CANADA Law and Practice Contributed by: Sarah Gingrich, Sean Stevens, Marie-Josée Neveu and Tracy Hooey, Fasken
duct that can give rise to oppression includes actions contrary to the company’s governing documents, actions contrary to the directors’ fiduciary duties, and/or actions that disregard or undermine the claimant’s legal rights or inter - ests. Unlike a derivative action, a shareholder need not first seek court approval to bring an oppression claim with the result that an oppres - sion claim (or the threat of an oppression claim) is often the first recourse of a disaffected share - holder in Canada. 5.5 Disclosure by Shareholders in Publicly Traded Companies Disclosure obligations can arise for shareholders in Canadian public companies in several differ - ent circumstances. Canadian securities laws generally require that “insiders” of Canadian public companies file reports disclosing information regarding trans - actions involving the company’s securities. The term “insider” is broadly defined and includes persons who have significant influence over the company and/or routine access to mate - rial undisclosed company information. This also includes the company’s officers and directors (as well as those of the company’s subsidiaries) and the company itself where it has purchased, redeemed or otherwise acquired some of its own securities and significant shareholders (ie, 10% shareholders). Insider reports must dis - close, among other things, (i) the insider’s direct or indirect beneficial ownership of, or control or direction over, company securities, and (ii) any change to the foregoing. Separate and supple - mentary insider reporting requirements exist for derivatives. Various exemptions from Canadian insider reporting requirements are available depending on the circumstances.
Should a shareholder acquire a 10% or more interest in a Canadian public company, the early warning reporting (EWR) system under Canadian securities laws is triggered. This requires that the shareholder (i) issue a news release before the opening of trading on the next business day, (ii) file an early warning report within two days of the 10% threshold being crossed, and (iii) not acquire additional shares from the time the reporting requirement is triggered until at least one business day after the early warning report is filed. Prescribed information for disclosure includes the amount of the shareholding and the shareholder’s investment intent. Additional news releases and early warning reports are required thereafter (i) each time the shareholder increases or decreases its shareholding by 2% or more, (ii) for every change in material informa - tion contained in a previously filed report, and (iii) should the shareholder’s ownership percent - age fall below the 10% threshold. The reporting threshold under the EWR system drops from 10% to 5% if the public company becomes the target of a takeover bid. The Investment Canada Act (Canada) and Com - petition Act (Canada) have thresholds for the acquisition of shares (33.33% and 20% respec - tively) of a Canadian public company that could trigger considerations under these statutes. Finally, any acquisition of shares in a Canadian public company by a shareholder that, together with the shareholder’s current interest (if any), would bring the shareholder’s interest to 20% or more must comply with Canada’s takeover bid regime.
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