Part 17 Complusory and Compelled Acquisitions (clauses 97)

The provisions with respect to take-over bids would be repealed and the definitions amended to reflect this.

The compulsory acquisition section would be amended to include a new provision requiring that a corporation which offers to repurchase its own shares (i.e., an issuer bid) must hold the payment owing to dissenting offerees in trust and deposit the money in a separate account in a bank, within the same time period currently required with respect to other offerors (s. 206(7.1)). In addition, a provision is included which requires a dissenting offeree to elect to transfer their shares on the terms of the take-over bid or to demand fair payment (s. 206(5)(b)).

The amendments would include a new right of compelled acquisition enabling a minority shareholder of a distributing corporation to force the majority shareholder to purchase their shares in certain circumstances. (s. 206.1).

A number of consequential amendments required as a result of amendments to other parts of the Act are also included in this Part. In addition, several minor technical amendments, amendments to the French version and amendments designed to clarify and facilitate the efficient operation and administration of the statute, are also made.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 97
CBCA Section No. 194 to 205
Topic  Take-Over Bids

Sources of Proposed Law 

Changes From Present Law
Repeal s. 194 to 205, inclusive

Purpose of Change 
A takeover bid under the CBCA is an offer to purchase any class of shares of the corporation that, if combined with the shares already owned by the offeror, would be more than 10 per cent of the total outstanding shares of that class.

Offerors who want to make a take-over bid for a CBCA corporation now are subject to the CBCA's takeover bid provisions and to the applicable takeover bid requirements under provincial securities legislation. The CBCA provisions apply to all corporations whose shares are publicly traded or that have more than 15 shareholders.

The repeal of the CBCA's takeover bid provisions would eliminate duplication in an area that is regulated by the provinces.

Similar Provincial Laws 
N/A

Current Wording 
194. In this Part,

"exempt offer" means an offer

(a) to fewer than fifteen shareholders to purchase shares by way of separate agreements,

(b) to purchase shares through a stock exchange or in the over-the-counter market in such circumstances as may be prescribed,

(c) to purchase shares of a corporation that has fewer than fifteen shareholders, two or more joint holders being counted as one shareholder,

(d) exempted under section 204, or

(e) by a corporation to repurchase its own shares to be held under section 32;

"offer" includes an invitation to make an offer;

"offeree" means a person to whom a take-over bid is made;

"offeree corporation" means a corporation whose shares are the object of a take-over bid;

"offeror" means a person, other than an agent, who makes a take-over bid, and includes two or more persons who, directly or indirectly,

(a) make take-over bids jointly or in concert, or

(b) intend to exercise jointly or in concert voting rights attached to shares for which a take-over bid is made;

"share" means a share carrying voting rights under all circumstances or by reason of the occurrence of an event that has occurred and that is continuing, and includes

(a) a security currently convertible into such a share, and

(b) currently exercisable options and rights to acquire such a share or such a convertible security;

"take-over bid" means an offer, other than an exempt offer, made by an offeror to shareholders at approximately the same time to acquire shares that, if combined with shares already beneficially owned or controlled, directly or indirectly, by the offeror or an affiliate or associate of the offeror on the date of the take-over bid, would exceed ten per cent of any class of issued shares of an offeree corporation and includes every offer, other than an exempt offer, by an issuer to repurchase its own shares.

195. Where a take-over bid is for all the shares of any class,

(a) shares deposited pursuant to the take-over bid, if not taken up by the offeror, may be withdrawn by or on behalf of an offeree at any time after sixty days following the date of the take-over bid;

(b) the offeror shall not take up shares deposited pursuant thereto until ten days after the date of the take-over bid; and

(c) the offeror, if he so intends, shall state in the take-over bid circular that he intends to invoke the right under section 206 to acquire the shares of offerees who do not accept the take-over bid and that the offeree is entitled to dissent and to demand the fair value of his shares.

196. (1) Where a take-over bid is for less than all the shares of any class,

(a) the offeror shall not take up shares deposited pursuant thereto until twenty-one days after the date of the take-over bid;

(b) the period of time within which shares may be deposited pursuant to the take-over bid or any extension thereof shall not exceed thirty-five days from the date of the take-over bid; and

(c) if a greater number of shares is deposited pursuant to the take-over bid than the offeror is bound or willing to take up and pay for, the shares taken up by the offeror shall be taken up rateably, disregarding fractions, according to the number of shares deposited by each offeree.

(2) Where a take-over bid for all the shares of any class is converted by amendment or otherwise to a bid for less than all the shares of a class, the take-over bid is deemed to be a take-over bid to which subsection (1) applies.

197. Whether a take-over bid is for all or less than all the shares of any class,

(a) shares deposited pursuant to the take-over bid may be withdrawn by or on behalf of an offeree at any time within ten days after the date of the take-over bid;

(b) shares deposited pursuant to the take-over bid shall, if the terms stipulated by the offeror and not subsequently waived by him have been complied with, be taken up and paid for within fourteen days after the last day within which shares may be deposited pursuant to the take-over bid;

(c) the period of time within which shares may be deposited pursuant to a take-over bid shall not be less than twenty-one days after the date of the take-over bid;

(d) if the terms of the take-over bid are amended by increasing the consideration offered for the shares, the offeror shall pay the increased consideration to each offeree whose shares are taken up pursuant to the take-over bid whether or not such shares have been taken up by the offeror before the amendment of the take-over bid;

(e) if the offeror intends to purchase shares to which the take-over bid relates in the market during the period of time within which shares may be deposited pursuant to the take-over bid, the offeror shall so state in the take-over bid circular; and

(f) if the offeror purchases shares to which a take-over bid relates other than pursuant to the take-over bid during the period of time within which shares may be deposited pursuant to the take-over bid,

(i) the payment other than pursuant to the take-over bid of an amount for a share that is greater than the amount offered in the take-over bid is deemed to be an amendment of the take-over bid to which paragraph (d) applies,

(ii) the offeror shall immediately notify the offerees of the increased consideration being offered for the shares,

(iii) the shares acquired other than pursuant to the take-over bid shall be counted to determine whether a condition as to minimum acceptance has been fulfilled, and

(iv) the shares acquired other than pursuant to the take-over bid shall not be counted among the shares taken up rateably under paragraph 196(1)(c).

198. (1) A take-over bid, including a copy of the take-over bid circular in prescribed form and any amendment of the take-over bid, shall be sent concurrently to each director of the offeree corporation, to each shareholder of the offeree corporation resident in Canada and to the Director.

(2) A take-over bid is deemed to be dated as of the date on which it is sent.

(3) For the purposes of this section and section 201, a shareholder of an offeree corporation is deemed to be resident in Canada if his latest address as shown in the securities register of the offeree corporation is an address within Canada.

199. Where a take-over bid states that the consideration for the shares deposited pursuant thereto is to be paid in money or partly in money, the offeror shall make adequate arrangements to ensure that funds are available to make the required money payment for such shares.

200. Where a take-over bid states that the consideration for the shares of the offeree corporation is to be, in whole or in part, securities of the offeror or any other body corporate, the take-over bid circular shall be in prescribed form.

201. (1) The directors of an offeree corporation shall send a directors' circular in prescribed form to each director of the offeree corporation, to each shareholder of the offeree corporation resident in Canada, to the offeror and to the Director.

(2) Unless the directors of an offeree corporation send a directors' circular under subsection (1) within ten days of the date of the take-over bid, the directors shall forthwith notify the offerees and the Director that a directors' circular will be sent and may recommend that the offerees do not tender their shares pursuant to the take-over bid until they receive the directors' circular.

(3) The notice required by subsection (2) shall be in prescribed form.

(4) The directors shall send the directors' circular required by subsection (1) to each offeree and to the Director at least seven days before the date the take-over bid terminates or before the sixtieth day of the take-over bid, whichever is earlier.

(5) Where a director of an offeree corporation is of the opinion that a take-over bid is not advantageous to the shareholders of the offeree corporation or where a director disagrees with any statement in a directors' circular, he is entitled to indicate his opinion or disagreement in the directors' circular required by subsection (1) and, if he indicates his opinion or disagreement, he shall include in that circular a statement setting out the reasons for his opinion or disagreement.

202. (1) A report, opinion or statement of a solicitor, auditor, accountant, engineer, appraiser or other person whose profession lends credibility to a statement made by him shall not be included in a take-over bid circular or a directors' circular unless that person has consented in writing to the use of the report, opinion or statement.

(2) On the demand of the Director, a person referred to in subsection (1) shall forthwith send to the Director a copy of any report, opinion or statement referred to in that subsection that is made by that person together with a copy of his consent.

203. (1) When a take-over bid is made by or on behalf of a body corporate, the directors of the body corporate shall approve the take-over bid and the take-over bid circular, and the approval shall be evidenced on the circular by the signature of one or more directors.

(2) The directors of an offeree corporation shall approve a directors' circular that contains the recommendations of a majority of the directors, and the approval shall be evidenced by the signature of one or more directors.

204. (1) Any interested person may apply to a court having jurisdiction in the place where the offeree corporation has its registered office for an order exempting a take-over bid from any of the provisions of this Part, and the court may, if it is satisfied that an exemption would not unfairly prejudice a shareholder of the offeree corporation, make an exemption order on such terms as it thinks fit, which order may have retrospective effect.

(2) An applicant under subsection (1) shall give the Director notice of the hearing of an application under that subsection, and the Director is entitled to appear and be heard in person or by counsel.

(3) The Director shall set out in the periodical referred to in section 129 the particulars of exemptions granted under this section.

205. (1) An offeror who, without reasonable cause, fails to comply with this Part or the regulations is guilty of an offence and liable on summary conviction to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding six months or to both.

(2) Where an offeror who is a body corporate commits an offence under subsection (1), any director or officer of the body corporate who knowingly authorized, permitted or acquiesced in the commission of the offence is a party to and guilty of the offence and is liable on summary conviction to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding six months or to both, whether or not the body corporate has been prosecuted or convicted.

(3) Where in connection with a take-over bid a person does not comply with this Act or the regulations, the Director or any interested person may apply to a court and on such application the court may make any order it thinks fit, including, without limiting the generality of the foregoing,

(a) an order restraining the distribution of a take-over bid circular, a directors' circular or other document used in connection with the take-over bid;

(b) an order, if the take-over bid is to continue, requiring correction of the take-over bid circular, directors' circular or other document and distribution of the corrected document to each offeree;

(c) an order varying the dates and times referred to in sections 195 to 197;

(d) an order requiring any person to comply with this Act or the regulations;

(e) an order compensating an aggrieved person;

(f) an order rescinding a transaction;

(g) an order requiring an offeror to dispose of shares acquired pursuant to the take-over bid; and

(h) an order prohibiting an offeror from voting shares acquired pursuant to a take-over bid.

(4) For the purposes of subsection (3), "interested person" includes

(a) an offeree whether or not he deposits shares pursuant to a take-over bid;

(b) an offeree corporation;

(c) an offeror; and

(d) a rival offeror.

Proposed Wording 
N/A