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

These defensive tactics would only be available to businesses incorporated under the Québec Business Corporations Act (the “QBCA”). They could be implemented or withdrawn by special resolution (2/3) of the shareholders.

First, QBCA corporations could amend their constituting documents to grant extra votes to shareholders that have held their shares for at least two years.

Second, QBCA 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;
  • within the 24 months following the takeover, the acquirer would have to 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;
  • the acquirer could not vote the shares it purchased following the takeover bid until a special majority of the shareholders, excluding directors and officers, grant the acquirer voting powers.

The implementation of this proposal requires amendments to the QBCA, which is highly unlikely before Québec’s upcoming election.