The Canadian Securities Administrators (CSA) is giving the industry another month to contemplate the possible impact of proposed amendments to various rules regarding the takeover bid regime in Canada.
Back in March, Canadian securities regulators proposed two sets of reforms to rules around takeover bids. First, the CSA proposed changes to the early warning reporting regime in Canada, in an effort to enhance market transparency and address concerns about the lack of disclosure required in the current regime.
Among other things, it proposed: lowering the early warning reporting threshold to 5% from 10%; requiring disclosure of ownership changes, both increases and decreases, of at least 2%; and, proposing that certain equity derivative positions be included in determining whether the threshold has been reached, in order to ensure “hidden ownership” positions and “empty voting” are disclosed. It also proposed more specific disclosure about an acquiror’s actual economic and voting interests in an issuer in required news releases and regulatory filings.
Second, regulators also proposed changes to allow target companies more latitude to defend against unsolicited take-over bids. In separate consultations, the CSA and Québec’s Autorité des marchés financiers (AMF) proposed two different approaches to permitting companies to play more effective defense in hostile takeover battles.
The CSA proposal would see it establish a new regulatory framework for the treatment of shareholder rights plans (aka poison pills) in Canada. It would allow the board of a target company, and its shareholders, greater discretion to use these sorts of plans (which grant existing shareholders the right to purchase shares at a discount, in order to make a buyout more expensive) as a takeover defense.
The AMF proposal calls for a broader review of the regulatory treatment of all defensive tactics, not just rights plans. It proposes to adopt a new policy that would require that regulators only intervene in situations where boards’ actions or decisions are clearly abusive of shareholders’ rights or negatively impact the efficiency of capital markets; and, it’s also proposing to change the take-over bid regime to require bidders to comply with certain conditions.
The comment period for all of these proposals was slated to end on June 12 but the regulators said Monday that they have been asked for additional time to properly review and assess the impact of the proposed amendments. So, they are extending the comment period from June 12 to July 12.