Shareholder Activism Defensive Tactics Attract OSC's Attention

Shareholder activism continues to evolve in Canada. As the tactics of activists have become increasingly sophisticated, boards have responded by expanding and refining their defensive tactics. A recent example is the growing popularity of contractual restrictions on transferring shares to certain classes of shareholders, including specific activists. This new strategy has attracted the attention of the Ontario Securities Commission (OSC) and may prompt regulatory intervention.

Share Transfer Restrictions – A New Defense to Shareholder Activism

Canadian public companies may restrict the transfer of their shares if the authority to do so is contained in their articles of incorporation, and both Canadian and U.S. companies have used shareholder agreements to prevent shareholders from transferring their shares to "activist investors". Initially, these restrictions simply prohibited a shareholder from transferring shares to anyone engaged in an activist campaign