With a longer deposit period and a 50% minimum tender condition,
Canadian securities regulators have agreed on a common cure for the
differing views on regulating a traditional M&A defensive
The Canadian Securities Administrators (CSA) have resolved their
competing views on the regulation of security holders rights plans
(commonly known as poison pills) and have announced a proposed
The CSA announced on September 11, 2014 that it will be
publishing for comments amendments to the take-over bid regime
Change the minimum deposit period so that the minimum period
that a take-over bid must remain open is increased from 35 days to
120 days, provided that:
the target company may reduce the minimum period to as little
as 35 days; and
if there are multiple bids, the target company must reduce the
period in a "non-discriminatory manner" (i.e. with
respect to all bids).
Introduce a requirement that:
a minimum of more than 50% of all outstanding target securities
owned or held by persons other than the bidder and its joint actors
be tendered and not withdrawn before the bidder can take up any
securities under the bid; and
if this minimum threshold is met and the bidder announces its
intention to take up securities under the bid, the bid must be open
for an additional 10 days (to allow other shareholders to
The CSA will not be proceeding with proposed National Instrument
62-105 Security Holder Rights Plans and the
Autorité des marchés financiers will not pursue the
alternative approach described in its concurrent consultation paper
(please see our previous bulletin here).
The proposed framework is intended to address the CSA's
concern that the Canadian take-over bid regime has become too
"bidder friendly". The CSA's aim is to provide a
target board with more time to respond to bids and the flexibility
to reduce deposit periods if warranted, "with the objective of
rebalancing the current dynamics between hostile bidders and target
boards". In addition, the amendments will effectively give
shareholders some say in the sale of a company by allowing them to
make "voluntary, informed and co-ordinated tender
decisions". One of the net results of the new regime may be
that securities regulators will be unlikely to allow a poison pill
to remain in place past the 120 day period.
As with any proposed cure, time will tell how effective it is
and what, if any, the side-effects are.
Pursuant to several recent legislative amendments and enactments, Ontario corporations holding a legal or beneficial interest in real property in Ontario are now subject to more onerous record-keeping requirements.
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