Following the publication of dueling consultation papers last year, Canadian securities regulators have decided to develop a harmonized approach to reforming the regulatory regime around takeover bids.
Last year, regulators put out two papers — one was issued by most of the Canadian Securities Administrators (CSA), and a separate paper was put out by the Autorité des marchés financiers (AMF) — proposing two different approaches for reforming the existing regime for takeovers. The proposals aimed to address concerns raised about the defensive tactics that are currently available to the directors of issuers that are targeted by hostile takeover bids, and whether the regime had become too friendly to hostile bidders.
Now, after reviewing the comments on both proposals, the regulators have decided to come together to develop a single, common approach. The CSA says CSA Notice 62-306 Update on Proposed National Instrument 62-105 Security Holder Rights Plans and the Autorité des marchés financiers (AMF) Consultation Paper An Alternative Approach to Securities Regulators' Intervention in Defensive Tactics "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."
The actual proposals are expected to be published in the first quarter of 2015. However, the CSA indicates that it plans to amend the rules to require that all non-exempt takeover bids: be subject to a mandatory majority minimum tender of all outstanding target securities; that bids must be extended by 10 days once the mandatory minimum tender condition has been met; and, that bids must remain open for a minimum of 120 days, subject to the ability of the target board to waive to a period of at least 35 days, in certain circumstances.
The original CSA proposal would have allowed a board to maintain a shareholder rights plan in the face of a hostile bid if a majority voted in favour of the rights plan, either in the face of the hostile bid or at the issuer's previous annual meeting. The AMF proposal went beyond shareholder rights plans and examined more fundamental issues with the takeover bid regime. It proposed a new policy that would limit the intervention of securities regulators to situations where a board prevented shareholders from considering a legitimate offer because of conflicts of interest; and, it proposed to require a minimum tender condition, and a mandatory 10 day extension after that condition is met.
"We have worked to develop a harmonized take-over bid regime for all Canadian jurisdictions and have been successful in achieving national agreement," said Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission (ASC). "The proposed amendments are designed to provide target boards with additional time to respond to hostile bids while reserving for shareholders the ability to make voluntary, informed and coordinated tender decisions."