CANADA Law and Practice Contributed by: Kevin West, Andrea Hill, Priya Ratti and Gabriel Potkidis, SkyLaw
Compulsory Acquisition Under corporate law, if a bidder obtains 90% of the outstanding shares subject to the bid within 120 days of the commencement of the bid, it can acquire all of the shares that remain outstanding for the same price as was offered under the bid. This compulsory acqui - sition procedure does not require a shareholder vote. Shareholders that did not tender to the bid are pro - vided with dissent rights that allow them to apply to a court to fix the fair value of their shares. 6.11 Irrevocable Commitments Before launching a bid, it is common for the bidder to enter into lock-up agreements with major target shareholders whereby the shareholders agree that they will tender to the bid. A “soft” lock-up allows a shareholder the right to withdraw and accept a higher offer, while a “hard” or irrevocable lock-up does not. Hard lock-ups are less common and are generally time-limited. 7. Disclosure 7.1 Making a Bid Public A takeover bid in Canada is launched by: • mailing the bid materials to the target shareholders directly; or • placing an advertisement in at least one daily newspaper in each applicable province in Canada and, concurrently with or prior to that publication, filing the bid documents and delivering them to the target. The advertisement method is typically used in hostile bids when the acquiror does not have access to the shareholder lists to complete the mailing itself and does not want to request the list in advance for fear of tipping off the target. Once the advertisement is placed, the acquiror must request the shareholder list from the target and mail the circular to target share - holders. In the context of an amalgamation, arrangement or other business combination, public companies in Canada are required to disclose material changes,
which may include the decision to implement these kinds of transactions at the board level or by senior management if they believe board approval is prob - able. 7.2 Type of Disclosure Required If the consideration for a bid is to be shares or partly shares, the bidder must provide prospectus-level dis - closure. The target must publicly file a directors’ circular, pre - pared by its board, which includes the board’s recom - mendations regarding the bid and other information. 7.3 Producing Financial Statements An acquiror providing share consideration must pro - vide its audited financial statements for the past three years, interim financial statements if available, and pro forma financial statements that give effect to the acquisition. The financials must include a statement of the finan - cial position of the issuer as at the beginning of the earliest comparative period for which financial state - ments that are included comply with the International Financial Reporting Standards (IFRS) in certain cases. If the statements are the first IFRS financial state - ments prepared by the issuer, the issuer must include the opening IFRS statement of financial position at the date of transition to the IFRS. The pro forma financial statements must be those that would be required in a prospectus, assuming that the likelihood of the acquisition is high and that the acqui - sition is a significant acquisition for the acquiror. If the acquiror is a reporting issuer, it may incorporate by reference its existing continuous disclosure. Securities laws in Canada require that annual and quarterly financial statements of reporting issuers be prepared in accordance with Canadian generally accepted accounting principles (GAAP) applicable to publicly accountable enterprises and disclose, in the case of annual financial statements, an unreserved statement of compliance with the IFRS. GAAP, in the context of Canadian securities regulation, must be
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