On February 25, 2016, concurrent with the publication of major
changes to the take-over bid regime, the Canadian Securities
Administrators ("CSA") announced significant amendments
to the early warning reporting rules. Market participants who take
large positions in public issuers, along with their advisers,
should pay careful attention to the changes.
Since 2013, the CSA has been considering changes to the early
warning system with the intent of enhancing public disclosure about
significant holdings of reporting issuers' securities. One of
the major proposed changes was to lower the early warning reporting
threshold from 10% to 5% thus requiring disclosure when a
securityholder reached an ownership level of 5%. After receiving
comments on the proposal, the CSA noted various concerns and a lack
of overall support concerning the lower threshold and the CSA
concluded not to adopt the lower threshold in the final amendments.
However, the CSA decided to implement many of the other changes it
The key changes that come into force on May 9, 2016 (or in
Ontario, the date of proclamation of regulations), include the
Disclosure of Decreases in
Ownership. Currently, persons who hold more than 10%
ownership (convertible securities are used in this calculation) in
a reporting issuer are required to issue an additional news release
and file an early warning report when an additional 2% or more of
outstanding securities is acquired. Disclosure will now be required
for decreases in ownership, control or direction of 2% or more of
outstanding securities. In addition, should a person decrease
ownership to less than 10%, disclosure is also required.
Enhanced Disclosure in Early
Warning Report. Early warning reports will now require
more detailed disclosure. The new Form 62-103F1 will require more
information regarding the purposes and intentions of the acquirer
for the acquisition or disposition of securities. In addition, the
report will require disclosure of an interest in a related
financial instrument, a securities lending arrangement and other
agreement in respect of the security of the class for which
disclosure is required. The Early Warning Report will need to be
certified and signed.
News Release Dissemination
Timeline. The current rules require a news release to be
issued "promptly" once the early warning thresholds are
crossed. The changes now require a news release to be issued
promptly and in any event, no later than the opening of trading on
the business day following the acquisition or disposition.
Monthly Reporting not
Available for Institutional Investors Soliciting Proxies.
Entities that qualify as "eligible institutional
investors" (e.g. financial institutions, pension funds, mutual
funds that are not reporting, certain investment managers) have
been able to report their holdings on a monthly basis under the
Alternative Monthly Reporting System
("AMRS"). The changes disqualify such
entities from the AMRS if they solicit proxies in support of
actions not supported by management of the reporting issuer.
Exemptions for Lenders and
Borrowers. As part of the amendments, when a person is a
lender of securities or acquires securities as a borrower in
certain lending arrangements, calculation of such securities are
excluded from the early warning thresholds (for example, generally,
if the owner of the securities is a lender and it has a written
agreement which provides that it has an unrestricted right to
recall all securities it has transferred or lent before the record
date for voting at any meeting of shareholders or the lender
requires the borrower to vote the securities transferred or lent in
accordance with the lenders instructions then it will not trigger
the early warning report requirement).
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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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