Part 17 Complusory and Compelled Acquisitions (clauses 98-100)

The provisions with respect to take-over bids would be repealed and the definitions amended to reflect this.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. 98 & 99
CBCA Section No. 206(1)
Topic Compulsory and Compelled Acquisitions

Sources of Proposed Law 

Changes From Present Law 
Keeps and redefines appropriate definitions in s. 194 and subs. 206(1) as follows:

Adds a new heading before s. 206.

(B) redefines take-over bids in s. 206 to include any offer to acquire all the shares of any class of shares;

(B) redefines the term "share" to include voting and non-voting shares; and

(C) moves the following definitions now found in s. 194: "offer", "offeree", "offeree corporation" and "offeror" into subs. 206(1).

Purpose of Change 
If sections 194 to 205, which regulate take-over bids are repealed, several definitions in s. 194, which are necessary for the proper interpretation of s. 206, need to be transferred to s. 206(1). In addition, the definitions of share and take-over bid need to be modified to reflect that the CBCA no longer regulates take-over bids. Therefore, any bid for all the shares of a class, whether or not the shares are voting, could be followed up by a compulsory acquisition (where the bid is accepted by the holders of 90% or more of the relevant class of shares, excluding shares held by the offeror or related party). These definitions are now found in the compulsory acquisition sections of other corporate laws.

The definition of "offeree corporation" would be amended to clarify that the compulsory acquisition provisions are only applicable to distributing corporations.

Similar Provincial Laws
Business Corporations Act (Saskatchewan)

Current Wording 
194. In this Part,

…

"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,

"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;

206. (1)"take-over bid" includes

(a) an offer to purchase shares of a class of shares to which no voting rights are attached if the offer complies with sections 195 to 203, and

(b) an offer to purchase shares, including shares to which no voting rights are attached, of a corporation having fewer than fifteen shareholders if the offer is made to all shareholders in the prescribed form and manner.

Proposed Wording 
Part XVII

Compulsory and Compelled Acquisitions

206. (1) The definitions in this subsection apply in this Part.

"take-over bid" means an offer made by an offeror to shareholders of a distributing corporation at approximately the same time to acquire all of the shares of a class of issued shares, and includes an offer made by a distributing corporation to repurchase all of the shares of a class of its shares.

"offer" includes an invitation to make an offer.

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

"offeree corporation" means a distributing 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, with or without voting rights, 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.

Bill Clause No. 99(4)
CBCA Section No. 206(3)(a)
Topic  Compulsory and Compelled Acquisitions

Sources of Proposed Law

Changes From Present Law 
Replaces the word "more" with the words "not less" in par. 206(3)(a).

Purpose of Change 
Subsection 206(2) indicates that a compulsory acquisition may occur where "not less than ninety percent of the shares of any class of shares to which the take-over bid relates, …" are tendered to the offer. Subsection 206(3) indicates that an offeror may send a notice to dissenting offerees and the (CBCA) Director advising, among other things, that ",… the offerees holding more than ninety percent of the shares, to which the bid relates, …" The language appears to be inconsistent as subsection (2) which refers to a threshold of 90% or more whereas subsection (3) refers to a threshold of more than 90%.

This clarification would amend what appears to be inadvertence in statutory drafting.

Moreover, s. 206(2) is the substantive subsection whereas subsection 206(3) is procedural. Deference should therefore be paid to subsection (2).

Similar Provincial Laws 
N/A

Current Wording 
206. (3) An offeror may acquire shares held by a dissenting offeree by sending by registered mail within sixty days after the date of termination of the take-over bid and in any event within one hundred and eighty days after the date of the take-over bid, an offeror's notice to each dissenting offeree and to the Director stating that

(a) the offerees holding more than ninety per cent of the shares to which the bid relates accepted the take-over bid;

Proposed Wording 
206. (3)(a) the offerees holding not less than ninety per cent of the shares to which the bid relates accepted the take-over bid;

Bill Clause No. 99(5), (6) and (10)
CBCA Section No. 206(3)(d), (5), new (5.1), (6), (9), (13) and (14)(a)
Topic  Compulsory and Compelled Acquisitions

Sources of Proposed Law 

Changes From Present Law
(A) Amends s. 206(5) to provide that the dissenting offeree:

(1) is required to elect to transfer shares on terms of the take-over bid or to demand fair payment (repeating same language now found in s. 206(3)(c) concerning offeror's notice); and

(2) is deemed to have elected to transfer shares on the terms of the take-over bid if he/she does not give the required notice in s. 206(5) that he/she wishes to demand fair value (repeating same language now found in s. 206(3)(d) concerning offeror's notice).

(B) Amends s. 206(3)(d), 206(6), 206(9), and 206(14)(a) to reflect the revision of subsection 206(5). S. 206(13) of the French version is amended to effect a grammatical change.

Purpose of Change 
(1) Currently, the obligation on the dissenting offeree to elect to transfer shares on terms of take-over bid or to demand fair payment is only inferred in the notice requirement set out in s. 206(3). Under that provision, the offeror is required to send to dissenting offerees a notice that they must make the election. However, there is no actual requirement for the dissenting offeree to make the election. S. 206(5) now requires the dissenting offeree to forward shares to the corporation and this seems like the logical place to add in the requirement to make the election.

This change would clarify the section.

(2) The section does not expressly set out the consequences for the dissenting offeree not having chosen between the take-over bid price and demanding fair value. Rather, the effect of paragraphs 206(3)c) and (d) is that if the dissenting offeree does not demand payment of the fair value, the dissenting offeree is deemed to have elected to transfer his shares at the take-over bid price. However, since subsection 206(3) deals only with the notice that must be given, it is not clear that dissenting offerees would be aware that this subsection has implications for their rights. By clearly outlining the effects for dissenting offerees of not making an election, this change clarifies this section.

(B) The revisions to s. 206(3)(d), 206(9) and 206(14)(a) are consequential amendments.

Similar Provincial Laws 
N/A

Current Wording 
206. (3)(c) a dissenting offeree is required to elect

(i) to transfer his shares to the offeror on the terms on which the offeror acquired the shares of the offerees who accepted the take-over bid, or

(ii) to demand payment of the fair value of his shares in accordance with subsections (9) to (18) by notifying the offeror within twenty days after he receives the offeror's notice;

(3)(d) a dissenting offeree who does not notify the offeror in accordance with subparagraph (c)(ii) is deemed to have elected to transfer his shares to the offeror on the same terms that the offeror acquired the shares from the offerees who accepted the take-over bid; and

(5) A dissenting offeree to whom an offeror's notice is sent under subsection (3) shall, within twenty days after he receives that notice, send his share certificates of the class of shares to which the take-over bid relates to the offeree corporation.

(6) Within twenty days after the offeror sends an offeror's notice under subsection (3), the offeror shall pay or transfer to the offeree corporation the amount of money or other consideration that the offeror would have had to pay or transfer to a dissenting offeree if the dissenting offeree had elected to accept the take-over bid under subparagraph (3)(c)(i).

(9) If a dissenting offeree has elected to demand payment of the fair value of his shares under subparagraph (3)(c)(ii), the offeror may, within twenty days after it has paid the money or transferred the other consideration under subsection (6), apply to a court to fix the fair value of the shares of that dissenting offeree.

(13) Dans le cadre d'une demande visée aux paragraphes (9) ou (10), les pollicités dissidents ne sont pas tenus de fournir caution pour les frais.

(14) On an application under subsection (9) or (10)

(a) all dissenting offerees referred to in subparagraph (3)(c)(ii) whose shares have not been acquired by the offeror shall be joined as parties and are bound by the decision of the court; and

(b) the offeror shall notify each affected dissenting offeree of the date, place and consequences of the application and of his right to appear and be heard in person or by counsel.

Proposed Wording 
206. (3) (d) a dissenting offeree who does not notify the offeror in accordance with subparagraph (5)(b)(ii) is deemed to have elected to transfer the shares to the offeror on the same terms that the offeror acquired the shares from the offerees who accepted the take-over bid; and

(5) A dissenting offeree to whom an offeror's notice is sent under subsection (3) shall, within twenty days after receiving the notice,

(a) send the share certificates of the class of shares to which the take-over bid relates to the offeree corporation; and

(b) elect

(i) to transfer the shares to the offeror on the terms on which the offeror acquired the shares of the offerees who accepted the take-over bid, or

(ii) to demand payment of the fair value of the shares in accordance with subsections (9) to (18) by notifying the offeror within those twenty days.

(5.1) A dissenting offeree who does not notify the offeror in accordance with subparagraph

(5)(b)(ii) is deemed to have elected to transfer the shares to the offeror on the same terms on which the offeror acquired the shares from the offerees who accepted the take-over bid.

(6) Within twenty days after the offeror sends an offeror's notice under subsection (3), the offeror shall pay or transfer to the offeree corporation the amount of money or other consideration that the offeror would have had to pay or transfer to a dissenting offeree if the dissenting offeree had elected to accept the take-over bid under subparagraph (5)(b)(i).

(9) If a dissenting offeree has elected to demand payment of the fair value of the shares under subparagraph (5)(b)(ii), the offeror may, within twenty days after it has paid the money or transferred the other consideration under subsection (6), apply to a court to fix the fair value of the shares of that dissenting offeree.

(13) Dans le cadre d'une demande visée aux paragraphes (9) ou (10), les pollicités dissidents ne sont pas tenus de fournir de cautionnement pour les frais.

(14)(a) all dissenting offerees referred to in subparagraph (5)(b)(ii) whose shares have not been acquired by the offeror shall be joined as parties and are bound by the decision of the court; and

Bill Clause No. 99(7) and (11)
CBCA Section No. new 206(7.1) and 206(18)(a)
Topic  Compulsory and Compelled Acquisitions

Sources of Proposed Law

Changes From Present Law 
(A) Amend s. 206 by adding a new provision dealing with issuer bids and payments in trust. In particular, require a corporation that offers to repurchase its own shares to hold the payment owing to dissenting offerees in trust, and to deposit the money in a separate account in a bank, within twenty days after a notice is sent under subs. 206(3).

(B) Amends s. 206(18)(a) to reflect the addition of subs. 7.1.

Purpose of Change 
While the definition of "take over bid" in s. 194 expressly includes an issuer bid, it is not clear that the rules in s. 206(7) concerning holding money in trust and paying it into a separate bank account also apply to the case where the offeror is the offeree corporation (the intention of s. 206 is to apply to both situations).

As a matter of fairness and protection for dissenting shareholders, a corporation making an issuer bid should not be entitled to cancel shares under s. 206(8) until the consideration has been put aside and protected.

This change would clarify the section and ensure that dissenting shareholders are protected. It would also further harmonize the CBCA with the Ontario Business Corporations Act.

Similar Provincial Laws 
Business Corporations Act (Ontario)

Current Wording 
206. (18) In connection with proceedings under this section, a court may make any order it thinks fit and, without limiting the generality of the foregoing, it may

(a) fix the amount of money or other consideration that is required to be held in trust under subsection (7);

Proposed Wording 
206. (7.1) A corporation that is an offeror making a take-over bid to repurchase all of the shares of a class of its shares is deemed to hold in trust for the dissenting shareholders the money and other consideration that it would have had to pay or transfer to a dissenting offeree if the dissenting offeree had elected to accept the take-over bid under subparagraph (5)(b)(i), and the corporation shall, within twenty days after a notice is sent under subsection (3), deposit the money in a separate account in a bank or other body corporate any of whose deposits are insured by the Canada Deposit Insurance Corporation or guaranteed by the Quebec Deposit Insurance Board, and shall place the other consideration in the custody of a bank or such other body corporate.

(18)(a) fix the amount of money or other consideration that is required to be held in trust under subsection (7) or (7.1);

Bill Clause No. 99(8)
CBCA Section No. 206(8)
Topic  Compulsory and Compelled Acquisitions

Sources of Proposed Law 

Changes From Present Law 
Amends s. 206(8) to make the issuance of a share certificate by the offeree corporation expressly conditional on the offeror complying with the payment obligation set out in s. 206(6).

Purpose of Change 
This change would clarify that a share certificate cannot be issued until payment has been made in accordance with s. 206(6).

Similar Provincial Laws 
N/A

Current Wording 
206. (8) Within thirty days after the offeror sends an offeror's notice under subsection (3), the offeree corporation shall

(a) issue to the offeror a share certificate in respect of the shares that were held by dissenting offerees;

(b) give to each dissenting offeree who elects to accept the take-over bid terms under subparagraph (3)(c)(i) and who sends his share certificates as required under subsection (5) the money or other consideration to which he is entitled, disregarding fractional shares, which may be paid for in money; and

(c) send to each dissenting shareholder who has not sent his share certificates as required under subsection (5) a notice stating that

(i) his shares have been cancelled,

(ii) the offeree corporation or some designated person holds in trust for him the money or other consideration to which he is entitled as payment for or in exchange for his shares, and

(iii) the offeree corporation will, subject to subsections (9) to (18), send that money or other consideration to him forthwith after receiving his shares.

Proposed Wording 
206. (8) Within thirty days after the offeror sends a notice under subsection (3), the offeree corporation shall

(a) if the payment or transfer required by subsection (6) is made, issue to the offeror a share certificate in respect of the shares that were held by dissenting offerees;

(b) give to each dissenting offeree who elects to accept the take-over bid terms under subparagraph (5)(b)(i) and who sends share certificates as required by paragraph (5)(a) the money or other consideration to which the offeree is entitled, disregarding fractional shares, which may be paid for in money; and(c) if the payment or transfer required by subsection (6) is made and the money or other consideration is deposited as required by subsection (7) or (7.1), send to each dissenting shareholder who has not sent share certificates as required by paragraph (5)(a) a notice stating that

(i) the dissenting shareholder's shares have been cancelled,

(ii) the offeree corporation or some designated person holds in trust for the dissenting shareholder the money or other consideration to which that shareholder is entitled as payment for or in exchange for the shares, and

(iii) the offeree corporation will, subject to subsections (9) to (18), send that money or other consideration to that shareholder without delay after

Bill Clause No. 100
CBCA Section No. new 206.1
Topic  Compulsory and Compelled Acquisitions

Sources of Proposed Law 

Changes From Present Law 
Provides for a limited compelled acquisition right applicable to shareholders of distributing corporations, giving such shareholders the right to compel the acquisition of their shares from the offeror, where a take-over bid has been accepted by 90% of shares or shares of a class, other than those held by the offeror, on the same terms under which the offeror acquired the shares of those who accepted the take-over bid.

Purpose of Change 
The purpose of this change is to balance the rights of minority shareholders with the rights of the offeror. It is also structured to place the financial costs of a takeover bid on the offeror rather than the corporation.

By setting the exit price at the take-over bid price accepted by 90% of shares held by third parties, the exit mechanism is both fair for a shareholder that wants out of the corporation (and provides equal treatment) and the offeror who may have to pay that amount to a large number of shareholders.

This provision was amended at the Senate Committee stage to clarify the time period within which shareholders, who wish to exercise their right to compel the acquisition of their shares by the offeror following a take-over bid, must require the offeror to acquire those shares.

Similar Provincial Laws 
Business Corporations Act (Ontario)

Current Wording 
N/A

Proposed Wording 
206.1 (1) If a shareholder holding shares of a distributing corporation does not receive an offeror's notice under subsection 206(3), the shareholder may

(a) within ninety days after the date of termination of the take-over bid, or

(b) if the shareholder did not receive an offer pursuant to the take-over bid, within ninety days after the later of

(i) the date of termination of the take-over bid, and

(ii) the date on which the shareholder learned of the take-over bid,

require the offeror to acquire those shares.

(2) If a shareholder requires the offeror to acquire shares under subsection (1), the offeror shall acquire the shares on the same terms under which the offeror acquired or will acquire the shares of the offerees who accepted the take-over bid.