On September 11, 2014, the Canadian Securities Administrators (the "CSA") announced in CSA Notice 62-306 – Update on Proposed National Instrument 62-105 Security Holder Rights Plans and AMF Consultation Paper An Alternative Approach to Securities Regulators' Intervention in Defensive Tactics (the "Notice") that the CSA, subject to the receipt of necessary approvals, intends to publish for comment a harmonized regulatory proposal with respect to take-over bids, issuer bids and defensive tactics in response to or in anticipation of unsolicited or hostile take-over bids.
Previously, on March 14, 2013, the CSA published for comment proposed National Instrument 62-105 Security Holder Rights Plans along with proposed Companion Policy 62-105CP Security Holder Rights Plans(collectively, the "CSA Proposal"), while the Autorité des marches financiers (the "AMF"), in addition to participating in the CSA Proposal, concurrently published their consultation paper entitled An Alternative Approach to Securities Regulators' Intervention in Defensive Tactics (the "AMF Proposal"). Currently, the review of defensive tactics by the Canadian securities regulators is conducted under their respective public interest jurisdictions in light of the guidance in National Policy 62-202 Defensive Tactics (the "Defensive Tactics Policy"). The CSA Proposal and AMF Proposal were in response to concerns raised with the CSA's current approach to reviewing defensive tactics with a view to revising the application of the Defensive Tactics Policy.
Both the CSA and the AMF have decided to not proceed with the CSA Proposal and the AMF Proposal, respectively. As set out in the Notice, the CSA intends to publish for comment a new harmonized regulatory proposal based on amendments to the take-over bid regime contained in Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids (for jurisdictions other than Ontario) and Part XX of the Securities Act (Ontario) and Ontario Securities Commission Rule 62-504 Take-over Bids and Issuer Bids (for Ontario) (collectively, the "Proposed Bid Amendments").
It is intended that the Proposed Bid Amendments will address the significant issues identified in both the CSA Proposal and the AMF Proposal and upon comments received to those two proposals. As set out in the Notice, the general objective of the Proposed Bid Amendments is to aim to facilitate the ability of shareholders to make voluntary, informed and co-ordinated tender decisions and provide target boards with additional time to respond to hostile bids, each with the objective of rebalancing the current dynamics between hostile bidders and target boards.
As set out in the Notice, the Proposed Bid Amendments would require that all non-exempt take-over bids:
- be subject to a mandatory tender condition that a minimum of more than 50% of all outstanding target securities owned or held by persons other than the bidder and its joint actors be tendered and not withdrawn before the bidder can take up any securities under the bid;
- be extended by the bidder for an additional 10 days after the bidder achieves the mandatory minimum tender condition and the bidder announces its intention to immediately take up and pay for the securities deposited under the bid; and
- remain open for a minimum of 120 days, subject to the ability of the target board to waive, in a non-discriminatory manner when there are multiple bids, the minimum period to a period of no less than 35 days.
In the Notice, the CSA announced that they were not contemplating any changes to the current take-over bid exemptions or the Defensive Tactics Policy at this time.