Canadian Lawyer

proposal would see that regulators not intervene to cease trade a rights plan that has complied with the proposed framework. It's being viewed as an important step in empowering the target board and shareholders in responding to a bid. In the U.S., securities commissions don't intervene and rights plans and disputes go before courts. "I think there is a lot of merit in where the AMF is trying to take the debate," says Yalden. "I think there is a lot to be said for standing back some. 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." Neither proposal would take Canada to the same place as the U.S., where boards have a lot more room to manoeuvre in responding to hostile bids. The CSA's proposed rules reflect certain elements of both the U.S./Delaware and U.K. regimes. "It would take us a little in the direction of the U.S., but not entirely," says Yalden. "If a bidder wants to try to get rid of a pill that was otherwise in place for a year, really the only option would be to convene a shareholder meeting to have shareholders vote to remove the pill. That is another feature the CSA is proposing — the shareholders should be able to remove the pill through a shareholder vote." In the United States, a rights plan can be used to stop someone from buying the shares of a company, even if shareholders are saying they want to sell. "There have been a couple of cases in the U.S. — [Air Products and Chemicals Inc. v. Airgas Inc.] being the most famous one — where the directors said: 'It's the wrong time to sell the company, if you wait a year or two the stock price is going to be higher. We hear you shareholders saying get out of the way but we're going to use the shareholder rights plan to just say no,'" says Gow. In 2011, Air Products and Chemicals Inc. dropped its $5.9-billion hostile bid for the packaged-gas supplier after a Delaware judge upheld Airgas Inc.'s anti-takeover defence. The AMF proposal comes closer to that model. It says an elected board of directors should be trusted to do the right thing, as they know more about the company than all the shareholders do. If they say it's the wrong time to sell, the securities commission won't intervene. What is being proposed is seen as a complete reversal of 20 years of law in Canada, says Gow. "Whether that's going to be acceptable in Canada I think is an open question. If I was acting for a pension fund who is a big shareholder of a target company who wants to sell, they would probably say, 'I put up $100 million to buy 10 per cent of the company, shouldn't I be the one to decide whether to sell it, not the board of directors?'" The consultation period ends June 12. SPECIALIZATION IN BUSINESS LAW Part-time, Executive LLM program for corporate counsel and practising lawyers Taught by U of T Faculty of Law professors, together with top international faculty from MIT-Sloan School of Management and expert practitioners. TIME: EVENT: For more information, call 416-978-1400 or visit: http://www.law.utoronto.ca/programs/GPLLM.html Supported by the Association of Corporate Counsel (ACC) - Ontario Chapter and in partnership with Carswell, a Thomson Reuters business. LLM_IH_Apr_13.indd 1 www.CANADIAN L a w ye r m a g . c o m June 2013 41 13-02-26 4:07 PM

• Cover