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One of the most important considerations for M&A purchasers (especially in cross-border transactions) is managing tax issues. Foreign purchasers of Canadian entities will need to plan around significant changes to the Income Tax Act, which were enacted in 2012. It is advised that foreign purchasers work through these rules carefully whenever the Canadian target has interests in foreign entities.

General trends in the drafting of agreements relating to the acquisition of shares of public entities are expected to reflect the caution shown in 2012. Buyers will attempt to limit transaction risk, and both parties will try to bridge the gap between buyer and seller in determining future value. Adjustment provisions in both directions can be flexible in a private M&A context; however, in public M&A for shares, adjustment mechanisms are rare.

Historically, it has been challenging for target boards in Canada to defend against hostile bids. In 2012 that challenge appeared to grow somewhat, but new rules expected to be proposed by the Ontario Securities Commission in 2013 might ultimately provide target boards with new powers to defend against these bids.

Under a spin-out coupled with an M&A transaction, the acquirer purchases the shares of the target, but the assets which the acquirer does not want are contemporaneously spun out of the target into a new company, whose shares are distributed to the target shareholders. Spin-outs are expected to continue to be a feature of mergers and acquisitions in 2013 as a tool for bridging value gaps.

The industry minister recently approved the high-profile proposed acquisitions by China National Offshore Oil Corp of Nexen Inc and by Petroliam Nasional Bhd of Progress Energy Resources Corp. In both instances the minister found that the deals were of 'net benefit' to Canada. In connection with this approval, the government has released a policy statement and revised guidelines on proposed investments by state-owned enterprises.

The Ontario Securities Commission (OSC) recently issued a cease-trade order in connection with Thirdcoast Limited's shareholder rights plan, or poison pill. The plan was adopted in response to an all-cash bid made by Parrish & Heimbecker Limited. It is clear that the OSC has affirmed the fundamental policy that a rights plan will be permitted only as a temporary measure to enhance shareholder value.

A recent panel discussion on cross-border issues in mergers and acquisitions focused on the review of shareholder rights plans – also known as poison pills – in Canada and Delaware and the differing approaches taken by courts as compared with the securities regulators. This update provides highlights of the panellists' remarks.

In a recent case the Ontario Securities Commission clearly rejected the proposition that securities commissions should defer to the business judgement of a target board of directors in deciding whether to cease trade a shareholder rights plan (also known as a poison pill). This decision should clarify some of the confusion arising from other earlier commission decisions.

Industry Canada has announced that the Investment Canada Act threshold for the review of direct acquisitions of Canadian businesses by World Trade Organisation (WTO) investors is expected to increase to C$312 million for 2011. Indirect acquisitions by WTO investors are not reviewable. Lower thresholds for direct and indirect acquisitions remain in effect for investments in the cultural sector and by non-WTO investors.

The Canadian minister of industry recently surprised industry experts and legal advisers by announcing that the BHP Billiton bid to acquire Potash Corporation of Saskatchewan Inc failed to satisfy the 'net benefit to Canada' test under the Investment Canada Act, calling into question just how open to business Canada really is.

The British Columbia Securities Commission (BCSC) released reasons of the majority of the panel supporting its decision to cease trade the Lions Gate shareholder rights plan. The BCSC held that a shareholder rights plan will be tolerated only where it provides a target board with additional time to seek an improved or alternative transaction. A plan may not be used as a 'just say no' defence to a takeover bid.

The Ontario Securities Commission (OSC) has released a highly anticipated decision in which it cease traded the proposed transaction to collapse the Magna International dual class share structure. The OSC determined that the disclosure provided to Magna's shareholders was insufficient to permit the shareholders to make an informed decision as to how to vote on the transaction.

The British Columbia Securities Commission (BCSC) has issued summary reasons for its decision to cease trade the Lions Gate Entertainment Corp shareholder rights plan. It is clear that the BCSC has firmly endorsed the position that a shareholder rights plan, or 'poison pill', is a temporary measure that will be tolerated only for as long as it assists a board of directors to discharge its fiduciary duties.

The Canadian Securities Administrators recently published the final version of National Instrument 55-104, Insider Reporting Requirements and Exemptions. The new rule updates the Canadian insider reporting regime and provides for a number of significant changes, including acceleration of the deadline for filing insider reports and amendment of the insider reporting exemption for eligible institutional investors.

Proposed amendments to the Toronto Stock Exchange rules will require an investment fund listed on that exchange to seek security holder approval if it is being acquired or if it proposes to acquire another investment fund by issuing securities in payment of the purchase price for that fund in excess of a specified threshold. Exemptions from these requirements will be available provided that specified conditions are met.

The Toronto Stock Exchange recently announced that it will amend its rules to eliminate an important exemption from its security holder approval requirements that are generally applicable to acquisitions involving the issuance by a listed issuer of securities from treasury.

The Ontario Securities Commission recently released a decision dismissing an application by Pala Investments Holdings Limited and its subsidiary to cease trade two shareholder rights plans of Neo Material Technologies Inc. This decision potentially indicates a shift towards providing boards of directors with greater flexibility in resisting takeover attempts.

A substantial number of the deals originating prior to the current market turmoil have faced considerable challenges. Some have been renegotiated or terminated and a relatively large number have resulted in litigation, often involving scrutiny of the actions of boards and management. Against this backdrop, a number of recent illustrative developments merit particular consideration.

The Ontario Superior Court of Justice's recent decision in Certicom Corp v Research In Motion Limited has significant implications for M&A practice in Canada, particularly in hostile situations. In the wake of the Certicom decision, acquirers contemplating hostile transactions in Canada will have to review and consider carefully the terms of any non-disclosure agreements that they have entered into with the potential target.

The Supreme Court of Canada recently released reasons supporting its unanimous decision to overturn the controversial Quebec Court of Appeal decision and approve BCE's proposed plan of arrangement. The Supreme Court's reasons provide valuable clarification regarding the duties of directors and the thresholds for challenging a transaction under the oppression remedy or the statutory standard for approval of a plan of arrangement.

There have been a number of recent takeover bids in Canada where the bidder has varied the bid after commencement to reduce the price offered for the securities. This kind of variation is unusual in Canada and may raise a number of potential issues that bidders should consider. These issues are particularly relevant where the bid is not supported and may be actively resisted by the target.

After almost 12 months of consultations and research, Canada’s Competition Policy Review Panel has issued its report. Many substantive and procedural recommendations of the panel are, for the most part, positive contributions to necessary and long-overdue reforms. This update looks at the key M&A-related recommendations of the report.

Including: Market and Regulation; Pre-bid; Announcing and Making the Offer; Consideration; Post-bid; Target’s Response; Tax; Other Regulatory Restrictions; Reform.

New rules governing takeover bids in Canada recently came into force, creating a more harmonized and streamlined takeover bid regime. While there are some significant changes to the takeover bid rules, the new regime can more accurately be characterized as an update to, as opposed to a complete revision of, well-established takeover bid principles.

The Ontario Securities Commission recently released its decision in the AiT Advanced Information Technologies/Weinstein Case. This decision has been eagerly anticipated due to its potential impact on disclosure decisions required to be made by public corporations in Canada.

The Ontario Securities Commission recently published its latest 'poison pill' decision following a hearing challenging the continued operation of an issuer’s pre-existing shareholder rights plan in the face of an unsolicited public takeover bid made directly to the issuer’s shareholders.

In a regulatory environment which increasingly encourages greater disclosure by public companies, one judgement that is often difficult to make is when to disclose negotiations relating to a proposed M&A transaction. If there are discussions which could lead to the takeover of a public company, at some point an announcement must be made.

A recent decision by the Ontario Superior Court of Justice, affirmed by the Ontario Court of Appeal, in the context of a battle for control has in effect prevented investors from receiving a potential superior offer which resulted from the breach of a confidentiality and standstill agreement.

The Ontario Superior Court of Justice has declined to grant an order requiring that a shareholders' meeting be held before an amalgamation proceeded between Glamis Gold Ltd and Goldcorp Inc. The court ruled that the transaction was not a formal arrangement pursuant to Section 182 of the Ontario Business Corporations Act, and therefore did not require a shareholders' vote.

The spate of M&A transactions in 2006 has resulted in some important regulatory and court proceedings dealing with the Canadian M&A landscape. One such case is the insider takeover bid or tender offer by Sears Holdings Corporation for all the publicly held shares of its 53.8%-owned subsidiary, Sears Canada Inc.

The Canadian Securities Administrators recently published for comment a proposed national instrument and companion policy dealing with the harmonization of the statutory and regulatory requirements and restrictions governing takeover bids and issuer bids across Canada.

Effecting a private placement across Canada generally involves dealing with similar, but not identical, sets of exemptions in the various Canadian provinces and territories. However, the Canadian Securities Administrators have now finalized a national instrument creating a harmonized set of rules for private placements applicable to all Canadian jurisdictions.

The Ontario Superior Court of Justice (Commercial List) recently found that Ford US of Canada, Limited had oppressed its minority shareholders and ordered it to pay more than the C$185 per share Ford Canada had offered dissenting shareholders upon the squeeze-out of public minority shareholders in September 1995.

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