Canada: The Future Of Poison Pills: A Look Ahead To The 2017 Proxy Season

When amendments to the Canadian take-over bid regime were announced and implemented earlier this year, there was speculation as to the continued relevance and importance of shareholder rights plans (poison pills). After all, the amendments addressed some of the very concerns that shareholder rights plans were originally designed to correct for, namely, by providing directors with more time to consider a bid and seek alternatives and by relieving pressure on shareholders to tender to a bid. Many practitioners, market participants and commentators wondered whether rights plans would continue to be relevant and, if so, what they would look like.

To help answer these questions, we undertook a review of reporting issuers that had publicly disclosed that their rights plans were up for shareholder approval in 2016. In this update, we discuss the results of our review and what it means for the upcoming proxy season.

How have issuers responded to the amended take-over bid regime?

We reviewed the public documents of reporting issuers that disclosed their rights plans were up for shareholder approval in 2016 and that filed information circulars after the amendments were announced. Our findings are as follows:

  • 26% terminated their rights plan or allowed their rights plan to lapse
  • 23% renewed their rights plan without making any amendments
  • 51% amended their rights plan

The actions of issuers during this past proxy season were likely impacted by the timing and effective date of the amendments which, although announced on February 25, 2016, only took effect on May 9, 2016. Of the 23% of issuers that renewed their rights plan without making any amendments, 75% filed their information circulars prior to the effective date of the amendments, suggesting that they were hedging against the possibility of the amendments not taking effect or that the announcement came too late in the proxy season for them to properly consider how best to amend their plan.

Moreover, ISS (Institutional Shareholder Services Inc.) announced at the beginning of March 2016 that, given the new rules would come into force in the middle of the proxy season, it would not update its voting policies for the 2016 proxy season. The one exception was to accept changes to rights plans that extended the minimum bid period for "permitted bids" to 105 days, which ISS stated would be the maximum period supported. This likely also factored into the decision of some issuers not to make any amendments to their rights plan in 2016.

The majority of those issuers that allowed their rights plan to lapse in 2016 cited the belief that the amended take-over bid regime provides sufficient protection against hostile bids. Interestingly, only 14% of the issuers that allowed their plan to lapse have a market capitalization of more than $500 million, while 64% of such issuers have a market capitalization of less than $100 million.

A small majority of issuers that had a rights plan up for renewal during the past proxy season elected to amend their plan. Although several amended only the definition of "permitted bid" to change the minimum period that a bid must remain open from 60 to 105 days, the majority made more comprehensive amendments.

2017 proxy voting Recommendations by Institutional Shareholder Services Inc. and Glass Lewis

Both ISS and Glass Lewis just released their proxy voting recommendations for the 2017 proxy season, and in both cases they formally amended their policies to increase the permitted bid periods to align with the new minimum deposit period required by the amended bid regime. Their updated policies state they will consider management proposals to ratify a rights plan on a case-by-case basis and will recommend voting against a rights plan with a permitted bid minimum period of greater than 105 days (instead of 60 / 90 days pursuant to their old policies). Otherwise, neither ISS nor Glass Lewis made any changes to its recommendations regarding rights plans.

What should an issuer do with its shareholder rights plan?

So...what should issuers with a rights plan up for renewal in 2017 do? Renew the rights plan (with appropriate amendments) or allow it to lapse? And should issuers without a rights plan consider implementing one? The answer depends on the particular circumstances of the issuer.

While the new take-over bid rules address some of the perceived timing and fairness issues that rights plans were intended to address, they do not protect issuers against creeping (exempt) take-over bids for control (such as the accumulation of 20% or more of the issuer's shares through stock exchange acquisitions, or the acquisition of a control block through private agreement purchases from a few large shareholders). Shareholder rights plans preclude creeping take-over bids, ensuring that all shareholders have an equal opportunity to share in the payment of a control premium.

The protection against creeping bids is the most compelling reason for issuers to have a rights plan. In assessing the need for a rights plan, an issuer should carefully consider the likelihood of a creeping take-over bid by scrutinizing its shareholder base (for example, to identify shareholders at or above the 10% level, which are required to file early warning reports under Canadian securities laws).

If a rights plan is to be renewed or implemented, the following are amendments that should be considered in order to be in line with the new take-over bid rules, institutional guidelines and market practice:

  • Extending the period of time a "Permitted Bid" or "Competing Permitted Bid" must remain open to align with the minimum period a take-over bid must remain open under Canadian securities laws.
  • Amending references from "Business Days" to "days" within the definitions of "Permitted Bid" and "Competing Permitted Bid," as applicable, to align with Canadian securities laws.
  • Amending the definition of "Close of Business" to provide that, within the definitions of "Permitted Bid" and "Competing Permitted Bid," "Close of Business" means 11:59 p.m., to align with Canadian securities laws.
  • Amending legislative references from "Multilateral Instrument 62-104" to "National Instrument 62-104" and deleting any references to OSC Rule 62-504.
  • Deleting or revising the recitals and other provisions of the rights plan that describe the purpose of the rights plan as ensuring that the board is provided with sufficient time to evaluate unsolicited bids. With the minimum bid period having been extended from 35 to 105 days, this rationale is less relevant.

While more extensive structural amendments could be considered to reduce duplication with the new take-over bid rules, the above more straightforward amendments are in line with market practice and institutional guidelines.

The amendments to the take-over bid regime can be accessed here.

The ISS and Glass Lewis proxy voting recommendations for the 2017 proxy season can be accessed here and here.

Our earlier commentary on the legislative amendments can be accessed here and here.

About Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

For more information about Norton Rose Fulbright, see

Law around the world

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.

Similar Articles
Relevancy Powered by MondaqAI
Burnet, Duckworth & Palmer LLP
Aird & Berlis LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Burnet, Duckworth & Palmer LLP
Aird & Berlis LLP
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