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Mergers and Acquisitions in Canada

Although securities regulations in Canada and many other countries, including the U.S., are based on similar principles, there are certain key distinctions. The first is that there is no federal securities legislation in Canada. Securities regulation is solely a matter of provincial or territorial jurisdiction, and is governed by the securities legislation of each of the 10 provinces and three territories of Canada[[The federal Canadian government and some of the provinces and territories have agreed in principle to jointly establish a “Cooperative Capital Markets Regulatory System” under which the federal and participating provincial and territorial governments would all play a role in overseeing the administration of uniform securities legislation. The timing of the implementation of the proposed new system is not yet known.]] However, with respect to take-over bids, the laws of the Canadian jurisdictions are substantially uniform. All of the jurisdictions have adopted National Instrument 62-104 - Take-over Bids and Issuer Bids (“NI 62-104”), which governs the securities law aspects of take-over bids.

A second key distinction between Canadian securities legislation and the legislation of other countries, such as the U.S., is that Canadian securities legislation is not based on a “registration system”. In Canada, a distribution of securities may only be made:

  1. 1.     pursuant to a prospectus which has been filed with and receipted (accepted) by the securities regulatory bodies in the provinces and territories in which the securities will be issued;
  1. 2.     pursuant to an exemption from the prospectus requirement in such jurisdictions; or
  1. 3.     pursuant to a discretionary order granted by the applicable securities commission.

The definition of “distribution” includes an issuance of previously unissued securities of an issuer, a trade of securities held by a control person, and a first trade in securities previously acquired pursuant to a prospectus exemption, unless certain conditions are met. These conditions may include a four-month hold period on securities acquired under a prospectus exemption, depending on which exemption was used. In addition to permitting a distribution, the receipt of a prospectus will also trigger continuous reporting obligations for the issuer under the securities legislation of the provinces and territories in which the prospectus was filed.

Additional posts from the blog



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)



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

by Guy Paul Allard

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.



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

by Daniel Katzin

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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