The newly-elected Parti Québécois government has
announced its intention to enact legislation making it more
difficult for foreign buyers to acquire Québec companies by
way of hostile take-over bid.
Highlights of the proposed legislation include:
providing boards of directors of publicly traded companies with
the authority to examine the impact of take-over bids not only on
shareholders, but also on stakeholders such as employees, retirees,
suppliers and affected communities;
allowing boards of directors to deny shareholders the
opportunity to vote on a proposed take-over bid if the board is of
the view that the bid is inadequate and would have a negative
impact on the company; and
insulating companies from potential legal actions stemming from
their refusal to accept a foreign take-over bid.
While not uncommon in the United States, where certain states
have adopted "anti-takeover legislation", the proposed
legislation represents a uniquely "made in Québec"
phenomenon in Canada.
Review of foreign take-overs in Canada is overseen by the
federal government under the Investment Canada Act, which
is focused on whether transactions proposed would be of "net
benefit" to Canada. The PQ announcement comes at a time of
meaningful uncertainty about foreign investment review in Canada,
with continuing uncertainty concerning the "net benefit"
test. In the wake of several high-profile cases, including the
rejection of BHP Billiton's acquisition of Potash Inc. in 2010,
the federal government has indicated that it is working to provide
increased clarity on the regime, in particular as it relates to
takeovers by state-owned entities. In the meantime, significant
transactions, such as the proposed purchase of Nexen Inc. by a
division of China National Offshore Oil Corp., and the offer by
Malaysian Petronas to purchase Progress Energy Resources Corp., are
working their way through the process.
The PQ proposal also comes at a time when securities regulators
are reconsidering how to regulate shareholder rights plans and
other tools available to Canadian boards facing unsolicited
take-over bids. The fate of the PQ proposal itself is uncertain, in
that the PQ leads a minority government and the other provincial
parties have not echoed the party's public complaints about
foreign take-over activity in Québec.
The only certainty in the mix is that international parties
considering acquisitions in Canada will have to focus carefully on,
and plan in detail for, their regulatory strategy.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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