BCSC Decides Red Eagle Poison Pill Case As Take-Over Bid Amendments Loom

The British Columbia Securities Commission (BCSC) released its reasons in Re Red Eagle, 2015 BCSECCOM 401, in which it cease-traded a rights plan in the face of a hostile bid. As perhaps one of the last rights plan cases to be decided before the proposed amendments to Multilateral Instrument 62-104 – Take-Over Bids and Issuer Bids(MI 62-104) come into force, its conclusions regarding rights plans are not surprising and may be of limited relevance in the future. However, the reasons do set out some timeless principles in relation to the other issues the BCSC faced in this case.

1. The Decision

There were three issues before the BCSC.

A. Cease-Trading the Rights Plan

CB Gold had adopted a rights plan in August 2014, that was subsequently approved by a 98% positive vote of the CB Gold shareholders in January 2015. Red Eagle made a hostile bid for the shares of CB Gold and, by the time of the hearing of its application to cease-trade the rights plan, the bid had