Canadian Securities Regulators Propose Changes to the Issuer Bid, Take-Over Bid and Beneficial Ownership Reporting Regimes
The Canadian Securities Administrators (CSA) have published proposed changes (the proposals) to the issuer bid, take-over bid and beneficial ownership reporting regimes, which are open for comment until August 12, 2026. The proposals are intended to give issuers greater flexibility to repurchase their own securities; impose new disclosure requirements relating to ownership of derivative-based economic interests in specified circumstances; and amend the issuer bid, take-over bid, and early warning reporting regimes through clarifying amendments and supplemental policy guidance.
Overview of CSA Proposals
New selective repurchase exemption. The CSA propose a new exemption to allow an issuer to repurchase up to 5 percent of a class of its outstanding securities over a 12-month period by selective repurchase, subject to conditions including liquid-market and pricing requirements and timely disclosure. This would represent a significant change from the current issuer bid regime, which does not include a “private agreement” exemption comparable to the take-over bid private agreement exemption. The CSA indicate that purchases made under the new exemption should not reduce an issuer’s normal course issuer bid capacity, and they intend to engage with designated stock exchanges on any corresponding rule or guidance changes.
Enhanced disclosure of equity equivalent derivatives in take-over bids and proxy contests. The proposals would require enhanced disclosure of “equity equivalent derivatives” and other arrangements that alter economic exposure by bidders in take-over bids and by dissident shareholders soliciting proxies by way of a dissident proxy circular. Among other things: (i) bidders and dissidents would be required to disclose relevant derivative positions and economic exposure arrangements in their take-over bid circulars and proxy circulars; (ii) bidders would be required to issue a news release before the open of the next trading day if those positions or arrangements change during the bid, and (iii) both bidders and dissidents would need to disclose any past or present relationships with derivative counterparties that could be perceived by a “reasonable person” to influence the decision of that counterparty to acquire, dispose of or vote securities of the target issuer.
Early warning disclosure of plans or future intentions. The CSA propose guidance aimed at curbing boilerplate disclosure of an acquiror’s “plans or future intentions” in early warning reports (EWR). The guidance would require an acquiror to re-assess the accuracy of its EWR disclosure concerning its plans and intentions each time the requirement to file is triggered, and to update its disclosure when its plans or intentions change, including before entering into a definitive agreement and in circumstances where it has taken irrevocable or significant steps to effect a potential transaction or event.
Early warning triggers and thresholds. The proposals include various amendments and clarifications to the early warning system, including: (i) specifying that an EWR must be filed by a person who held 10 percent or more of the outstanding voting or equity securities of an issuer before and immediately after that issuer becomes a reporting issuer; (ii) to require an EWR upon the formation or cessation of a joint actor relationship where the group would in aggregate hold 10 percent or more of the target securities, even without a contemporaneous acquisition or disposition of securities; (iii) to clarify the trigger for subsequent reports under both the early warning system and alternative monthly reporting (AMR) system in various contexts, including following an issuer action and during the pendency of a non-exempt bid; (iv) to permit an eligible institutional investor not currently filing under the AMR system to enter or re-enter it; and (v) to clarify how early warning thresholds are to be calculated, including through illustrative guidance on EWR calculations involving convertible securities not exercisable within 60 days. Although the CSA’s guidance labels these proposals as “clarifying” changes, in some cases they arguably re-write the existing reporting rules and could, once in effect, require market participants to revisit their reporting practices.
Amending and codifying common discretionary exemptions. The CSA propose various amendments that relate to take-over and issuer bid exemptions, including to: (i) eliminate the 5 percent market purchase exemption that currently permits bidders to make limited market purchases during the pendency of a bid; (ii) expand the availability of exemptions for non-reporting issuers; (iii) allow issuers to extend “Dutch auction” issuer bids without first taking up securities; (iv) facilitate issuer bids that provide an option for securityholders to maintain their proportionate interest in the issuer; and (iv) allow issuers to repurchase or redeem convertible securities during an issuer bid.
Miscellaneous. The proposals include a few miscellaneous items, including: replacing three-business-day settlement requirements in take-over bids and issuer bids with a “promptly” standard tied to prevailing settlement practices, and providing policy guidance on bid conditions, mini-tenders, offshore repurchases and acting jointly or in concert in proxy contests.
Why It Matters
For issuers, the proposed selective repurchase exemption would create a new capital allocation tool for addressing large-block liquidity issues, provided the repurchase is structured within the proposed 5 percent limit and satisfies other conditions. For bidders and activists, the proposals would increase disclosure obligations around derivative-based economic exposure once a formal bid or proxy contest is underway, while preserving the current general approach that derivative exposure is not automatically aggregated for early warning threshold purposes. In addition, bidders and activists need to be mindful of the possibility of an early warning obligation arising on the formation or dissolution of a joint actor relationship, even absent a purchase or disposition of securities. For market participants generally, the proposals would codify recurring exemptive relief, clarify (or in some cases adjust) early warning calculations and reporting triggers, and provide additional policy guidance.
Davies intends to submit a comment letter concerning these proposals, and we invite interested parties to contact us to discuss any comments or questions they may have on the CSA proposals.
