While the Canadian Securities Administrators' (CSA) proposed
changes to the hostile take-over bid regime have been discussed
extensively in Canada, a series of similar legislative changes in
France have received relatively little coverage. Although attained
by different means, both changes point towards a potential shift in
power from hostile bidders and activist shareholders to target
boards. While the full extent of these changes have yet to
materialize, an understanding of both regimes will help readers
analyze their impacts and apply them to the Canadian context.
Canada: Proposed Measures
On March 31, 2015, the CSA published proposed amendments to
Canada's take-over bid regime. While these amendments have been
previously addressed on
this blog, they generally provide target boards with more time
to respond to hostile bids, require a minimum tender of fifty
percent of outstanding securities, and stipulate a mandatory
extension period after the bidder has received tenders of more than
fifty percent of the outstanding securities.
stated previously, "[w]e expect that if adopted, the 120
Day Requirement will result in a reduction in hostile take-over bid
France: The Florange Act
In March, 2014, the French government enacted the Florange
Act. Among other things, the Act effects the
one-share, one-vote principle and allows boards to enact defences
to hostile bids, such as poison-pills, without shareholder
Most importantly, the Act provides for
"time-phased" voting or "loyalty shares". Under
this rule, shareholders who have held a security for at least two
years are granted double-voting rights. Unless French corporations
opt out, the double-voting rights will come into force on March 31,
While many corporations have actively opposed it, the more
interesting issue is the impacts the Florange Act may have
on hostile takeovers of French corporations.
Comparison of Impacts between Canadian and French Regimes
While both the Canadian and French laws will likely dissuade
hostile bidders and activist shareholder campaigns, both will
achieve this result by different means. The Canadian proposal would
provide boards with more time to evaluate proposals and look for
other offers. Hostile bidders would have to hold their positions
for longer and would be more exposed to share price fluctuations as
well as potential rival bids.
Under the Florange Act, most hostile bidders and
activists will not receive the second vote under the "loyalty
shares" regime. This may discourage this type of investor
since their capital would have to be tied up for two years to
obtain the special voting rights.
It has also been argued that the French reforms may protect unproductive boards since bidders and
activists may be unwilling and unable to act. The same may hold
true for Canadian boards, albeit to a lesser extent given the less
Although neither the French nor Canadian changes have fully
taken effect, both may have impacts on the relationships between
activists, hostile bidders and the respective boards. An
understanding of these changing dynamics will allow stakeholders to
better evaluate special situations when they arise in the
The author would like to thank Mark Bissegger, summer
student, for his assistance in preparing this legal
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