Canada: Canadian Securities Administrators Propose Harmonized Canadian Take-Over Bid And Issuer Bid Rules

Last Updated: May 8 2006


As a further leg to their harmonization stool, the Canadian Securities Administrators ("CSA") have published for comment a proposed National Instrument 62-104 – Take Over Bids and Issuer Bids (the "Instrument") and a related companion policy dealing with the harmonization of the statutory and regulatory requirements and restrictions governing take-over bids and issuer bids across Canada. The Instrument complements and broadens the reach of the CSA’s substantive harmonization efforts by initiating the process which will result in a uniform regime of bid rules operating much like the rules now in place across Canada for distributions and trades in securities under National Instrument 45-106 – Prospectus and Registration Exemptions and for corporate governance purposes under Notice 52-313 – Status of Proposed Multilateral Instrument 52-111 – Reporting on Internal Control Over Financial Reporting.


While the stated purpose of the Instrument is laudable and the CSA are to be commended for their substantive harmonization efforts in respect of Canadian take-over bid and issuer bid legislation, some of the Instrument’s proposed substantive changes to the existing Ontario takeover bid and issuer bid scheme of regulation warrant careful consideration in order to determine whether such changes would be in the public interest.


As a harmonization initiative, the CSA are to be congratulated for preparing and publishing the Instrument for comment. With the implementation of the Instrument, the CSA intend to eliminate duplication and inconsistencies in existing take-over bid and issuer bid regimes and codify certain discretionary exemptions which have been routinely granted. While the Instrument does contain some consequential amendments to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, the Instrument does not amend Ontario Securities Commission Rule 61-501 – Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions or Quebec Regulation Q-27 Respecting Protection of Minority Securityholders in the Course of Certain Transactions.

In addition to provisions designed to carry out the harmonization of take-over and issuer bid requirements, the Instrument does include some proposed substantive changes to the existing Ontario bid rules which warrant further consideration and comment by market participants so that the CSA may determine whether such changes would be in the public interest. Among these changes are the following:

(1) Private Agreement Exemption: The Instrument proposes to amend the existing private agreement take-over bid exemption "by clarifying that the exemption cannot be relied on for additional purchases by the same offeror". Offerors relying on the private agreement exemption must complete their purchases within six months of an initial purchase and are restricted to using the exemption only once in relation to a particular offeree issuer. While there is a carve-out for certain intra-group transactions (e.g. between affiliates), the intent is to restrict the number of times an offeror may make use of the exemption. The CSA state that this restriction is necessary to ensure that the exemption is used for its original purpose of allowing limited transfers by groups of controlling securityholders rather than for the purpose of avoiding the formal bid requirements.

(2) Collateral Benefits: Under the existing securities legislation applicable to take-over bids, there is a strict prohibition on an offeror entering into any collateral agreement, commitment or understanding with any holder or beneficial owner of securities of the offeree issuer that has the effect of providing to the holder or owner a consideration of greater value than that offered to other holders of the same class of securities. Because of this prohibition, the CSA receives many applications for exemptive relief relating to compensation arrangements with employees and directors of an offeree issuer. Since 2004 the CSA have referred to and adopted as the basis for relief in these circumstances the regulatory approach taken in Rule 61-501 to the "collateral benefits" issue and the Instrument contemplates formal legislative adoption of similar provisions in order to obviate the need for individual applications for discretionary exemptive relief.

(3) Certain Variations to Bids: The Instrument contains a provision which would prohibit an offeror from making certain variations to a bid once the bid has been commenced:

  1. lower the consideration offered under the bid,
  2. change the form of consideration offered under the bid, other than to add to the consideration already offered under the bid,
  3. lower the proportion of outstanding securities for which the bid is made, or
  4. add new conditions.

The CSA specifically request comment on whether the aforementioned changes are so fundamental that they should trigger a new bid rather than be treated in a manner similar to any other variation or change to a bid.

(4) Acting Jointly or In Concert: The Instrument proposes to modify the existing legislative rebutable presumption applicable to determining whether persons or companies are acting jointly or in concert with an offeror in connection with the holding or acquisition of securities. If a person or company is acting jointly or in concert with an offeror, the existing statutory provisions consider that person or company to be an offeror and subject to the take-over bid regime. The Instrument would establish an acting jointly or in concert deeming provision for persons or companies, that as a result of any agreement, commitment or understanding with the offeror or any other joint actor or concert party, acquires or offers to acquire securities or intends to exercise any voting rights attaching to any securities together with every affiliate of the offeror. Under existing legislation, such persons or companies are presumed, but not deemed, to be acting jointly or in concert with an offeror. Associates of the offeror would continue to be subject to a rebutable presumption with respect to whether they are acting jointly or in concert with an offeror. The CSA notes that the Instrument’s contemplated deeming provisions may be the subject of exemptive relief but are not intended to be rebutable by evidence to the contrary unlike a presumption.

(5) Foreign Issuer Exemption: The Instrument contemplates that take-over bids for, and issuer bids by, a foreign issuer will be exempt from Canadian requirements, including French translation, if certain requirements are met, including (i) that the bidder reasonably believes that less than 10% of the outstanding securities of the class subject to the bid are beneficially owned by Canadian securityholders; (ii) the published market on which the greatest dollar volume of trading in securities of the class in the twelve months before the bid was outside Canada; and (iii) securityholders in Canada are entitled to participate the bid on terms at least as favourable as the terms that apply to the general body of securityholders. This new foreign issuer exemption would be in addition to the existing de minimis exemption (in respect of issuers with fewer than fifty securityholders in Canada holding less than 2% of the outstanding securities of the class subject to the bid).

(6) Odd Lots and Modified Dutch Auctions: The Instrument contemplates new exemptions from the bid requirement for proportionate take-up of deposited securities in order to permit issuers to buy odd lots and to effect Dutch auction issuer bids thereby removing the need for issuers to make applications to the CSA for routinely granted discretionary relief. 1100 Ottaw Ontario K1P 1J9

(7) Filing of Agreements: The Instrument includes a new requirement for bidders to publicly file copies of agreements, such as lock-up and support agreements, as well as other agreements of which the bidder is aware that could affect control of the target if the bidder has access to them and these agreements could be reasonably regarded as material to a tendering securityholder under the bid.


While the stated purpose of the Instrument is laudable and the CSA are to be commended for their substantive harmonization efforts in respect of Canadian take-over bid and issuer bid legislation, some of the Instrument’s proposed substantive changes to the existing Ontario take-over bid and issuer bid scheme of regulation warrant careful consideration in order to determine whether such changes would in fact be in the public interest.

The CSA are seeking comments on the proposed Instrument and companion policy and will accept comments until July 28, 2006.

If you have any questions or need more information, please contact either the author below or any member of the BLG Securities and Capital Markets Practice Group with whom you have consulted in the past.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions