Canadian Securities Regulators Propose New Regimes For Shareholder Rights Plans

On March 14, 2013, Canadian securities regulators published two separate proposals that would significantly change the rules concerning common defensive tactics in the face of hostile take-over bids and the manner in which contests for corporate control are regulated and conducted.

The Canadian Securities Administrators' (CSA) proposals are outlined in its proposed National Instrument 62- 105 Security Holder Rights Plans ("NI 62-105"). The CSA's proposals would provide the board of an issuer targeted by a hostile bid with greater flexibility to use a shareholder rights plan, or "poison pill", as a defence tactic. In place of the current system, where poison pills can effectively only be used to facilitate the target board's efforts to achieve a superior value transaction, the new rules would provide target boards with the flexibility, with shareholder support, to "just say no" to a hostile bid.