In today’s Financial Post, Barbara Shecter
highlighted the use of modified shareholder rights plans
(colloquially known as "poison pills") as an emerging
defensive tool against opportunistic shareholder activism in
Canada. Traditionally, poison pills are used by boards of target
companies as defensive tools to guard against unsolicited takeover
bids. By expanding the typical definition of "beneficial
ownership" in a poison pill (which is typically limited to
concepts of ownership and is used to determine whether the poison
pill is triggered) by including securities that a shareholder does
not own but has a right to vote or the right to direct the voting
of, the poison pill could then be triggered where a group of
shareholders intend to vote together even if they don't own
shares or intend on making a takeover bid. In this context, the
poison pill works to defend against predatory "wolf pack"
shareholders who intend on using their collective voting power to
seek control of the target, instead of making a bid. Such modified
poison pills are known as a "voting pill" and, as Ms.
Shecter points out, are already well-known in the United States.
The rise of advance notice by-laws in Canada are another example of
a defensive tool that enjoyed widespread use in the United States
prior to becoming popular in Canada.
Given the recent statements by hedge-fund manager Bill
Ackman regarding Canadian capital markets as being fertile ground
for activists, and the recent cautionary piece by Wes Hall (founder of
Kingsdale Shareholder Services) which argued that Canadian public
companies are ill-prepared to deal with the next wave of
shareholder activism, it is perhaps not surprising that Canadian
public companies are receptive to including additional tools, such
as voting pills, in their defensive proxy playbook. However, it is
uncertain whether voting pills will enjoy the same popularity and
success as advance notice by-laws. Proxy advisory firm ISS, for
example, does not support the adoption of poison pills that do not
exclude reference to voting agreements among shareholders, and
securities regulators may be less willing to permit a poison pill
to stand where the effect appears to be to prevent proxy
The increasing interest in voting pills however, particularly
following the recent rise in popularity of advance notice by-laws,
may signal that Canadian public companies are seeking to adjust to
the challenges of an increasingly activist corporate landscape. It
is a landscape that, as Mr. Hall explains (and as alluded to in the
statements of Mr. Ackman), is already familiar to veteran
activists, many of whom come from south of the border. For Canadian
public companies, such challenges require boards, their advisors,
and, where appropriate, securities regulators, to carefully
consider the appropriateness of any defensive tool. For shareholder
activists, such challenges represent a new frontier of
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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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