The Lexpert Guides to the Leading US/Canada Cross-Border Corporate and Litigation Lawyers in Canada profiles leading business lawyers and features articles for attorneys and in-house counsel in the US about business law issues in Canada.
Issue link: https://digital.carswellmedia.com/i/138095
SHAREHOLDER ACTIVISM I expect the trend to spread more widely to senior issuers in 2013." FINALLY, 2013 may see some "THE 10 PERCENT EARLY WARNING REQUIREMENT MAKES [CANADA] PARTICULARLY INTERESTING TO US DISSIDENT INVESTORS, AS DOES THE FACT THAT WE DON'T MAKE THE SAME USE OF STAGGERED BOARDS THAT US COMPANIES DO." important developments regarding poison pill defenses to hostile takeover bids. Canadian and US policy on the use of poison pills differ markedly. The US position, and particularly that of the trend-setting Delaware courts, is that so long as a board has acted within the scope of its fiduciary duties, the courts will not question its actions — including the decision to issue a poison pill and "just say no" to a take-over bid. It is a position that shareholder activists like Carl Icahn have long lambasted, preferring the traditional Canadian view, which nods much more distinctly in the direction of shareholders' rights by allowing poison pills to remain in place just long enough for a company to seek out competing bids. Canada's securities regulators have long cast a wary eye on poison pills. National Policy 62-202 of the Canadian Securities Administrators (CSA) provides that the interests of the shareholders of a target corporation lie in being "free to make a fully informed decision" about the bid. Implementing a poison pill, then, is contrary to the interests of shareholders unless the defensive tactic is tied to a "genuine attempt to obtain a better bid." The policy allows regulators to intervene where an SRP would likely "deny or limit severely the ability of shareholders to respond to a bid." To this end, regulators have consistently held that SRPs must terminate at some point. The rationale here is that the ability to freely dispose of shares is a fundamental right attached to owning them. "When" rather than "whether" a plan will terminate becomes the issue. But the gap between the Canadian and American positions may soon narrow. At press time, the CSA had just released a proposal that would provide for a shareholder vote to determine whether any rights plan of the company would stay in force. At the same time, Québec unveiled a more radical proposal that would enable a "just say no" defense that Québec's securities regulator, the Autorité des marchés financiers, could override if the target's directors were acting in their own interest. Both the CSA and AMF proposals were still open for comments at press time. Julius Melnitzer is a legal affairs writer in Toronto. www.lexpert.ca | LEXPERT • June 2013 | 27 B-00-Features.indd 27 13-05-17 9:31 AM