Canadian Lawyer

LEGAL REPORT/Securities Law "Rights plans have become more a part of the landscape and I think there is real merit in taking a look at whether there is a need to rebalance the equation between bidders, shareholders, and boards. I think it's a very healthy thing the AMF is doing." Robert Yalden, Osler Hoskin & Harcourt LLP Under the AMF proposal, intervention by the regulator would be "restrained to situations where boards' actions or decisions are clearly abusive of security holders' rights or negatively impact the efficiency of capital markets." Howard says: "The regulators in Quebec are saying they want to encourage greater deference to the decisions the board might make in deciding how best to respond to a bid. Notwithstanding what the shareholders might want — which is arguably narrowly focused on maximizing profit. The question [for the shareholder] becomes: 'Is this going to give me the most money for my shares now?' The AMF is saying, 'Let's take this opportunity to focus more on the duty of the directors.'" A 2008 case involving BCE saw the Supreme Court of Canada more closely examine the duty of the board of directors — to whom do they owe fiduciary duties? "Traditionally directors owed a duty to the corporation, which is always mea- Professional Directory Supreme Court of Canada Counsel and Agency Services Henry S. Brown, QC D. Lynne Watt Graham Ragan Guy Régimbald Matthew Estabrooks With the assistance of: Brian A. Crane, QC Eduard J. Van Bemmel, Law Clerk 160 Elgin Street Suite 2600 Ottawa Ontario K1P 1C3 T 613-233-1781 montréal ottawa toronto hamilton waterloo region calgary vancouver beijing moscow london THOMSON ROGERS AND CANLNC EXPERTS TEAM UP TO PRESENT The Birth Trauma Conference ntitled-2 1 CALGARY - JUNE 6TH, 2013, VANCOUVER - JUNE 7TH, 2013 TORONTO - JUNE 24TH, 2013 13-01-14 Topics and activities to include: • A conversation on SOGC/ACOG guidelines • Expert witness panel discussion • Fetal monitoring update • Challenges to Proof, standard of care and causation • Case study and mock Examination for Discovery • Recent developments in the Supreme Court • Question and answer period • Networking wine and cheese reception 40 June 2013 www.CANADIAN The experts you need, The quality you deserve. www.CanLNCExperts.ca 855-278-9273 (toll free) Experts@CanLNCExperts.ca L a w ye r m a g . c o m sured in what's best for the shareholders. Now for the first time, arguably, it's a broader group of stakeholders they're focused on," says Howard. The duty would extend beyond short-term profit or share value — she says it's appropriate for the board to consider a broader group of stakeholders such as employees, consumers, government, and environment. Most agree the current takeover bid regime in Canada is outdated and especially as international interest in Canadian companies is a focus, a review is long overdue. "The [CSA] proposal is a good one because I would say currently our regime in Canada is a little bidder friendly," says Graham Gow, a partner with McCarthy Tétrault LLP in Toronto. "I think it's a move in the right direction." While not "a seismic change," Gow says it would shift the balance of power between the hostile bidder on the one hand, and the target board of directors on the other. "The important message coming out of the CSA and Quebec is the securities commissions are rethinking the role they should be playing in hostile takeover bids," says Robert Yalden, a Montreal-based partner with Osler Hoskin & Harcourt LLP. "Historically they've been quite interventionist and quite prepared to strike down rights plans in particular; the most common defensive tactic targets use in Canada when faced with a hostile bid." Kevin West, a securities lawyer with SkyLaw LLP in Toronto, says it's a delicate balance between being bidder friendly versus giving directors more latitude to say no. "I don't see the proposal changing the balance a whole lot. The main thing is the securities commissions are going to stay out of it," he says. A rights plan deters a bidder from buying up target shares by granting shareholders of the target company, other than the bidder, the right to purchase additional shares at a discount if an acquirer exceeds a specified share ownership threshold. "By giving the shareholders the ultimate ability to decide whether a rights plan stays in place will give more certainty to the pro2:30 PM cess, so that's a good step forward," says West. The CSA is proposing if shareholders approve a rights plan, regulators will not intervene and will allow it to stay in place for a full year before going to a shareholder vote. It is also proposing to increase the frequency of when shareholder rights plans are issued. Right now, if adopted, a plan can be kept in place for three years. The proposed change would require companies to take them to their shareholders once a year. Under the existing framework, securities regulators in Canada will generally cease trade a shareholder rights plan after a limited period of time once the rights plan has given the target board sufficient time to respond to the bid. The CSA

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