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.
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M&A REGULATION SIGNIFICANT CHANGES PROPOSED IN M&A REGULATION IN CANADA SECURITIES REGULATORS' PROPOSALS FOR REFORM OF RIGHTS PLAN REGULATION AND EARLY WARNING REQUIREMENTS WOULD SIGNIFICANTLY CHANGE THE REGULATORY LANDSCAPE FOR CANADIAN M&A TRANSACTIONS By Neill I. May, Jon Feldman and Ryan Szainwald; Goodmans LLP ALTHOUGH IN MANY respects Canadian securities laws have been substantially reformulated and updated in recent years, there are elements of the regulatory framework that have avoided comprehensive policy review or revision for some time. Ironically, some of these elements relate to the regulation of public M&A, a fast-evolving and highly scrutinized category of corporate activity. The absence of regulatory reform in this area does not mean that there has been no pressure for reformulation or reform, or a lack of consistent commentary and discussion about the need for change; on the contrary, questions concerning the regulation of defensive tactics in particular have been extensively and enthusiastically debated in Canada for many years. Recently, Canadian securities regulators published proposals that would significantly change the regulatory system for M&A transactions in this country. Those changes, if adopted in the form proposed, would (i) significantly change the rules concerning common defensive tactics in the face of hostile takeover bids and the manner in which contests for corporate control are regulated and conducted, and (ii) update the requirements for disclosure of securities ownership to more closely align with the requirements of other jurisdictions and to reflect the complexities of contemporary securities markets. RIGHTS PLANS IN CANADA Rights plans (also commonly referred to as poison pills) are often used in Canada by publicly traded issuers in anticipation of, or in response to, unsolicited (or "hostile") take-over bids. Similar to those used in other jurisdictions, rights plans in Canada typically provide for the issuance of rights that are exercisable, in the event of a hostile bid, by all securityholders (other than the bidder) for additional shares of the issuer at a deep discount. As a technical matter, the triggering of a rights plan would result in dramatic dilution of the bidder, rendering completion of the hostile bid uneconomic. In practical terms, a rights plan forces a hostile bidder to negotiate for the waiver, or to seek legal nullification, of the plan to proceed with its bid. www.lexpert.ca | LEXPERT • June 2013 | 43 C-00-Firm.indd 43 13-05-17 10:06 AM