On September 11, 2014, the Canadian Securities Administrators proposed a new, harmonized approach to the take-over bid rules in force throughout Canada (the "Concept Proposal").
The Concept Proposal seeks to facilitate informed, co-ordinated and voluntary tendering to a take-over bid by a target company's shareholders and to provide its board of directors with additional time to respond to a hostile bid. These proposed reforms are expected to address a perceived power imbalance in the existing take-over bid rules that is said to favour hostile bidders over the boards of directors of target companies.
The key features of the Concept Proposal are:
Additional time to select a better or competing offer
- Minimum bid period of 120 days: a take-over bid would be required to remain open for a minimum of 120 days, although the target company's board would have the ability to reduce this period to 35 days (which reduction would apply to all bidders in a competitive scenario). The minimum bid period is 35 days under the existing take-over bid rules.
Reduction in ability to launch coercive bids
- Minimum tender condition in excess of 50%: for a bidder to take-up any securities under a bid, more than 50% of all outstanding securities of a class held by non-bidding parties would need to be tendered. There is no minimum tender condition under the existing take-over bid rules.
- 10-day bid period extension: upon meeting the minimum tender condition and announcing its intention to take-up and pay for the tendered securities, a bidder would be required to extend its bid for a period of 10 days. Under the existing take-over bid rules, a bidder is not required to extend its bid upon announcing it will take-up and pay for securities.
In March of 2013, the CSA proposed reforms to the regulation of shareholder rights plans in Canada. Concurrently (and despite contributing to the CSA proposal), Québec's securities regulator, the Authorité des Marchés Financiers, released a white paper in which it recommended broader reforms to take-over bid regulation (and, in particular, a board of directors' discretion to reject a hostile bid). The Concept Proposal replaces these previous proposals in favour of a harmonized set of reforms to Canada's take-over bid laws.
The CSA intends to publish its draft rules for comment in the first quarter of 2015.
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