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Mergers and Acquisitions in Canada


The scope of access during due diligence has been affected by the federal Personal Information Protection and Electronic Documents Act[[SC 2000, c.5.]] (“PIPEDA”). PIPEDA stipulates that personal information in the control of the corporation (including information pertaining to customers, contractors and business partners) cannot be used or disclosed without the consent of the individual to whom the personal information applies. “Personal information” must be about an identifiable individual.

It is also possible that personal information pertaining to employees cannot be disclosed in certain cases. For example, if one is purchasing a federally-regulated business or employees are located in a province with its own privacy legislation, the employer cannot disclose personal information concerning employees without their consent although, fortunately, the provinces of Alberta and British Columbia have passed specific provisions to allow for disclosures during the sale process. Even in other provinces such as Ontario, which does not have its own private sector privacy legislation, employees’ personal information cannot be disclosed under PIPEDA during a commercial activity, without their consent. The sale of a business may well meet the definition of a commercial activity. As a prudent measure, where a data room is set up for multiple potential bidders, identifiers linked to personal information should be deleted.

Any potential purchasers should be required to sign a comprehensive non-disclosure agreement, which provides that the potential purchaser will destroy or return all personal information disclosed during due diligence if the transaction is not concluded, and will protect the personal information in a manner comparable to that in which it is protected by the seller. Whenever possible, personal information should not have identifiers on it.

British Columbia and Alberta both have similar provincial privacy legislation that sets out a reasonable protocol which allows for disclosure of personal information in the context of an acquisition. It must be borne in mind that the Province of Quebec has had personal information protection legislation in place since 1994. Local legal advice should be obtained if a transaction involves disclosure, use or transfer of personal information in Quebec.

Most provinces also have legislation relating to personal health information. If such information is involved, special consideration must be given to protecting its privacy.

Additional posts from the blog

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21

New Bill Heightens Potential for More Investment Canada Reviews of SOE Acquisitions

by Sandra Walker

Last week the Canadian Government introduced amendments to the Investment Canada Act (ICA) to implement its revised policy towards state-owned enterprises (SOEs) which it announced in December last year. At that time, while it approved the acquisition by Chinese SOE, CNOOC, of Canadian oil and gas company, Nexen, the Government announced its intention to prohibit acquisitions of control of Canadian oil sands businesses by SOEs except on an exceptional basis. It also stated that joint ventures and minority investments were welcome. In addition, the government indicated it would closely monitor SOE acquisitions in other sectors of the economy and would distinguish between SOE and non-SOE investments when setting the ICA review threshold. (See Focus on Foreign Investment Review, December 2012)

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The Autorité des marchés financiers Proposes An Alternative Approach to Securities Regulators Intervention in Defensive Tactics

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On March 14, 2013, the Autorité des marchés financiers (“AMF”) published for comments a consultation paper (the “AMF Proposal”) pertaining to defensive tactics in response to take-over bids. This consultation is taking place concurrently with the one launched the same day by the Canadian Securities Administrator (“CSA”) with the release of proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans (collectively, “62-105”). Unlike the CSA’s 62-105, the AMF Proposal addresses all defensive tacticsii, not only security holders rights plans.

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Proposed New Framework for Rights Plans a Potential Game Changer for Hostile Bids

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The Canadian Securities Administrators published for comment a proposed new regulatory framework for rights plans under proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans (collectively, “62-105”). If adopted, 62-105 would provide issuers with a game changing tool to respond to hostile take-over bids, where a target board will be able to use a rights plan as leverage to negotiate with a potential bidder.



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