The Canadian Securities Administrators ("CSA") have
announced major amendments (the "Amendments") to the
Canadian take-over bid regime that are expected to come into force
on May 9, 2016 throughout Canada.1
The Substance and Purpose of the Amendments
The Amendments reflect a re-balancing of the dynamics among
offerors, offeree issuer board of directors ("offeree
boards") and offeree issuer security holders ("offeree
security holders"). According to the CSA, the Amendments are
intended to (i) facilitate the ability of offeree security holders
to make voluntary, informed and co-ordinated tender decisions, and
(ii) provide offeree boards with additional time and discretion
when responding to a take-over bid. In effect, the Amendments take
many aspects, as will be seen below, of privately-enacted
shareholder rights plans and turn them into mandatory default rules
for Canadian issuers.
Specifically, once in effect, the Amendments will require
non-exempt take-over bids to:
remain open for a minimum deposit period of 105 days (as
opposed to the current 35 day minimum) unless: (a) the offeree
board states in a news release a shorter deposit period for the bid
of not less than 35 days, in which case all contemporaneous
take-over bids must remain open for at least the stated shorter
deposit period, or (b) the issuer issues a news release that it
intends to effect, pursuant to an agreement or otherwise, a
specified alternative transaction, in which case all
contemporaneous take-over bids must remain open for a deposit
period of at least 35 days;
receive tenders of more than 50% of the outstanding securities
of the class that are subject to the bid, excluding securities
beneficially owned, or over which control or direction is
exercised, by the offeror or by any person acting jointly or in
concert with the offeror (the "Minimum Tender
be extended by the offeror for an additional 10 days after the
Minimum Tender Requirement has been achieved and all other terms
and conditions of the bid have been complied with or waived (the
"10 Day Extension Requirement").
Shareholder Rights Plans
The Amendments have turned several standard provisions under
shareholder rights plans into mandatory statutory rules.
Specifically, the standard shareholder rights plan has provisions
similar to the Minimum Tender Requirement and the 10 Day Extension
Requirement. However, shareholder rights plans typically extend the
minimum period for deposit from 30 days to 60 days, whereas the
Amendments will require a minimum deposit period of 105 days.
Despite many aspects of shareholder rights plans being
formalized in the Amendments, Canadian reporting issuers may still
find shareholder rights plans useful, particularly to regulate
certain bids remaining exempt under the amended take-over bid
regime. "Creeping bids" (e.g. bids made through normal
course purchases in the open market) and hard lock-up agreements,
for instance, will remain exempt under the Amendments.
As the CSA's commentary has indicated that National Policy
62-202 Take-Over Bids – Defensive Tactics will
remain in effect after the Amendments, we expect securities
regulatory authorities to continue to assess whether particular
shareholder rights plans are abusive to offeree security holders.
We further expect that, barring unordinary circumstances, a
shareholder rights plan would be cease traded if it remained in
effect for a period longer than 105 days (plus the 10 Day Extension
As companies proceed through the 2016 proxy season, they should
be aware that their shareholder rights plans may not comply with
the upcoming Amendments. For example, rights plans may need to be
amended to reflect the requirement that the minimum deposit period
is reduced to 35 days for all bids upon the offeree entering into
an alternative transaction.
1 Except in Ontario, where the Amendments will come into
force on the later of (a) May 9, 2016, and (b) the day on which
certain sections of Schedule 18 of the Budget Measures Act, 2015
(Ontario) are proclaimed in force.
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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