AMF Publishes Consultation Paper On Alternative Approach To Securities Regulators’ Intervention In Defensive Tactics

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Further to an earlier post, the Autorité des marchés financiers (“AMF”) has published a consultation paper (the “AMF Proposal”) inviting comments on an alternative approach to that contemplated by the Canadian Securities Administrators’ Proposed National Instrument 62-105 – Securities Holder Rights Plans.

The AMF states that the aim of the AMF Proposal is to restore the regulatory balance between bidders and target boards and update the policy framework of the current take-over bid regime to reflect the current legal and economic environment and market practices respecting unsolicited take-over bids.

The AMF Proposal introduces two significant changes to the current take-over bid regime that would:

1. replace National Policy 62-202 with a new policy on defensive tactics that would clearly recognize the fiduciary duty of directors to the corporation in responding to an unsolicited take-over bid and would redefine securities regulators’ intervention on the ground of public interest; and

2. require, as an irrevocable condition of any bid for all securities of a class, and for any partial bids, that more than 50% of the outstanding securities of the class held by persons other than the offeror and those acting in concert with it, be tendered and not withdrawn on the date the bid would otherwise expire.

The AMF believes that the implementation of these changes would have the following effects:

  • it would give directors more latitude to exercise their fiduciary duty and consider all alternatives to maximize security holder value, without securities regulators’ intervention;
  • it would create a revised framework for the regulation of all defensive tactics, not only rights plans;
  • it would mitigate the coercion effects of the current take-over bid regime for all bids and not just those subject to rights plans;
  • it would provide a direct regulatory solution to some gaps in the current take-over bid regime;
  • it could minimize the ability of arbitrageurs to exert influence on the sale of take-over targets ; and
  • it could encourage bidders to negotiate with boards and, as a result, possibly maximize security holder value.

The AMF Proposal can be found by clicking here.