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Jeremy, there are a number of changes being considered by Canadian regulators
that would alter the balance between shareholders and boards. What can you
tell us about this?
First is a new rule on poison pills.
Traditionally, there had always come a time when a poison pill would be cease
traded or had to go.
The regulators are now proposing rules that say that they will actually not
intervene in shareholder rights plan or poison pill disputes
but rather give target companies the opportunity to keep the pill in place
indefinitely so long as shareholders vote to affirm the poison pill. So if you vote to
keep a pill in place in the face of a bid,
the pill can stand.
The change now will give target boards at least 90 days in which to respond to
a takeover bid. Effectively, Canadian shareholders will be asked if the
board wants to say "no" to a bid, to vote "yay" or "nay" on the poison pill and if
they vote to keep it in place,
the pill will stand. Whereas under the current law
regardless of what the shareholders would say or do on
any kind of vote, it was open to the regulators to see straight the pill,
and get rid of it within 40 to 70 days.
At the moment, shareholders only need to report their holdings in companies once
they go through a 10% threshold.
The U.S. rule is 5%.
That's the rule, that's the level that's going to be imposed in
Canada going forward and that's going to allow boards of directors to be in
a better position to gauge activist activity, to be informed of movements
in the stock, and to make tactical decisions and response.
So, Jeremy, obviously these are rules that are under consideration. How long could it take for
these new rules to be in place?
Well, the regulators have published these rules for comment for a 90 day period
but at any rate it'll probably be at least six months before we see these things
come into effect and possibly as much as a year.