Concerned with the hollowing out of Quebec Inc, the Parti Québécois minority government came out strongly in favour of the right of a board of directors to 'just say no' to hostile takeovers. Under a proposal contained in its 2014-2015 budget tabled on February 20 2014, Quebec corporations could implement novel defensive tactics.

These defensive tactics would be available only to businesses incorporated under the Quebec Business Corporations Act. They could be implemented or withdrawn by special resolution, which must be supported by two-thirds of the shareholders.

Quebec Business Corporations Act corporations could amend their constituting documents to grant extra votes to shareholders that have held their shares for at least two years.

Alternatively, Quebec Business Corporations Act corporations could also amend their constituting documents to provide the following in the event of a takeover not approved by the board of directors existing at the time of the offer:

  • a prohibition from amalgamating with its acquirer for a period of five years from the acquisition;
  • a prohibition from selling assets representing 15% of its business for a period of five years from the acquisition;
  • a requirement that, within 24 months of the takeover, the acquirer return profits from the resale of shares acquired in the year preceding the takeover;
  • a prohibition from removing sitting directors before the expiry of their term, which term may not extend over three years; and
  • a prohibition on the acquirer voting the shares that it purchased following the takeover bid until a special majority of the shareholders, excluding directors and officers, granted it voting powers.

The implementation of this proposal requires amendments to the Quebec Business Corporations Act, which is highly unlikely before Quebec's upcoming election.

For further information on this topic please contact Pascal de Guise or Misha Benjamin at Borden Ladner Gervais LLP by telephone (+1 514 879 1212), fax (+1 514 954 1905) or email (pdeguise@blg.com or mibenjamin@blg.com).The Borden Ladner Gervais LLP website can be accessed at www.blg.com.