Over the summer, the British Columbia Securities Commission
(BCSC) issued reasons for its previous decision that allowed
Augusta Resource Corporation (Augusta) to maintain its shareholder
rights plan after a hostile bid was made by HudBay Minerals Inc.
(HudBay). The BCSC permitted Augusta's rights plan to stay in
place for an unusually long period of 155 days after HudBay
initiated its bid.
HudBay had brought an application to the BCSC asking for the
shareholder rights plan to be cease traded under the public
interest power of the Securities Act. HudBay argued that
the shareholder rights plan was no longer serving any defensible
purpose, and that Augusta's board was "just saying
no" to the bid. Augusta's position, on the other hand, was
that the best interests of the shareholders would be served if the
board was given more time to complete the permitting process on a
Consistent with previous decisions, the BCSC considered a
variety of contextual factors in determining whether to cease trade
the rights plan. However, the BCSC clearly placed considerable
weight on the fact that Augusta's shareholders overwhelmingly
approved the continuation of the rights plan in the face of
HudBay's bid. Of the shares that were voted, an overwhelming
94% of the shares (excluding those held by HudBay) were voted in
favour of maintaining the shareholder rights plan.
The decision's recognition of the importance of a
shareholder vote is to some extent consistent with the principles
underlying the recent proposal of the Canadian Securities
Administrators (CSA) on rights plans (National Instrument 62-105)
– see the
previous blog post by our colleagues Ian Michael and Shane
D'Souza on this topic. However, the BCSC clearly stated that it
was not following the changes in policy which were reflected in the
CSA proposal, and that under existing policy a shareholder vote
should not be determinative of whether a rights plan will be
allowed to continue.
The ultimate outcome of the CSA proposal is not yet known. In
the meantime, companies fending off a hostile bid should continue
to strongly consider the strategic merit of seeking shareholder
ratification of a rights plan through a vote that is held after the
hostile bid has been made.
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.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
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