The investor protection rules that apply in corporate takeover bids may soon undergo major changes in Canada. Provincial and territorial securities regulators have proposed a new national framework for the regulation of takeover bids, including the use of “poison pills” by target companies.
A poison pill makes it prohibitively costly for the hostile bidder to obtain control of the target without the target board’s cooperation. But, by empowering management and the board, the pill also places a wedge between the bidder and the target shareholders to whom it has made the offer.
Issues of conflicted or entrenched directors and managers can also arise. Under the new framework, takeover bids must receive tenders of more than 50 percent of the outstanding securities subject to the bid. Bids must remain open for a minimum of 120 days; a significant increase from the current requirement of 35 days.
C.D. HOWE INSTITUTE – OCTOBER 29, 2015.
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