The OECD’s updated G20/OECD Principles of Corporate Governance (the “Principles”) highlight that core corporate governance principles are well embedded in the Canadian framework and that many of the new governance initiatives outlined in the Principles are already being pursued in Canada. The Principles, first published in 1999 and previously revised in 2004, provide a widely accepted international reference point used by policymakers in setting corporate governance standards across the globe.… Continue Reading
In October, 2015, short-sellers attacked three Canadian public companies: Valeant Pharmaceuticals International, Inc., DH Corporation and Nobilis Health Corp. All three companies refuted the short sellers’ allegations in traditional media. We suggest below that these companies could have also used social media to get their side of the story out. In our view, there was a potential opportunity to further influence market sentiment about allegations that had already negatively impacted secondary market trading.… Continue Reading
The following post on the Canadian Securities Regulatory Monitor blog may be of interest to readers of this blog: The 2016 Proxy Season: Updates to the ISS Canadian Proxy Voting Guidelines.
On November 20, 2015, Institutional Shareholder Services Inc. (“ISS”) released its updated Canadian proxy voting guidelines for meetings on or after February 1, 2016.1 The updates provide new or updated guidance with respect to voting for equity compensation plans, electing directors with too many board appointments and electing directors of externally managed issuers such as REITs. Read More
In a recent policy statement, the Canadian Coalition for Good Governance (“CCGG”) endorsed the use of “universal proxies” whenever there is a contested director election at a Canadian public company. A “universal proxy” is a proxy voting form which lists all nominees for election regardless of who nominated them (whether management or dissident shareholder). Although there is nothing under corporate or securities laws which prohibits a company or a dissident from using a universal proxy, it is common practice for Canadian issuers and dissident shareholders to solicit votes with the use of proxies which only list their … Continue Reading
In our two recent articles, available here and here, we outlined how social media can influence proxy contests and identified some potential legal challenges with this development. This update focuses on the recent use of social media in the high-profile (failed) hostile bid for Syngenta AG (“Syngenta”) by Monsanto Company (“Monsanto”).
In May 2015, Monsanto made a $45 billion bid (its third bid in four years) for Syngenta. Syngenta’s board almost immediately rejected the offer on the grounds of anti-trust concerns and lack of protection for shareholders should the deal fall apart. The rejection … Continue Reading
The Canadian Coalition for Good Governance (CCGG) recently published a policy encouraging issuers to take measures to enhance “proxy access”, meaning the ability of shareholders to have meaningful input into the director nomination process. The CCGG published this policy in the midst of a surge of voluntary adoption of proxy access by significant issuers in the United States. As of the date of this publication, we are not aware of any Canadian issuer that has adopted proxy access.
In Canada, a registered shareholder can always have a say in the director nomination process by nominating individuals from the floor … Continue Reading
After taking a break last proxy season, “golden leash” arrangements are back in the spotlight. A few days ago, Institutional Shareholder Services Inc. (“ISS”) gave “cautious support” to so-called “golden leash” arrangements between Third Point LLC and its two nominees to the board of Dow Chemical Co.… Continue Reading
Social media has very seldom been leveraged in Canadian proxy contests. One reason for this may be the lack of knowledge about its full potential. To address this reason, our first post in this series reviewed social media’s impact on public discourse and proxy contests in the U.S. and Canada.
Another reason for the limited use of social media in Canadian proxy contests is the lack of specific regulatory guidelines. Unlike in the U.S., in Canada there is no regulatory guidance on the use of social media to communicate with shareholders. This article reviews some legal considerations applicable … Continue Reading
Social media has revolutionized how stakeholders receive information about companies. An estimated 1.79 billion people used social media in 2014; 2.44 billion will by 2018. Despite such staggering statistics, social media has not been leveraged to its full potential in Canadian proxy contests. According to a 2013 survey, a majority of directors on the boards of Canada’s largest companies acknowledged that they did not know much about social media.
This is the first of two posts about harnessing social media in Canadian proxy contests. It reviews the use of social media to influence public discourse and proxy contests … Continue Reading
On March 31, 2015, the Canadian Securities Administrators (CSA) published a CSA Notice and Request for Comment with respect to proposed amendments to Multilateral Instrument 62-104 – Take-Over Bids and Issuer Bids (MI 62-104) and changes to National Policy 62-203 – Take-Over Bids and Issuer Bids.
The proposed amendments codify and in some cases clarify the concepts previously announced by the CSA in September 2014 and result in some significant changes to the take-over bid regime. Please see our detailed report Amendments to Take-Over Bid Rules Will Deliver More Support to Boards for an in-depth review of some of the … Continue Reading
Because of the growing risk of litigation by unhappy (or simply opportunistic) shareholders following the sale or acquisition of a company, corporate governance practices during the M&A process face increasing scrutiny.
In a recent article titled “Documenting the Deal: How Quality Control and Candor Can Improve Boardroom Decision-making And Reduce The Litigation Target Zone”, forthcoming in The Business Lawyer, Leo Strine, Chief Justice of the Delaware Supreme Court, sets forth some best practices for directors and legal and financial advisors “to conduct an M&A process in a manner that: i) promotes making better decisions; ii) reduces conflicts of … Continue Reading
Industry Canada has announced that the 2015 Investment Canada Act (“Act”) threshold that applies to most direct acquisitions of Canadian businesses by non-Canadians will be C$369 million. This is an increase from last year’s $354 million threshold. The threshold applies to the gross book value of the target’s assets. Note that under the Act, a non-Canadian includes a Canadian-incorporated entity that is ultimately controlled outside of Canada.
The existing lower threshold of C$5 million will continue to apply to transactions that relate to cultural businesses or where none of the parties are from a country that is a WTO member.… Continue Reading
With the 2015 Proxy Season close at hand, Glass, Lewis & Co., LLC (Glass Lewis) and Institutional Shareholder Services Inc. (ISS) recently released their updated Canadian proxy voting guidelines. Changes and clarifications have been made to their guidelines in such areas as advance notice policies and by-laws, shareholder rights plans and majority voting.… Continue Reading
This is the final article in our mini-tender trilogy. We have previously discussed mini-tender offers from the perspectives of the offeror, and the issuer and shareholders. This article considers how mini-tenders might be strategically used in proxy contests.
As shareholder activism rises, the activists’ toolkit keeps evolving. The strategic use of a mini-tender offer in a recent proxy contest suggests that such offers may increasingly be considered as a means of influencing the outcome of proxy contests.… Continue Reading
After taking a break this past proxy season, “golden leash” arrangements are back in the spotlight. A few days ago, Third Point LLC proposed so-called “golden leash” arrangements for their two nominees to the board of Dow Chemical Co.
“Golden leash” arrangements arise when a shareholder activist privately offers to compensate its nominee directors in connection with such nominees’ service as a director of the target corporation. Arrangements vary but include compensating activist directors who are elected based on achieving benchmarks, such as an increase in share price over a fixed term. Shareholder activists only provide such incentives to elected … Continue Reading
In our previous article, we introduced mini-tenders and discussed the factors that should be considered before launching a mini-tender offer. As a refresher, a mini-tender is an offer to purchase securities below the threshold that triggers regulatory rules for take-over bids. Such an offer is not specifically regulated and can be used to acquire small but not insignificant positions in public companies, often at a discount to the prevailing market price.
In this article, we discuss mini-tenders from the perspective of issuers and shareholders.
Mini-tenders have a bad reputation, which may explain why they are used infrequently. This is the first in a trilogy of articles about mini-tender offers from the perspectives of offerors, issuers and shareholders. It reviews factors that an offeror should consider before launching a mini-tender offer.
A mini-tender is simply an offer to purchase securities below the threshold that triggers regulatory rules for take-over bids. Such an offer is not specifically regulated and can be used to acquire small but not insignificant positions in public companies, often at a discount to the prevailing market price.
On October 10, 2014, the Canadian Securities Administrators (CSA) provided an update on the status of proposed amendments to Canada’s early warning reporting (EWR) system first published in March 2013. After extensive public consultation, the CSA announced that they will proceed with the amendments except for two important proposals: to reduce the reporting threshold from 10% to 5% and to include “equity equivalent derivatives” for the purposes of determining the threshold for EWR disclosure. The CSA intends to publish final amendments to the EWR system and related guidance in the second quarter of 2015, subject to the receipt of … Continue Reading
Shareholder activists are increasingly influential in Canada’s M&A landscape, but expect that trend to intensify with a proposal to list Pershing Square Holdings on the Euronext Amsterdam stock exchange. The listing is expected to complete Bill Ackman’s capitalization of the new $5 billion fund associated with Pershing Square Capital Management. The listing, which is likely to be complete by mid-October, will provide Mr. Ackman with the stable pool of capital he has long believed his investment strategy would benefit from.
In his 2014 Q2 letter to investors, Mr. Ackman expressed frustration that the Pershing Square group of funds must keep … Continue Reading
On September 11, 2014, the Canadian Securities Administrators (CSA) published CSA Notice 62-306 – Update on Proposed National Instrument 62-105 Security Holder Rights Plans (Notice) and the Autorité des marchés financiers (AMF) Consultation Paper An Alternative Approach to Securities Regulators’ Intervention in Defensive Tactics. The notice indicates that the CSA intend to publish for comment a new harmonized proposal based on amendments to the takeover bid regime which will aim to facilitate the ability of shareholders to make voluntary, informed and coordinated tender decisions and provide target boards with additional time to respond to hostile bids, with the objective … Continue Reading
The debate about so-called “golden leash” arrangements has picked up again. The Council of Institutional Investors (“CII”), an influential association of institutional investors, recently wrote a letter to the U.S. Securities and Exchange Commission (“SEC”) expressing its concerns regarding the transparency of compensation paid in “golden leash” arrangements.
As discussed in our previous post, “golden leash” arrangements arise when a shareholder activist privately offers to compensate its nominee directors in connection with such nominees’ service as a director of a target corporation. In January, 2014, Institutional Shareholder Services Inc. provided its views on by-laws designed to prohibit “golden leash” … Continue Reading
The recent outcome of the Augusta/HudBay poison pill hearing provides some insight into how a shareholder rights plan may withstand scrutiny from a Canadian securities regulator for an extended period of time in the right circumstances. Though perhaps the result of somewhat unique facts, including insufficient initial support for the price being offered by the bidder and an active process being conducted by the target company, the British Columbia Securities Commission’s decision in Augusta/HudBay is also of interest in the context of the ongoing debates sparked by the proposed National Instrument 62-105 on Security Holder Rights Plans.… Continue Reading
There are important lessons in a recent Ontario Court of Appeal decision examining shotgun buy-sell provisions, and in particular, the enforceability of a buy-sell offer that does not perfectly comply with the terms and conditions of the shotgun provision.
Unanimous shareholder agreements, partnership agreements, and joint venture agreements often contain what is commonly known as a “shotgun buy-sell provision”, which provides a mechanism for involuntarily expelling one or more parties from the business venture when the business relationship between them sours.… Continue Reading
There are important lessons in a recent Ontario Superior Court decision examining defensive tactics taken by a board in the context of a contested shareholders’ meeting.
In Concept Capital Management Ltd. v. Oremex Silver Inc., 2013 ONSC 7820, the board of Oremex — during a contested election — postponed a shareholders’ meeting and issued shares to a third party, GRIT, in a financing transaction that closed in escrow on the same date as the revised record date for the meeting. Oremex took the view that the new shares could be voted at the contested meeting.