8 | LEXPERT • June 2015 | www.lexpert.ca/usguide-corporate/
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CORPORATE GOVERNANCE
NEW TAKE-OVER BID REGIME
In March 2015, the Canadian Securities Administrators released for comment
dra rules on what some observers have been calling a new "just say slow" take-
over regime.
e proposed rules mandate that a take-over bid must remain open for 120
days, though target boards may in certain cases shorten that period to 35 days.
Shareholders will still have their say on a bid by way of a new 50 per cent minimum
tender condition. If the minimum condition is met, undecided shareholders will
have 10 days to accept. Exemptions are unchanged under the new rules.
Under the current regime, directors must issue a circular evaluating the bid
within 15 days, and bids must remain open for only 35 days. While defensive
measures such as poison pills are frequently used to buy time, bidders can gener-
ally obtain regulatory orders to cease trade the pills within 60 days.
" e new regime takes the sting out of the process by setting bright-line ground
rules," says Alfred Page in Borden Ladner Gervais LLP's Toronto offi ce. "While
that makes things easier for bidders in some ways, it makes it harder in others."
e extended bid length, for example, gives other interested bidders a longer
period to intervene, creating uncertainty for the initial bidders, especially if they
are hostile. In turn, the uncertainty can give boards more negotiating leverage.
"We anticipate that hostile bidders will perceive the benefi t of engaging more
with target boards who will have the ability to waive the minimum tender period
for friendly transactions," write John Emanoilidis, Andrew Gray, omas Yeo
and Sophia Tolias in Torys LLP's client bulletin.
According to the Torys lawyers, poison pills will still be useful as a device to
regulate exempt purchases of target securities. "However, we would expect that
the regulators would not generally permit a target board to maintain a poison pill
if a bid has been accepted by a majority of disinterested shareholders and if the bid
otherwise complies with the new rules," they write.
e comment period for the dra rules closed on June 29, 2015.
Corporate governance and shareholder
activism have seen a number of key
developments recently in Canada
JULIUS MELNITZER
ACTIVISM
AND GOVERNANCE
ACTIVISM ACTIVISM
PHOTO:
SHUTTERSTOCK
