CSA Proposes Significant Changes To Regulation Of Shareholder Rights Plans

On March 14, 2013, the Canadian Securities Administrators ("CSA") published for comment proposed National Instrument 62-105 and the proposed companion policy (collectively, the "Proposed Rule"), setting out a new regime for the regulation of shareholder rights plans in Canada.

Currently, a bidder making an unsolicited takeover bid for a Canadian public company can apply to the applicable provincial securities regulator for an order cease trading the target's rights plan, which effectively terminates the operation of the plan. With a few exceptions, the Canadian securities regulators have cease traded rights plans on the basis of what the Canadian regulators have described as a fundamental principle that ultimately shareholders must be given the opportunity to choose between the offer made by the unsolicited bidder and any alternatives proposed by management – at some point the pill "must go".