid, the bid would have to be extended, giving shareholders the opportunity to tender or withdraw with knowledge that the condition has been waived.

Shareholder Approval Not Relevant Unless Target Pursuing Alternatives

Moreover, the BCSC stated that although shareholder approval is a factor that is to be considered in determining whether it is time for a rights plan to go, under prior cases shareholder approval or other evidence of shareholder support for the continuation of an SRP has only been relevant in determining whether the SRP should be permitted to continue for a further temporary period in order that the board may generate other alternatives (such as superior offers) for shareholders. The BCSC noted that in Lions Gate's case the board was not pursuing any competing bid or alternative transaction for shareholders and that the only effect of continuing the SRP would be to deny Lions Gate shareholders the opportunity to accept or reject the Icahn offer.

Reservations about Neo Technologies and Pulse Data

The BCSC noted that its discussion of prior securities commissions decisions on SRPs would not include references to the Ontario Securities Commission decision in Neo Material Technologies or the Alberta Securities Commission decision in Pulse Data Inc. In these cases, the securities commissions allowed a shareholder rights plan to stand in the face of a bid where there was overwhelming shareholder support for the plans to remain in place, even though the target board was not pursuing any alternative transaction for shareholders. The BCSC in Lions Gate stated that these decisions were distinguishable on their facts, and, importantly, that it had reservations about the Pulse Data and Neo Materials decisions centered on "their apparent departure from the Canadian securities regulators' view of the public interest as it relates to SRPs prior to those decisions." The BCSC will elaborate further on its reservations in its final reasons. The final reasons may lay to rest the debate that followed the OSC's Neo decision as to whether Neo reflected a change in the regulatory approach to poison pills.


1. The BCSC's decision noted that one panel member did not agree with all of the majority's reasoning and will write separate reasons.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.