Canada: WeirFoulds Securities Law Quarterly: March 31, 2016

Last Updated: April 8 2016
Article by Michael Dolphin and Zachary Goldenberg


On February 29, 2016, the CSA published final amendments to the early warning system which, upon receiving all Ministerial approvals, will come into force on May 9, 2016. The amendments are designed to provide greater transparency regarding the holdings of reporting issuers' securities and to enhance the quality and integrity of the early warning reporting system. The following is a summary of changes to the early warning system.

Decreases in Ownership

Disclosure will now be required of decreases in ownership of 2% or more for securityholders subject to reporting, as well as disclosure when a securityholder's ownership falls below the early warning reporting threshold of 10%. Currently only increases in positions of 2% or more or a material change to a previously reported fact are subject to reporting.

Exemption for Certain Securities Lending Arrangements

Lenders have been provided an exemption from including securities that are lent or transferred pursuant to a specified securities lending arrangement for purposes of determining the 10% reporting  threshold. A specified securities lending arrangement requires, among other things, that the lender  have an unrestricted ability to recall the securities before a meeting of securityholders and/or that the lender can require the borrower to vote the securities as instructed by the lender.

Exemption for Short Selling Borrowers

A new exemption from the reporting threshold trigger is being provided to borrowers in connection with certain short sales. This exemption can be relied upon on the condition that the borrowed securities are disposed of by the borrower within three business days and that the borrower does not currently or intend to vote the securities. The CSA has clarified the application of this exemption and has indicated that any securities lending arrangements in effect at the time of a reportable transaction will be required to be disclosed in an early warning report, even if the triggering transaction did not involve a securities lending arrangement.

Alternative Monthly Reporting

The alternative monthly reporting system is made unavailable to eligible institutional investors who solicit, or intend to solicit, proxies from securityholders of a reporting issuer on matters relating to the election of directors or a reorganization, amalgamation, merger, arrangement or similar corporate action involving the securities of the reporting issuer.

Enhanced Disclosure

The amendments also now require disclosure in the early warning report of the material terms of any related financial instruments, securities lending arrangements and other agreements, involving securities. The amendments will require more detailed information regarding the intentions of the acquiror and the purpose of the transaction be provided in the early warning report. The early warning report will now be required to be certified and signed as opposed to just signed as is the case currently.

Timing for Issuance of News Release and Early Warning Report

The amendments have clarified that an early warning news release is to be filed no later than the opening of trading on the business day following the acquisition and the early warning report must be filed no later than two business days following the acquisition.

Streamlining of Information in News Release

The information required in a news release filed in connection with the early warning reporting requirements has been further streamlined by allowing the news release to make reference to the early warning report for specified further details.


The CSA have published substantial changes to the take-over bid rules which are expected to come into force on May 9, 2016 under National Instrument 62-104 – Take-Over Bids and Issuer Bids ("NI 62-104"). Ontario has made legislative changes to the Securities Act (Ontario) to accommodate the adoption of NI 62-104.

Minimum Tender Requirement

Once in effect, the amendments will require that all non-exempt take-over bids meet a minimum tender requirement of more than 50% of the outstanding securities that are subject to the bid, excluding securities owned by the bidder itself or any person acting jointly or in concert with the bidder (the "Minimum Tender Requirement").

105 Day Minimum Deposit Period

The amendments will require a minimum deposit period of 105 days, which may be shortened in the following circumstances: (a) at the discretion of the target board announcing a shorter deposit period of not less than 35 days through the issuance of a news release, during which time all contemporaneous bids are to remain open for at least the number of days in the shorter deposit period; or (b) in the event that the issuer issues a news release announcing its intention to enter into a specified alternative transaction, during which time all contemporaneous take-over bids are to remain open for a deposit period of at least 35 days.

10 Day Extension Requirement

The minimum deposit period will be subject to an extension period of a minimum of 10 days after the Minimum Tender Requirement is satisfied and all other conditions are met. Under the existing regime, non-exempt take-over bids must remain open for 35 days and are not subject to any minimum tender requirement or an extension requirement once the bidder has taken up deposited securities.

Practical Implications to Shareholder Rights Plans

In light of the minimum deposit period being extended to 105 days from 35 days under the current regime, in our view the ability for target boards to rely on shareholder rights plans as a defensive measure to an unsolicited take-over bid may be stifled, and the incentive of implementing a shareholders rights plan "strategically" at an annual meeting or "tactically" in the face of a bid will be mitigated. The amendments to the take-over bid regime do not include any changes to the CSA's approach to shareholder rights plans and other defensive measures as set out in National Policy 62-202 – Take-Over Bids – Defensive Tactics ("NP 62-202"), and historically, securities commissions have cease traded shareholders rights plan within 50 to 70 days of commencement of an offer [we do note that there have been some recent decisions where courts have cease traded shareholder rights plans outside this 50-70 day period, such as the Alberta Securities Commission's decision in November 2015 with respect to Suncor Energy Inc.'s proposed take-over bid of Canadian Oil Sands Limited, where the rights plan was cease traded after more than 90 days following commencement of the hostile bid], which is well within the timeframe of the new minimum deposit period. The CSA has noted that NP 62-202 continues to apply to capital market participants following amendments to NI 62-104 and that securities regulators will continue to monitor the activities of target boards to determine whether their conduct is interfering with the rights of securityholders.

Due to the lack of guidance by the CSA and uncertainty of the position proxy advisory firms will take with respect to best practices implementing or amending a shareholder rights plan following the amendments to NI 62-104, we recommend that issuers defer implementing or amending their shareholder rights plan until the amendments to NI 62-104 come into effect in May, 2016.


In light of the recent adoption by the CSA of amendments relating to rights offerings (the "CSA Amendments"), the TSX and the TSX-V (together, the "Exchanges") recently provided guidance with respect to Section 614 - Rights Offerings of the TSX Company Manual and Policy 4.5 – Rights Offerings of the TSX-V Corporate Finance Manual (together, the "Manuals") in order to clarify the
Exchanges' positions in light of the CSA amendments.

The Exchanges intend, subject to all regulatory approvals, to amend the Manuals to formally incorporate the guidance contained in the TSX Notice and the TSX-V Bulletin. In the interim, the Exchanges provided listed issuers and their advisors with the following guidance.

TSX Notice

Pre-clearance of Rights Offering Documents

Even though a rights offering circular is no longer subject to CSA review and approval prior to delivery to a listed issuer's securityholders, pre-clearance of rights offering documents is still required by the TSX, including the rights offering notice, together with the rights offering circular, or rights offering prospectus (the "Rights Offering Documents"). Rights Offering Documents should be filed in draft form with TSX at least five trading days prior to finalization.

Determination of Record Date

Subsection 614(e) of the TSX Company Manual currently requires that all deficiencies raised by TSX be resolved at least seven trading days in advance of the record date, which effectively means that the record date cannot be determined until the Rights Offering Documents are in final form. Effective immediately, the TSX has reduced the advance notification period to set the record date for all rights offerings from seven trading days to five trading days. The TSX is of the position that five trading days is sufficient time to advise market participants of the commencement of ex-rights trading in the listed securities, which typically begins two trading days prior to the record date.

TSX-V Bulletin

The TSX-V provides listed issuers and their advisors with similar guidance to that of the TSX with respect to the pre-clearance of rights offering documents and the determination of the record date. However, the TSX-V does not provide a minimum number of days in which the Rights Offering Documents must be filed with the TSX-V, and instead requires that the Rights Offering Documents be filed with the TSX-V in draft form to provide the TSX-V with a sufficient review period.

The TSX-V has also provided guidance with respect to the following:

Minimum Rights Subscription Price - $0.01

The TSX-V is proposing to amend Policy 4.5 to provide that the subscription price for securities acquired on the exercise of rights cannot be less than $0.01. Until the amendments to Policy 4.5 come into effect, the TSX-V will, on application, grant waivers of the current $0.05 minimum subscription price, as long as the subscription price for the securities acquired on the exercise of rights is not less than $0.01.

Minimum Warrant Exercise Price

Policy 4.5 is proposed to be further amended to provide that the minimum exercise price of a warrant forming part of a unit being acquired on the exercise of a right must not be less than the greater of the market price prior to the news release announcing the rights offering and $0.05.

Optional Listing of Rights

It is proposed that references to the rights being listed for trading on the TSX-V be amended to expressly provide that rights may be, but are not required to be, listed for trading on the TSX-V, at the election of the issuer. Until the proposed amendments come into effect, the TSX-V will, on application, approve a particular rights offering where the Issuer elects not to list the rights for trading. An Issuer that has applied or intends to apply for a waiver of the listing requirement for a rights offering must specifically disclose that it has made such application or intends to make such application in the press release announcing the rights offering. In any case, as required by subsection 5.1 of Policy 4.5, all rights must remain transferable.

New Large Shareholders

The TSX-V is proposing to amend Policy 4.5 to provide that shareholder approval for the creation of a new control person as a consequence of a stand-by commitment for a rights offering generally will not be required provided that the rights are listed for trading on the TSX-V and the subscription price for the rights is at a "significant discount" to the market price. A "significant discount" would be equal to at least the maximum discount to market price allowed for private placements. If either of these criteria is not satisfied, the Exchange may first require shareholder approval for the creation of a new control person.

Personal Information Form (Form 2A)

Any individual who may own or control, beneficially or as nominee, directly or indirectly, securities representing more than 10% of the voting rights attached to all outstanding voting securities of an issuer (or where the securityholder is not an individual, any director, officer or insider of that securityholder) on the completion of the rights offering must first file with the TSX-V a duly completed Personal Information Form (Form 2A) or, if applicable, a Declaration (Form 2C1) before the Exchange will accept a rights offering which includes a stand-by commitment.


On February 19, 2016 the OSC published its Staff Notice 51-726 - Report on Staff's Review of Insider Reporting and User Guides for Insiders and Issuers, which sets out the results of its review of the continuous disclosure records and insider filings of 100 reporting issuers whose principal regulator is the OSC.

Staff examined the filings of approximately 1,500 reporting insiders on the System for Electronic Disclosure by Insiders ("SEDI") to assess compliance with NI 55-104 - Insider Reporting Requirements and Exemptions and related securities legislation. Overall, the review found that the compliance rate for insider reporting could be substantially improved. Staff also found material insider reporting deficiencies in approximately 70% of the issuers reviewed, with approximately 200 reporting insiders filing new insider reports to address material deficiencies and 150 reporting insiders filing correctional reports.

Reporting insiders are reminded that it is their responsibility to file insider reports with the commissions in a timely fashion regardless of whether a third party agent is used, and reporting insiders should conduct periodic checks of the information contained on SEDI to ensure that their reports are being filed correctly and the information on SEDI is reported accurately.

Issuers should conduct annual reviews of their insider trading policies to ensure they are in compliance with current Canadian securities legislation, and appoint a senior officer to approve and monitor the trading activity of all insiders, officers and senior employees. It is also recommended that issuers implement a written policy prohibiting derivative-based transactions, granting stock options and setting of the exercise price during blackout periods.


The OSC recently entered into settlement agreements with certain mortgage investment entities ("MIEs"), mortgage brokers, administrators and their principals involved in trading in securities without registration, contrary to the Securities Act (Ontario). These settlements involved substantial penalties and costs being levied against businesses and individuals, as well as the requirement to reimburse investors where the investment was not suitable.

Entities whose business involves trading in securities such as units or common shares of MIEs, may be required to register with the OSC in addition to registration with the Financial Services Commission of Ontario. Entities are encouraged to review the registration requirements and obtain legal advice if necessary.

Registration requirements under Ontario securities law are set out in the Securities Act (Ontario) and National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations. Guidance on how these requirements apply to MIEs and entities that invest their assets in mortgages can be found in CSA Staff Notice 31-323 Guidance Relating to the Registration Obligations of Mortgage Investment Entities and OSC Staff Notice 81-722 Mortgage Investment Entities and Investment Funds.

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.

Michael Dolphin
Events from this Firm
7 Dec 2017, Webinar, Toronto, Canada

FEX Members Jeff Noble, BDO, and Caroline Abela, WeirFoulds LLP, invite you to a complimentary webinar series titled: All About Shareholders.

30 Jan 2018, Seminar, Toronto, Canada

WeirFoulds Partner Caroline Abela will instruct The Advocates' Society program, "Cross-Examination".

30 Jan 2018, Seminar, Toronto, Canada

WeirFoulds Partner Marie-Andrée Vermette will instruct The Advocates' Society program, "Cross-Examination: Strategies for Success".

In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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