The Canadian Securities Administrators (CSA) have adopted
amendments to Canada's take-over bid regime which will take
effect on May 9, 2016.1 These fundamental changes will
provide boards of directors of target companies with more time and
more leverage to respond to unsolicited bids, establish a majority
acceptance standard for bids and impose a mandatory extension
period to relieve concerns that target shareholders may be coerced
into tendering to a bid out of a concern of being left holding
securities in a closely held company with significantly less
The following is a summary of the changes for all non-exempt
50% Minimum tender condition. The bidder must
receive tenders of at least 50% of the outstanding securities
subject to the bid prior to taking up any securities.
Mandatory 10-day extension. The bidder will be
required to extend the deposit period for a minimum of 10 days once
the 50% minimum tender condition has been met.
105-day minimum deposit period, subject to certain
exceptions. All take-over bids will be required to remain
open for a minimum of 105 days, unless:
the target board agrees to a shorter deposit period of not less
than 35 days (which reduced period will apply to all competing
the target company announces that it intends to effect a
specified alternative transaction, in which case all
contemporaneous take-over bids will have their initial tender
period reduced to 35 days.
These changes will provide boards of target companies with
considerably more time to seek alternatives to an unsolicited bid
and heighten the risk to the bidder of an interloping bid being
made. This is expected to reduce the frequency of hostile bids and
increase the level of engagement between potential bidders and
Similar to the provisions included in most shareholders'
rights plans, the majority approval requirement through the minimum
tender condition will prevent the practice followed by many bidders
of electing to waive a minimum tender condition in order to acquire
a significant (albeit less than a majority) ownership position and
thereby be in a position to block future change of control
The mandatory minimum 10-day extension requires bidders to
publicly disclose by news release: (i) that the minimum tender
condition has been met, (ii) that all other bid conditions have
been satisfied or waived, (iii) the number of securities deposited
to the bid at the expiry of the initial deposit period, and (iv)
that the period during which securities may be deposited under the
bid has been extended (which must be for at least 10 days). This
will allow undecided target securityholders additional time to
accept the bid with the benefit of the knowledge that a majority of
their peers have already done so.
Of note, the take-over bid amendments do not make any changes to
National Policy 62-202 Take-Over Bids – Defensive
Tactics, which allows target boards to continue using
shareholders' rights plans to restrict a bidder's ability
to acquire the target's securities by way of exempt take-over
bids such as a creeping take-overs and private agreement purchases.
We expect that the circumstances in which the regulators would
permit a poison pill to continue beyond 105 days would be very
1 The amendments will take effect in all Canadian
jurisdictions except Ontario on May 9, 2016 and, in Ontario, on the
later of May 9, 2016 and the day that certain sections of the
Budget Measures Act, 2015 (Ontario) are
proclaimed into force.
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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).