Share Buy-Backs, Shareholder Activism, Takeover Bids And IPOs: CSA Proposes Sweeping Changes To Canadian Securities Law

In a broad set of proposals announced last week, the Canadian Securities Administrators (CSA) is considering wide-ranging amendments to Canadian securities law.

The changes, if adopted as proposed, would impact several areas of securities law and practice, including:

• issuer bids (i.e., share buy-backs),
• shareholder activism and proxy contests,
• takeover bids,
• reporting of cash-settled derivatives during takeover bids and proxy solicitation campaigns,
• initial public offerings (IPOs), and
• institutional investor reporting under the alternative monthly reporting (AMR) system.

The CSA’s overall stated aim is to enhance the competitiveness of Canada’s capital markets, and the CSA is requesting stakeholder comments by August 12, 2026.

Our high-level insights on the CSA’s proposed changes follow. If you are interested in submitting comments to the CSA, contact any Fasken capital markets partner. For more Fasken capital markets thought leadership, visit our Capital Markets and M&A hub and subscribe.

Issuer Bids (Share Buy-Backs)

The CSA has proposed numerous amendments aimed at providing issuers greater flexibility in relation to issuer bids. These include, in brief:

• A new “Selective Repurchase Exemption” that allows issuers to buy-back up to 5% of the outstanding securities of a class in a 12-month period. The CSA’s stated goal is to facilitate repurchases of large blocks of securities, while minimizing the potential for undue market impact, e.g., an overhang that artificially depresses the securities’ market price. Conditions to the exemption include:
  • The buy-backs must involve no more than 5 different persons across no more than 5 separate transactions.
  • The consideration paid (including any commissions or brokerage fees) must be less than the closing price of the securities on their principal trading market on the date of the bid.
  • There must be a “liquid market” for the securities (as defined in MI 61-101) and the issuer’s board must determine that (1) the market for the securities would not reasonably be expected to be materially less liquid following the repurchase, and (2) the repurchase would not reasonably be expected to have a significant negative effect on the market price or value of the securities.
  • The issuer must file a news release after making the bid and before the opening of markets disclosing the number or principal amount of securities acquired within the preceding 12-month period in reliance on the exemption.
  • The exemption effectively codifies the circumstances in which regulators have been prepared to grant relief orders allowing issuers to repurchase blocks of shares from shareholders wishing to sell.
  • Shares acquired under the exemption’s 5% limit do not count toward the limits allowed under other available exemptions, including a normal course issuer bid (NCIB).
• To facilitate an issuer bid conducted by way of a modified “Dutch auction”,^[1] regulators have previously granted relief from certain requirements under NI 62-104 to take up all shares tendered prior to extending the auction period. The proposed changes would codify this relief, subject to certain exceptions.
• Issuers conducting a share buy-back via a modified “Dutch auction” often include a proportionate tender option whereby shareholders can elect to tender an amount of shares that would maintain their proportionate interest in the issuer following the buy-back. Regulators have previously granted relief from the proportionate take up requirement under NI 62-104 to facilitate such an option, and the proposed changes would codify this relief.
• The CSA is proposing to expand the “non-reporting issuer exemption” regarding issuer bids under NI 62-104. This exemption allows certain issuers who are not a reporting issuer, whose securities have no published market, and who have fewer than 50 securityholders, excluding current or former employees of the issuer or its affiliates, to complete an issuer bid exempt from NI 62-104’s issuer bid requirements. The proposed changes would expand those who are excluded when determining the 50 securityholder threshold to include categories of persons who are in a similar position to employees, such as officers, directors and consultants, and to include certain spouses if the employee or employee adjacent person controls or directs the spouse’s securities.
• The proposed changes expand the exemption that allows issuers to acquire securities that are the subject of an issuer bid where the repurchase or redemption is in accordance with terms and conditions attached to such securities to also include securities convertible into the securities that are the subject of an issuer bid.

Shareholder Activism, Proxy Contests and Takeover Bids

The CSA’s proposals include numerous elements relevant to shareholder activism, proxy contests and takeover bids. These are, in brief:

• Clarifying regulator expectations regarding the disclosure of a shareholder’s plans or future intentions under the early warning report (EWR) regime. The CSA expressed concern with (1) what it views as acquiror overreliance on “broad, boilerplate language” as a basis for not filing updated EWRs, and (2) the “market practice” of acquirors only filing updated EWRs upon entering a definitive agreement regarding the issuer or its securities.
  • The CSA has proposed new guidance in NP 62-203 to clarify, among other things, that it expects updated EWR disclosure by an acquiror “as soon as a change in plans or future intentions occurs or if the acquiror or any joint actor has taken irrevocable steps to effect a potential transaction”.
  • The regulators have not provided guidance on what constitutes “irrevocable steps,” but have indicated that significant steps in respect of a particular transaction may, individually or taken together, amount to a change in plans or future intentions.
  • It remains unclear whether Canadian regulators will adopt the approach taken by the U.S. Securities and Exchange Commission (SEC) in a series of enforcement actions over the past decade concerning shareholders’ failure to update their Schedule 13D disclosures. In those cases, the SEC considered that steps such as retaining legal or financial advisors and meeting with an issuer’s management to explore a potential going-private transaction were sufficient to trigger disclosure updates (when accounting for the relevant circumstances).
• Closing a “gap” in EWR disclosure obligations related to joint actor relationships. At present, the obligation to disclose a joint actor relationship does not arise until (1) the formation of a joint actor relationship among parties collectively controlling 10% or more of an issuer’s equity or voting securities, and (2) the subsequent acquisition by one of the joint actors or more of such securities. The CSA’s proposed changes effectively remove this second requirement such that the formation of a joint actor relationship alone among parties collectively controlling 10% or more of a class of an issuer’s securities will trigger an EWR disclosure obligation.
• New disclosure obligations in proxy contest information circulars and takeover bid circulars regarding any equity equivalent derivatives, including cash settled equity total return swaps. The CSA cites an “asymmetry of information” during a takeover bid or proxy solicitation as only the bidder or soliciting securityholder would be aware of its aggregate economic position as there is no duty to disclose equity equivalent derivatives held by such bidder or soliciting securityholder. The CSA states that the aggregate economic position of a soliciting shareholder or takeover bidder is material to a shareholders’ ability to assess the viability of success of a solicitation or bid and potential alternative options, including as relates to the soliciting shareholder’s or bidder’s influence and leverage over a counterparty’s decision to acquire, dispose of or vote securities in the circumstances.
  • In particular, regulators have introduced deeming provisions under which securities underlying equity equivalent derivatives are included in calculating the ownership of an acquiror or joint actor that is a counterparty to such derivatives during a proxy solicitation campaign. These deeming provisions are intended to ensure, through the EWR regime, the disclosure of changes in a soliciting securityholder’s aggregate economic position—whether arising from beneficial ownership of securities or economic interests in equity equivalent derivatives—following the filing of its proxy circular. This obligation applies where the securityholder’s aggregate economic position is equivalent to beneficial ownership of 10% or more of the outstanding securities of the relevant class.
• The CSA is proposing to remove the 5% market purchase exemption available under Canada’s takeover bid regime.^[2] The CSA states that, while the exemption aims to, among other things, promote liquidity in the issuer’s shares, it has received stakeholder feedback that liquidity is rarely a concern during a takeover bid. The CSA also notes (1) limited use of the exemption in practice historically, and (2) concern that the exemption could be used abusively by bidders to thwart the emergence of competing bids. 
• In addition to expanding the “non-reporting issuer exemption” for an exempt issuer bid (see above), the CSA is proposing consistent changes to expand the equivalent “non-reporting issuer exemption” that allows for a takeover bid to be completed without meeting the takeover bid requirements under NI 62-104. The proposed changes would similarly expand those who are excluded when determining the 50 securityholder threshold required under the exemption to include not only employees, but also categories of persons who are in a similar position to employees, such as officers, directors and consultants, and to include certain spouses if the employee or other person in a similar position controls or directs the spouse’s securities. This would codify the circumstances in which regulators have previously granted discretionary relief from the takeover bid or issuer bid requirements.
• Two proposed changes regarding EWR triggers. First, clarifying that the need to file a subsequent EWR is assessed based on a 2% or more change in the acquiror’s post-event percentage ownership of the applicable securities relative to the percentage ownership that the acquiror reported in its most recent EWR. Second, proposed guidance and illustrative examples regarding when control of convertible securities not convertible within 60 days of their date of acquisition needs to be included in calculating EWR triggers.

Initial Public Offerings (IPOs)

• Significant shareholders upon an IPO now have EWR duties. The CSA has proposed imposing EWR disclosure obligations on persons who own or control over 10% or more of the outstanding voting or equity securities of a non-reporting issuer that becomes a reporting issuer. However, the regulators would not require filing the typical news release expected under the typical EWR disclosure obligations.
  • This is a significant change that levels the playing field by subjecting substantial shareholders at the time of an issuer’s IPO to the EWR regime. Previously, because the EWR regime was only triggered by an acquisition of securities, shareholders who acquired their holdings prior to an issuer going public were not required to file an early warning report or comply with ongoing update obligations, including those arising from changes in their intentions.

Institutional Investor Reporting

Several of the CSA’s proposed changes are directed at reporting by institutional investors. These include, in brief:

• Clarifying that eligible institutional investors (EIIs) under the alternative monthly reporting (AMR) system are required to file an AMR upon crossing fixed 2.5% thresholds in excess of 10% (e.g., 12.5%, 15%, 17.5%, etc.) instead of the current practice of calculating the 2.5% threshold against the EII’s previously reported position.
• Clarifying that EIIs that are exempt from the EWR requirements under s.4.1 of NI 62-103 are not exempt from the requirement to issue and file a news release under s.5.4 of NI 62-104 in connection with acquisitions during a non-exempt issuer bid or takeover bid.
• Specifying the conditions under which an EII not filing AMR reports may enter or re-enter the AMR system after the EII has been disqualified from reporting under the AMR system under s.4.2 of NI 62-103 in connection with a proxy solicitation campaign, takeover bid or other proposed transaction. These include a requirement to file a press release disclosing the EII’s intention to report under the AMR.

Submitting Comments

Canada’s securities regulators are requesting comments on the foregoing proposals by August 12, 2026. If you are interested in submitting comments to the CSA, contact any Fasken capital markets partner.

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.