Canada: Significant Changes Proposed To Canada's Take-Over Bid Laws: Advantage Shifts To Target Companies

The highly anticipated amendments to the take-over bid regime in Canada have now been released by the Canadian Securities Administrators (CSA). The CSA had previously outlined the general nature of these proposed changes in a notice released on September 11, 2014, which we reviewed in a previous bulletin.

Proposed Amendments

The proposed new amendments require that all non-exempt take-over bids meet the following conditions:

  • Minimum Tender Condition: There is to be a minimum tender condition of more than 50% of the outstanding securities of the class that are subject to the bid. The more than 50% tender will exclude securities beneficially owned, or over which control or direction is exercised, by the bidder or by any person acting jointly or in concert with the bidder. So, for example, if the bidder wishes to make a bid for all of the issued and outstanding common shares of Company A and the bidder already owns 25% of the common shares of Company A, more than 50% of the remaining 75% of the common shares must be tendered to the bid before the bidder can take up and pay for the shares. The more than 50% minimum tender condition will also apply to partial bids, so that more than 50% of the securities of the class that are subject to the bid will have to be tendered and the offeror will be obliged to take up the deposited securities pro rata to complete the partial bid.
  • 120 Day Bid Period: The bid must remain open for a minimum deposit period of 120 days.  However, there are two important exceptions to this rule:

    • Voluntary Reduction By Target Board: If the target board issues a news release in respect of a proposed or commenced take-over bid which states that the board will accept a specified shorter deposit period for the bid which is not less than 35 days, then the minimum deposit period for that bid only needs to be at least the number of days from the date of the bid as stated in the news release (provided that the bid must not expire before 10 days from the date of variation). However, if there are any other outstanding or subsequent take-over bids, these would also gain the benefit of the stated shorter minimum deposit period. In any event, no bid could stay open for less than 35 days.
    • Non-Voluntary Reduction for "Alternative Transaction": If an issuer issues a news release announcing some type of "alternative transaction", such as a plan of arrangement to be approved by security holders of the issuer, then the minimum deposit period for any then-outstanding take-over bid or any take-over bid subsequently commenced before the completion of such alternative transaction need only be at least 35 days.
    In both of these exceptions to the 120 day rule, the bid would still need to remain open at least 10 days after the date of any notice of variation concerning the reduction of the deposit period.
  • 10 Day Automatic Extension: After the expiry of the initial deposit period (the 120 day period or the shorter period, if applicable), the bidder must extend its bid by an additional 10 days if:  (a) all terms and conditions of the bid have been complied with or waived; and (b) the minimum tender condition is satisfied (more than 50% of applicable securities have been tendered).

Other proposed changes to the current bid regime include matters relating to varying a bid, changing information for a bid, taking up and paying for tendered securities and withdrawal rights.

Main Purpose of Proposed Changes

The main goal of the proposed amendments is to rebalance the current dynamics between bidders, target boards and target security holders. Indeed, it does appear that the proposed amendments will give significantly more power and flexibility to target boards and their security holders in the face of hostile bids:

  • the required 120 day bid period will give boards extra time to consider the bid (and possible alternatives, such as seeking a "white knight" bidder);
  • the minimum tender requirement will have a roughly equivalent effect to requiring a shareholder vote; and 
  • the 10 day automatic extension will reduce the pressure that security holders may feel to tender to the bid.

Impact of Proposed Changes:  What About "Poison Pills"?

As we pointed out in our September 16, 2014 bulletin, these changes to Canada's take-over bid regime are generally viewed as being "pro-target", in that they will make life somewhat easier for target boards of directors, and somewhat more difficult for bidders (especially hostile bidders and those bidders wishing to pick up shares via partial bids).

We also noted in our previous bulletin that the three most important changes (a minimum tender condition, a 10-day automatic extension feature and a lengthened minimum deposit period) are all common and key features of Canadian shareholder rights plans/poison pills. Therefore, these changes can fairly be characterized as the legislative imposition of certain key features of shareholder rights plans on all Canadian public companies. One can argue that as a result, much of the existing rationale for adopting shareholder rights plans has been weakened. This naturally raises the question:  are shareholder rights plans on their way out in Canada?

It is true that the most compelling rationale for Canadian public companies to adopt a rights plan -- i.e., to deter coercive bids and to buy more time for the target board -- will no longer exist. So it is reasonable to expect that this will result in fewer rights plans being adopted in Canada in the future. However, it is important to note that these changes only apply to non-exempt take-over bids. So even with these changes in place, it will still be possible for third parties to acquire control of a target company via exempt purchases such as through the "private agreement" exemption to the take-over bid rules (for example, through a series of small, incremental exempt purchases, often referred to as a "creeping take-over"). Alternatively, a third party can seek to acquire effective control of a public company by acquiring a large amount of the company's convertible debt. Another consideration for potential targets will be the recent advent in Canada of the so-called "voting pill", which is essentially a shareholder rights plan modified to cover off hostile proxy solicitations.

In the final analysis, potential targets will benefit from the proposed changes and the number of hostile bids launched in Canada will likely be reduced. We also think there will still be a role for shareholder rights plans, but they certainly will not play the prominent role that they have historically played in contested take-overs in Canada.

The comment period on the proposed amendments will remain open until June 29, 2015.

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