On February 20, 2014, the Ministry of Finance and the Economy
(Québec) tabled its Budget for 2014-2015 and issued a press
release quoting Minister Nicolas Marceau as "reacting very
favourably to the Report of the Task Force on the Protection of
Québec Businesses" which was released in conjunction
with the Budget.
Reminiscent of the message of former Québec premiers
Lesage and Lévesque, "Maîtres chez nous"
(masters in our own house), which inspired the cultural revolution
in Québec in the 1960s, the Minister said: "Being
masters and prosperous in our own house also means protecting the
head offices of Québec businesses. The presence of head
offices in Québec is both a major source of wealth and a
strategic factor in economic development decisions". The press
release went on to say: "That is why we are very favourable to
the Task Force's recommendations that seek to maintain and
foster the development of Québec head offices and enable
Québec's public companies to protect themselves against
unsolicited takeover bids".
The Minister intends to move quickly to propose legislative
amendments to the Business Corporations Act
(Québec) to permit publicly-traded Québec
corporations to adopt and embody in their constating documents
(articles) some key recommendations of the Report. They are a
strong departure from the current state of affairs and
voting shares including additional voting rights when
beneficial owners have held such shares for two years or more;
a prohibition on mergers or other amalgamations of the assets
of the corporation with those of the offeror or a substantial sale
of assets representing 15% of the corporation for five years;
a "giving" to the corporation by the offeror of the
profits made in the 24 months following the takeover bid at the
time of resale of the shares of the corporation purchased during
the 12 months preceding the launching of the takeover bid;
preventing the revocation of the term of office of an existing
director before the end of his term for three years; and
preventing the offeror from exercising its voting rights in
respect of shares it holds after the launching of the bid, to apply
until the other shareholders, excluding the directors and the
manager-shareholders, adopt a resolution with two-thirds of the
votes restoring the voting rights to the offeror and related
These proposals echo and reinforce the proposal of the
Autorité des marches financiers (AMF), released in March,
2013, that would update the regulatory framework concerning all
defensive tactics by a board. The AMF proposals were made in
the context of an ongoing dialogue on shareholder rights plans
(poison pills) amongst the AMF, the Canadian Securities
Administrators (CSA), and other interested parties in Canada. What
is at stake is nothing less than who prevails in change-of-control
scenarios: directors or the owners of businesses (the
shareholders). American investors, in particular, who, along with
Canadian institutional investors, maintain a robust market in
improving underperforming companies, will quickly see that the
proposals go well beyond the most far reaching consitituency state
statutes promoting local industrial development at the expense of
owners of these businesses. The Executive Director of the Canadian
Coalition for Good Governance was quoted today as saying "as
shareholders we don't believe this is a decision to be made by
directors – it's a decision that should be made by
shareholders", in commenting on Québec's move. With
an imminent Québec election on the horizon, movement on
these proposals will bear close monitoring.
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