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LEGISLATIVE AND REGULATORY CHANGES about 45 days – for a company to seek out competing bids. Indeed, Canada's securities regulators have traditionally cast a wary eye on poison pills. The Canadian Securities Administrators (CSA)'s National Policy 62-202 provides that the interests of the shareholders of a target corporation lie in being "free to make a fully informed decision" about a 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. "The way the current rules work, there's a hearing at some point before the Commission and ultimately the plan goes away," explains John Turner of Fasken Martineau DuMoulin LLP's Toronto office. "It's very unusual for the Commission to let the board just say no, so the bidder knows that there's an end game." Under the changes proposed by the CSA in March 2013, shareholdCanadian rules on poison pills, early warning thresholds, director ers would have the right to approve elections and anti-corruption laws have all seen major changes of any SRP by majority vote of the affecting mining companies BY JULIUS MELNITZER target's disinterested shareholders within 90 days of the earlier of the board's adoption of the plan or the THE LAST YEAR or so has seen significant changes to Canada's commencement of the bid, and on an annual basis thereafter. Failing legislative and regulatory landscape as it affects mining and resource such approval, the pill would lapse after 90 days. companies. Among the most noteworthy developments are changFor its part, Quebec's securities regulator, the Autorité des es and proposed changes to the rules governing poison pills, early marchés financiers, has proposed an alternative new regime that warning thresholds, director elections and anti-corruption laws. could allow directors to "just say no" in appropriate cases. By way of contrast, the CSA proposal has been said to effect a "just say slow" > POISON PILLS defence that will give boards more time to respond to a hostile bid. Canadian and US policy on the use of poison pills differ markedly. Although the CSA proposal still leaves Canadian boards a long The US position, and particularly that of the trend-setting Delaware way from the "just say no" defence that their American countercourts, is that so long as a board has acted within the scope of its parts enjoy, it does promise meaningful benefits to mining and refiduciary duties, the courts will not question its actions — including source companies. the decision to issue a poison pill and "just say no" to a take-over bid. "Mining companies have to deal with commodity cycles," says It is a position that shareholder activists like Carl Icahn have Michael Amm in Torys LLP's Toronto office. "On the down cycle, long lambasted, preferring the traditional Canadian view that nods it can be extremely difficult to conjure up alternatives to a hostile much more distinctly in the direction of shareholders' rights by al- bid, and it's important that the boards of mining companies have lowing poison pills to remain in place just long enough – generally tools by which they can extend the time to seek white knights and The Rules of the Game 14 LEXPERT | 2013/14 | WWW.LEXPERT.CA

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