Canada: Top Public M&A And Proxy Contest Developments In 2017

While the number of Canadian M&A transactions this year has been slightly higher than in 2016, the total value of deals is somewhat lower. There was also a drop in the number of proxy contests. Nevertheless, there were a number of important legal developments. Set out below is our discussion of the most notable ones.

CSA Staff Notice on material conflict of interest transactions

In an important Staff Notice (Notice) published on July 27, 2017, staff of the securities regulatory authorities in each of Ontario, Québec, Alberta, Manitoba and New Brunswick (Staff) indicated that they intend to subject material conflict of interest transactions regulated by Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) to greater regulatory scrutiny. Material conflict of interest transactions are now being reviewed on a real-time basis to assess compliance with the requirements of MI 61-101 and to determine whether the transaction raises public interest concerns.

Staff have also provided guidance regarding their expectations of enhanced disclosure and the active role to be played by special committees of independent directors.

Moreover, where a fairness opinion is obtained for a material conflict of interest transaction, Staff are requiring disclosure of the structure of a financial advisor's compensation (but not the amount of the advisor's fee) as well as the financial analysis underlying the opinion.

Issuers and their advisors in material conflict of interest transactions need to be prepared for the possibility of real-time review of disclosure documents and the risk that supplemental disclosure may be required that could delay the transaction. To minimize this risk, boards of issuers in conflict transactions should ensure that special committees are formed early in the process, retain independent advisors, and include comprehensive disclosure in the transaction circular.

Staff's guidance on fairness opinions, like the Notice as a whole, only applies to material conflict of interest transactions. Nevertheless, it will be interesting to see whether the Notice will influence fairness opinion practice more generally, particularly given the interplay of the Notice with the InterOil decision, which is discussed in greater detail below.

For further information regarding the Notice, please refer to our Osler Update: Securities Commission staff raise the bar for conflict transactions.

Private placements in proxy contests

In April, the Ontario Securities Commission (OSC) overturned a decision by the Toronto Stock Exchange (TSX) conditionally approving a private placement of shares in the context of a proxy contest. The TSX had approved the issuance of almost 10% of the common shares of Eco Oro Minerals Corp. (Eco Oro) to existing shareholders supportive of the incumbent board of directors. The shares were issued just eight days prior to the record date for a shareholders meeting requisitioned to replace Eco Oro's board of directors. The OSC's decision effectively required Eco Oro to unwind the private placement unless it was approved by Eco Oro's shareholders. See our Osler Update: The Eco Oro decision – OSC invokes broad jurisdiction in effectively neutralizing a private placement.

Material conflict of interest transactions are now being reviewed on a real-time basis to assess compliance with the requirements of MI 61-101 and to determine whether the transaction raises public interest concerns.

While the OSC rendered its decision pursuant to a provision of Ontario securities law that provides for the review of TSX decisions, the OSC also indicated that, whether or not there is a TSX decision, a person may seek to invoke the OSC's public interest jurisdiction under Ontario securities laws based on the underlying policies in National Policy 62-202 – Take-Over Bids – Defensive Tactics (NP 62-202). The reference to NP 62-202 is instructive as there is a line of decisions addressing the use of private placements in the context of contested take-over bids, most recently the Dolly Varden decision described in our Osler Update entitled Contested private placements under the new take-over bid regime: the Dolly Varden decision. In that decision, the OSC and the British Columbia Securities Commission (BCSC) upheld a contested private placement by the target of an unsolicited take-over bid where they concluded that there was a legitimate need for the financing and the private placement was not implemented as a defensive tactic in response to the bid. The OSC and BCSC provided important guidance on the regulatory analysis and treatment of contested private placements in light of the traditional limitations on defensive tactics set forth in National Policy 62-202.

In response to the OSC decision in Eco Oro, in which there was some evidence that Eco Oro had not informed TSX staff of the proxy battle and impending shareholders meeting, the TSX issued a Staff Notice providing guidance with respect to the information required by issuers when completing TSX Form 11 – Notice of Private Placement. The TSX Staff Notice provides that, in connection with any notice of a private placement, the TSX expects issuers to provide the TSX with information regarding any relevant significant matters including, but not limited to, any upcoming shareholders meeting for which a record date has been or is shortly expected to be determined, any pending mergers, acquisitions, take-over bids, changes to capital structure or other significant transactions, and any details regarding potential dissident shareholders and/or anticipated proxy contests.

Fairness opinions after Interoil

In March, the Supreme Court of Yukon issued its reasons for approving Exxon Mobil's acquisition of InterOil, which closed on February 22, 2017. The original $2.3-billion arrangement had been blocked by the Yukon Court of Appeal on the basis that it was not fair and reasonable. This determination was made in large part due to the lack of disclosure of the financial analysis underlying the original fairness opinion in support of the transaction, leading to a concern that the shareholder vote approving the arrangement was not fully informed.

Responding to the criticism in the Court of Appeal decision, InterOil's revised proxy circular contained (i) a fixed fee long-form fairness opinion that contained detailed financial analysis about the value of InterOil and the consideration payable under the arrangement, and (ii) a report of an independent committee of directors in support of the arrangement.

In approving the amended arrangement, the Court noted that the interim order of the Court required the above-noted disclosure in the proxy circular and observed that, in the Court's view, these two requirements "provide a minimum standard for interim orders of any plan of arrangement. It is not acceptable to proceed on the basis of a Fairness Opinion which is in any way tied to the success of the arrangement."

Since the Yukon Court of Appeal's decision, there has been considerable debate in the legal and investment banking community as to whether Canadian practice relating to fairness opinions should change in response to the decision. So far, practice has been mixed. Market participants have not uniformly adopted the three practices suggested by the Court of Appeal and adopted by the parties in the revised InterOil arrangement: disclosure of the financial analysis underlying the fairness opinion, disclosure of the financial advisor's fees, and obtaining fixed fee opinions from financial advisors whose compensation is not conditional on the conclusion reached in the opinion or the outcome of the transaction.

As expected, several corporations completing arrangements under the laws of British Columbia have obtained a fairness opinion that includes at least some disclosure of the underlying financial analysis carried out by the provider of the opinion. The Yukon Court of Appeal is constituted with judges of the British Columbia Court of Appeal, so the decision of the Yukon Court of Appeal in InterOil would be expected to be followed by judges in British Columbia. There have also been arrangements in other jurisdictions in which InterOil-style fairness opinions have been obtained, although standard short-form opinions continue to be used in many transactions.

As noted above, Staff's guidance on fairness opinions in material conflict of interest transactions, coupled with the InterOil decision, may push issuers and their advisors to disclose more of the financial analysis underlying fairness opinions, as is the practice in the United States.

Until there is further judicial or regulatory consideration of this issue, market practice will likely continue to vary, depending on a number of factors, including the form of the transaction (arrangement or some other structure), the jurisdiction of the transaction, the robustness of the sale process, and the likelihood of legal challenge by a disgruntled shareholder.

Hostile take-over bids under the new bid regime

In May 2016, Canada's new take-over bid regime was adopted, which provides for a minimum 105-day bid period, a mandatory 50% minimum tender condition and a 10-day extension once the minimum tender condition has been satisfied. Following its adoption, there were questions as to whether the new regime – in particular the 105-day minimum bid period – might have a chilling effect on hostile bids.

Although it's too early to draw any definitive conclusions, to our knowledge, there have only been three hostile bids in 2017 to date: Nuri Telecom's bid for Apivio Systems; Pollard Banknote's bid for Innova Gaming; and Aurora Cannabis's bid for CanniMed Therapeutics. This is down from five hostile bids in 2016 and is well below the average over the past 10 years. Time will tell whether this is simply a slow year or the start of a broader trend.

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
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
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