Tucked away in the latest Ontario budget bill, presented in March 2007, was a re-enactment of Part XX of the Ontario Securities Act. Part XX governs take-over bids and issuer bids conducted in Ontario. The re-enactment of Part XX was given greater exposure when the Ontario Securities Commission (OSC) published for comment on April 6, 2007 a proposed local rule, OSC Rule 62-504, Take-Over Bids and Issuer Bids (proposed OSC Rule 62-504). This rule is intended to supplement and work in conjunction with Part XX as proposed to be re-enacted (the new Part XX).
The combination of the proposed re-enactment of Part XX and proposed OSC Rule 62-504 represents a departure by Ontario, at least in form, from a Canadian Securities Administrators (CSA) initiative (which included Ontario) that culminated in April 2006 in the publication of proposed National Instrument 62-104 Take-Over Bids and Issuer Bids (proposed NI 62-104). We reported on NI 62-104 in an earlier issue.
The CSA publication of a proposed national bid rule assumed that each provincial government would make the necessary amendments to its respective securities legislation in order to allow its securities regulator to regulate take-over bids and issuer bids almost exclusively under the terms of a common national bid rule. The Ontario legislature appears not to have accepted this approach to the regulation of take-over bids and issuer bids and to have determined to retain direct legislative authority for these provisions and not to delegate authority to the securities regulator.
When supplemented with proposed OSC Rule 62-504, the new Part XX tracks most, but not all, of the changes that were proposed by the CSA in April 2006 as part of the national bid rule. In addition to the immediately obvious reorganization along the lines of the reorganization made in the national bid rule, the following key amendments are made in the new Part XX and proposed OSC Rule 62-504:
- the burden of proof has been reduced in certain circumstances where it is alleged that an offeror has acted jointly or in concert with another person or company; however, an express exemption for lock-up agreements has been added;
- formal provisions are included providing for the conduct of ‘dutch-auction’ issuer bids obviating the need for routine exemptive relief applications;
similar to the proposed national bid rule but with some technical differences, an exception to the prohibition on collateral benefits is created for certain employment-related arrangements; and
- also similar to the proposed national bid rule is the creation of a new exemption from the formal bid requirements for bids that are carried out in accordance with the laws of a foreign jurisdiction, if more than 90 per cent of the securities subject to the bid are held outside Canada.