CSA Provide Update on Proposed National Instrument 62-105 Security Holder Rights Plans and AMF Consultation Paper

In an effort to address various concerns raised with the Canadian Securities Administrators’ (CSA)  approach to reviewing defensive tactics adopted in response to, or in anticipation of, unsolicited or “hostile” take-over bids, the CSA published for comment proposed National Instrument 62-105 Security Holder Rights Plans (NI 62-105) in March 2013. The Autorité des marchés financiers (AMF) concurrently published a consultation paper entitled An Alternative Approach to Securities Regulators’ Intervention in Defensive Tactics detailing its response to these same concerns.

On September 11, 2014 and in light of comments received in respect of NI 62-105 and the AMF consultation paper, the CSA announced that they will not be proceeding with their prior response and intend 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).

The CSA have indicated that the proposed take-over bid amendments will address key issues identified in NI 62-105 and the AMF consultation paper and will 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.

Specifically, the proposed take-over bid amendments will 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outstanding target securities owned or held by persons other than the bidder and its joint actors be tendered and not withdrawn before the bidder can take up any securities under the bid;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 50% 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.

The CSA have indicated that they are not contemplating any changes to the current take-over bid exemptions or National Policy 62-202 Defensive Tactics.

The CSA are in the process of developing the proposed take-over bid amendments and, subject to necessary approvals, intend to publish the proposed amendments in the first quarter of 2015.

This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.

If you would like further information regarding the issues discussed in this update or if you wish to discuss any aspect of this commentary, please feel free to contact us.