CHAMBERS GUIDE: Canada Corporate M&A Law and Trends 2023

CHAMBERS GLOBAL PRACTICE GUIDES
Corporate M&A
2023
Definitive global law guides offering
comparative analysis from top-ranked
lawyers
Canada: Law & Practice
and
Canada: Trends & Developments
Kevin West, Andrea Hill,
Priya Ratti and
Diana Nicholls Mutter
SkyLaw

CANADA
2 CHAMBERS.COM
Law and Practice
Contributed by:
Kevin West, Andrea Hill, Priya Ratti and Diana Nicholls Mutter
SkyLaw
Canada
Ottawa
USA
Greenland
Contents
1. Trends p.5
1.1 M&A Market p.5
1.2 Key Trends p.5
1.3 Key Industries p.7
2. Overview of Regulatory Field p.8
2.1 Acquiring a Company p.8
2.2 Primary Regulators p.8
2.3 Restrictions on Foreign Investments p.9
2.4 Antitrust Regulations p.10
2.5 Labour Law Regulations p.10
2.6 National Security Review p.11
3. Recent Legal Developments p.11
3.1 Significant Court Decisions or Legal
Developments p.11
3.2 Significant Changes to Takeover Law p.12
4. Stakebuilding p.13
4.1 Principal Stakebuilding Strategies p.13
4.2 Material Shareholding Disclosure Threshold p.13
4.3 Hurdles to Stakebuilding p.14
4.4 Dealings in Derivatives p.15
4.5 Filing/Reporting Obligations p.15
4.6 Transparency p.15
5. Negotiation Phase p.15
5.1 Requirement to Disclose a Deal p.15
5.2 Market Practice on Timing p.15
5.3 Scope of Due Diligence p.15
5.4 Standstills or Exclusivity p.16
5.5 Definitive Agreements p.16
6. Structuring p.17
6.1 Length of Process for Acquisition/Sale p.17
6.2 Mandatory Offer Threshold p.17
6.3 Consideration p.17
6.4 Common Conditions for a Takeover Offer p.18
6.5 Minimum Acceptance Conditions p.18
6.6 Requirement to Obtain Financing p.19
6.7 Types of Deal Security Measures p.19
6.8 Additional Governance Rights p.20
6.9 Voting by Proxy p.20
6.10 Squeeze-Out Mechanisms p.20
6.11 Irrevocable Commitments p.21
7. Disclosure p.21
7.1 Making a Bid Public p.21
7.2 Type of Disclosure Required p.21
7.3 Producing Financial Statements p.21
7.4 Transaction Documents p.22
8. Duties of Directors p.22
8.1 Principal Directors’ Duties p.22
8.2 Special or Ad Hoc Committees p.23
8.3 Business Judgement Rule p.23
8.4 Independent Outside Advice p.23
8.5 Conflicts of Interest p.23
9. Defensive Measures p.24
9.1 Hostile Tender Offers p.24
9.2 Directors’ Use of Defensive Measures p.24
9.3 Common Defensive Measures p.24
9.4 Directors’ Duties p.25
9.5 Directors’ Ability to “Just Say No” p.25
10. Litigation p.25
10.1 Frequency of Litigation p.25
10.2 Stage of Deal p.25
10.3 “Broken-Deal” Disputes p.26
11. Activism p.26
11.1 Shareholder Activism p.26
11.2 Aims of Activists p.26
11.3 Interference With Completion p.26

CANADA Law and Practice
Contributed by: Kevin West, Andrea Hill, Priya Ratti and Diana Nicholls Mutter, SkyLaw
3 CHAMBERS.COM
SkyLaw is a premier corporate and securities
firm in Canada. The SkyLaw team has an un-
paralleled practice in international M&A, gov-
ernance and corporate finance. SkyLaw law-
yers have worked at top-tier global law firms in
Toronto, New York, London, Sydney and Dubai,
providing the firm with a unique reach into major
global financial centres. The firm excels in major
acquisitions, bespoke equity and debt invest-
ments, joint ventures and reorganisations. The
majority of SkyLaw’s M&A work involves acqui-
rors based in the USA, the Middle East, Aus-
tralia, China, Europe and elsewhere around the
world. Recent engagements include high-pro-
file private equity investments and strategic ac-
quisitions by Fortune 500 companies. The firm
has once again been voted as one of Canada’s
Top 10 corporate law boutiques.
Authors
Kevin West is a senior corporate
and securities lawyer with 25
years of experience. Kevin has
led countless corporate
transactions, including mergers
and acquisitions, financings and
joint ventures. He also has significant
experience advising companies on corporate
governance, disclosure and compliance
issues. Prior to launching SkyLaw in 2010,
Kevin was a partner at Davies Ward Phillips &
Vineberg LLP, where he represented a number
of foreign companies making acquisitions in
Canada. Before joining Davies, he practised
with Sullivan & Cromwell LLP in New York and
Sydney, Australia, and clerked for Justice Ian
Binnie at the Supreme Court of Canada.
Andrea Hill is a corporate and
securities lawyer with a decade
of experience in a broad
corporate practice. Her areas of
expertise include establishing,
structuring and governing
corporations, raising capital, mergers and
acquisitions, and general corporate and
securities matters. Andrea has published
multiple articles in national Canadian media
and is a repeat contributor by invitation to the
Globe and Mail’s Report on Business. She was
also one of the first corporate lawyers in
Canada to advise regulated cannabis firms,
and she has spoken about Canadian cannabis
laws at some of the industry’s highest profile
conferences.

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Priya Ratti is a corporate and
securities lawyer with a focus on
M&A transactions. Prior to
joining SkyLaw, she ran her own
practice, representing clients in
a wide range of civil litigation
and corporate matters. Priya completed her
law degree at the University of Ottawa, where
she worked with a select team to establish
Canada’s first national, bilingual and student-
run business law clinic providing pro bono
legal services to local entrepreneurs and
start-ups. Priya currently manages
SkyCounsel, SkyLaw’s practice support
platform for independent legal professionals,
and is an active contributor to the firm’s Our
Insights blog.
Diana Nicholls Mutter is a
lawyer at SkyLaw who advises
on and assists clients with a
wide range of M&A, financing,
and corporate and securities law
matters. Diana has published
several articles analysing securities law
developments in both Canadian and USA law
journals, including the American Bar
Association’s The International Lawyer, the
Canadian Business Law Journal, and the
Banking and Finance Law Review. Before
joining the firm, she completed a research
based LLM at Osgoode Hall Law School with a
focus on securities and corporate governance
and obtained a JD from Western Law.
SkyLaw Professional Corporation
3 Bridgman Avenue, Suite 204
Toronto, Ontario M5R 3V4
Canada
Tel: +1 416 759 5299
Fax: +1 866 832 0623
Email: kevin.west@skylaw.ca
Web: www.skylaw.ca

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1. Trends
1.1 M&A Market
After a blockbuster year for M&A transactions
in 2021, Canada saw a steady decline quarter
after quarter throughout 2022 in deal count and
volume, with a slight bounce back in Q4. The
M&A climate in 2022 was significantly impacted
by the extreme economic upheaval in Canada
and globally, including significant inflation, rapid
interest rate hikes and a looming recession. The
twin shocks of pandemic and war have reshaped
many aspects of the economy, including a
movement towards “friend-shoring” as Canada
implemented protectionist policies and invested
in domestic supply chains, particularly for critical
minerals required for the green economy.
While the total transaction count decreased from
2021 by 17% and the value decreased by 35%,
some industries were more active than oth-
ers. REITs were the busiest sector by volume
throughout 2022, with CAD32.7 billion in M&A
activity, whereas mining led 2022 with over 600
deals.
Canada has started 2023 with new-found opti-
mism, with expectations that activity should
return to pre-pandemic levels, but the M&A
market faces some significant risks. Investor
confidence, a key driver for M&A activity, has
been shaken by recent bank collapses, although
Canadian banks are believed to be in a stronger
position. Increasing government intervention in
M&A transactions through foreign investment
and competition reviews could add complex-
ity and delay. Dealmakers are taking longer and
scrutinizing deals more carefully in the current
environment.
1.2 Key Trends
Key trends that affected M&A activity in Canada
in 2022 included the following:
• The Bank of Canada raised its key inter-
est rate seven times since March 2022,
from 0.75% to 4.75%, as inflation rose to
above 6.3%. High interest rates, stubborn
and increasing inflation, and a weakened
exchange rate caused dramatic economic
disruption.
• The looming fears of a global recession
impacted decisions to invest, purchase and
divest, and made it difficult to value potential
targets.
• Federal and provincial governments
announced plans for significant investment
in critical minerals, technology and green
energy.
• The powers in national security legislation
were broadened, including the establishment
of a multi-step forfeiture process. The Cana-
dian government blocked certain Chinese
investments in the mining sector on national
security grounds. The list of sanctioned enti-
ties and persons grew.
• Virtually all COVID restrictions were dropped
in Canada and most government support
programs have ended.
• Market participants made it back to the office
after working from home for two years.
• Environmental, social and governance (ESG)
considerations continue to be a driver of
change as companies divest certain assets
and investors avoid companies with poor
ESG track records.
Many of these trends will continue to impact
dealmaking in 2023:
• While the Bank of Canada has not ruled out
further rate increases in 2023, it became the

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first central bank across the G10 group of
large economies to pause its rate-tightening
cycle at the end of March 2023.
• Canada is expected to enter a recession
in 2023, albeit a mild one due to its strong
labour market. As decision-makers plan for a
recession and focus on their investments in
core assets, there may be an uptick in divest-
ment leading to some acquisition opportuni-
ties.
• The vacancy rate for commercial real estate
space is far above pre-pandemic levels in
parts of the country as many employers are
offering remote or hybrid work arrangements.
The vacancy rate for industrial real estate,
however, remains very low.
• Corporate insolvencies are rising, and
restructuring arrangements under corporate
statutes are being used more frequently to
recapitalize at an earlier stage in the process
as compared to traditional insolvency pro-
ceedings.
• The Canadian middle market is a significant
contributor to the Canadian economy, and
activity is expected to increase in late 2023
as retiring business owners look to sell their
businesses.
• As buyers spend more time on due diligence
and valuing target companies, earn-outs are
more likely to be used as a tool in M&A trans-
actions going forward.
• Deals among closely-affiliated countries
(friend-shoring transactions) are likely to
continue increasing as a result of geopolitical
tensions.
• Canadian regulators continue to broaden
enforcement powers to restrict foreign state-
owned enterprises from acquiring critical
minerals.
• The technology, mining and financial sectors
continue to gain momentum. Cybersecurity
firm Magnet Forensics agreed to be acquired
in January 2023 by private equity firm Thoma
Bravo. Rio Tinto closed its acquisition of the
shares of Turquoise Hill for CAD4.24 billion.
One of the largest transactions in Canadian
M&A history in the financial sector is set to
close in 2023 – RBC’s CAD13.5 billion all-
cash acquisition of HSBC Canada.
• The CAD20 billion acquisition of Shaw by
Rogers received final government approval
in March 2023 after two years of regulatory
uncertainty. Dealmakers are concerned by the
federal government’s imposition of unprec-
edented and legally binding commitments,
adding greater political risk to transactions in
politically sensitive industries.
• Shareholder activists continue to be more
involved in M&A decision-making, encour-
aging companies to pursue transactions to
create value or to compel divestiture.
• Despite increasing regulatory enforce-
ment and shareholder activist pressure,
coupled with the rising costs of borrowing
and increased closing timelines, the strong
demand for minerals, technology, alternative
energy and financial services plus the rising
middle market will likely lead to a steady M&A
deal count in early 2023.
In March 2023, the dramatic failure of Silicon Val-
ley Bank in the United States and the collapse
of the 166-year-old global bank Credit Suisse
have rattled markets and increased fears of a
global recession. The Canadian banking industry
is believed to be more resilient as it is dominat-
ed by six large national institutions that are well
capitalized and diversified. The level of investor
confidence following these shocks will be a key
determining factor of economic activity in 2023.

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1.3 Key Industries
Key industries for Canadian M&A in 2022 includ-
ed mining, oil and gas, and information technol-
ogy.
Mining
Approximately 43% of all publicly traded mining
companies in the world are listed on a Cana-
dian stock exchange. In 2022, the mining sector
experienced a reduction in deal volumes relative
to 2021 but the outlook for this year is optimistic,
particularly in light of the post-pandemic boom
in commodity prices and the billions of invest-
ment dollars promised by Canadian govern-
ments for the mining industry. However, a global
recession would naturally dampen demand and
push some commodity prices downward.
Several notable transactions involved the gold
sector. Demand for critical minerals and base
metals is likely to be strong as industries increase
their focus on the manufacture of environmen-
tally friendly products, such as electric vehicles
by the automotive sector.
Increased intervention by regulators owing to
political tensions may have an adverse impact
on this sector as well. In November 2022, the
federal government announced that it had
ordered three Chinese companies to sell their
interests in Canadian essential mineral compa-
nies for national security reasons, even though
none of the investments involved a controlling
interest and none of the investors had publicly
obvious Chinese state ownership. The orders
were made in connection with Canada’s criti-
cal minerals strategy to protect mineral supply
chains consistent with its friend-shoring policy.
Oil and Gas
The oil and gas sector is of significant impor-
tance to the Canadian economy (Canada is the
world’s fourth-largest producer of oil).
Globally, the oil and gas sector experienced
reduced activity in 2022 owing to volatile com-
modity prices and a resulting gap between buyer
and seller valuations. Despite this global trend,
Canada saw some high-value deals announced
in late 2022.
Oil and gas prices were affected by numerous
factors in 2022. The reopening of global econo-
mies, OPEC supply restrictions, and a period of
reduced investment in new production led to
increased prices and profitability for this sec-
tor. Oil and gas prices were expected to remain
healthy in 2023 and, combined with the upcom-
ing completion of the Trans Mountain pipeline
expansion (expected to be mechanically com-
pleted in late 2023 and operational in early 2024)
a positive outlook was created for investment in
this sector. However, OPEC+ producers in early
2023, unexpectedly announced that they would
cut output even further, causing a dramatic rise
in prices on the heels of the lower prices that
followed the collapse of Silicon Valley Bank. This
could in turn exacerbate inflation and impede the
ability of central banks to reign it in.
Since Russia’s invasion of Ukraine, numer-
ous countries, including Canada, have banned
imports of Russian oil and petroleum products.
Recently, the G7 countries along with the EU and
other allies also announced a price cap on Rus-
sian oil products. As a result of these measures,
the EU will need to seek out the energy resourc-
es of other regions and European countries may
look to Canada.

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Technology
Canada has a solid presence within the tech-
nology sector. It is home to leading technology
hubs and companies, such as Shopify Inc., as
well as to market leaders in numerous sectors,
including cleantech.
While valuations of technology companies in
2022 did not remain at the record numbers seen
in 2021, M&A activity in the technology sector
remained strong.
Sector consolidation, desire for increased effi-
ciency, productivity and automation continue to
drive strong interest in information technology.
The somewhat recent reduction of elevated valu-
ations and stock prices in the technology sec-
tor may lead to continued activity in this sector
in 2023, including in the area of going-private
transactions.
Cannabis
Canada was one of the first countries to legalise
the production and sale of cannabis. Following
an initial frenzy, the cannabis market continues
to underperform the broader stock market. Capi-
tal is increasingly difficult to raise, and many pro-
ducers are distressed, resulting in consolidation
and retrenching across the industry.
Fading hopes that the USA federal government
will legalize cannabis, together with supply gluts
in Canada (which has issued over 900 cannabis
licenses to date) and in some US states, have
dragged down profitability and stock prices, both
for Canadian licenseholders and for US multi-
state operators listed on Canadian exchanges.
2. Overview of Regulatory Field
2.1 Acquiring a Company
Most public company acquisitions in Canada will
be conducted by way of:
• a takeover bid, either hostile (unsolicited) or
friendly (solicited and/or negotiated); or
• a negotiated, court-approved plan of arrange-
ment.
Companies can also be acquired by way of:
• an asset or share purchase; or
• an amalgamation or other corporate reorgani-
sation.
2.2 Primary Regulators
M&A activity in Canada is primarily regulated by:
• the Canadian federal government, particularly
where the target is in a regulated industry or
the acquiror is non-Canadian;
• provincial securities regulators; and
• stock exchanges.
Reporting issuers, which includes all issuers with
securities listed on a Canadian stock exchange,
must file continuous disclosure documents with
the applicable provincial securities regulators
on the System for Electronic Document Analy-
sis and Retrieval (SEDAR). Reporting insiders
– which includes directors, officers and 10%
beneficial owners of a class of securities of a
reporting issuer – must file trade reports on the
System for Electronic Disclosure by Insiders
(SEDI) unless an exemption is available.
There are 13 jurisdictions and securities regu-
lators in Canada. Multiple attempts at creating
a national securities regulator have failed, most

9 CHAMBERS.COM
recently, a cooperative model which was aban-
doned in 2021.
2.3 Restrictions on Foreign Investments
Investment Canada Act (ICA) and National
Security Review
Consistent with the approach of most countries,
the Canadian government may restrict the ability
of a non-Canadian to acquire or start a business
in Canada, in particular if the investment relates
to a cultural business (for example, broadcast-
ing and publishing) or raises national security
concerns. The government may block proposed
foreign investments, allow them to proceed with
conditions, or order divestiture if an investment
has already been made.
A transaction by a non-Canadian is reviewable
if the enterprise value of the target business
exceeds certain financial thresholds (for WTO
investors that are not state-owned enterprises,
the threshold is an enterprise value of CAD1.287
billion). If reviewable, the government will deter-
mine whether the transaction is of “net benefit”
to Canada. If not reviewable, a notification under
the ICA must be filed within 30 days after com-
mencing a new business activity or acquiring
control of an existing Canadian business.
The Canadian government may review any
acquisition on national security grounds under
the ICA, whether or not it is subject to net benefit
review. There is no definition of “national secu-
rity” in the ICA, nor are there specific monetary
thresholds that automatically trigger a national
security review.
The past year has brought a sea change in the
government’s approach toward foreign invest-
ment and national security review. Investments
by entities with ties to Russia and China, and
any foreign investments into the critical miner-
als sector and certain other protected industries
are expected to be subject to greater scrutiny.
Proposed amendments would grant the Ministry
new negotiation and enforcement powers.
Effective 2 August 2022, a new voluntary pre-
closing filing mechanism came into force, per-
mitting certain non-Canadian investors to con-
firm in advance whether a proposed investment
would be subject to a national security review. If
a pre-closing filing is not made, the government
will have up to five years after becoming aware
of a transaction (changed from 45 days) to initi-
ate a national security review.
In addition, the government announced that it
would initiate a national security review for all
investors with ties to Russia and investors in
critical minerals that are tied to Chinese state-
owned enterprises. In November 2022, the gov-
ernment ordered three Chinese firms to divest
their investments in Canadian lithium companies
on national security grounds.
Furthermore, in December 2022 the government
introduced Bill C-34, which would significantly
amend the ICA and is expected to be passed
in the summer of 2023. Among other things,
the amendments include a new pre-closing fil-
ing requirement for certain investments in “pre-
scribed businesses”; new powers for the Minis-
ter of Innovation, Science and Industry to extend
the national security review of investments,
impose interim conditions for investments and
accept undertakings, and share information with
foreign governments; and stronger penalties for
non-compliance with the ICA.
Sanctions
Canada has sanctions and related measures in
place against countries, individuals and entities
which the government has identified as being

10 CHAMBERS.COM
responsible for or complicit in human rights vio-
lations, significant acts of corruption, or terrorist
activities. Canada currently has imposed sanc-
tions in relation to 23 countries.
Canada’s sanctions against Russia, origi-
nally implemented in 2014 following Russia’s
attempted annexation of Crimea, were updated
dozens of times throughout 2022 in response
to its invasion of Ukraine. These broad-ranging
sanctions target entities and individuals asso-
ciated with Russia’s military, government, and
financial and energy sectors. In recent months,
hundreds of additional names have been added
to the sanctioned list for their involvement with
human rights violations and disinformation and
propaganda campaigns.
The shifting landscape of sanctions regulations
requires Canadian businesses and their stake-
holders to keep a close eye on their compliance,
including reviewing their shareholder base and
disclosing, and in some cases divesting, assets
in sanctioned jurisdictions.
Industries with Limits on Foreign Ownership
Ownership by non-Canadians is restricted in
certain sectors, including the airline, banking,
telecommunications and insurance industries.
2.4 Antitrust Regulations
Competition Act
Foreign investment is also subject to pre-merger
notification under the Competition Act if it meets
both of the size thresholds summarised below:
• size of parties – the parties to the transaction,
together with their affiliates, have combined
assets in Canada or total annual gross rev-
enues from sales in, from or into Canada with
a value in excess of CAD400 million; and
• size of transaction – the aggregate value of
the Canadian assets or annual gross rev-
enues from sales in or from Canada of the
target exceed CAD93 million.
Regardless of whether notification is required,
the Competition Bureau reserves the right to
review any transaction for up to one-year post-
closing to determine whether it is likely to lessen
or prevent competition substantially. In addition,
all business activity in Canada is subject to scru-
tiny for anti-competitive behaviour.
Significant amendments to the Canadian Com-
petition Act came into force in June 2022. Among
other things, these amendments expanded the
factors that the Competition Tribunal may con-
sider when reviewing a merger to determine
whether it will substantially lessen or prevent
competition, including the entrenchment of a
leading incumbent’s market position, the effects
of the transaction on quality, choice or consumer
privacy and a change to innovation in the rele-
vant market. These amendments also introduce
an anti-avoidance provision in the context of
notifiable transactions.
2.5 Labour Law Regulations
Employment legislation varies by jurisdiction in
Canada. Minimum statutory employment stand-
ards, such as notice requirements on termina-
tion, generally cannot be contracted out of or
waived. For example, an employment agreement
providing for “termination at will” would not be
enforceable.
Other legislation applies to the employment rela-
tionship, including the applicable human rights
code, pay equity statute and occupational health
and safety legislation.

11 CHAMBERS.COM
Canada supports the principles of collective bar-
gaining. Each jurisdiction in Canada has a labour
code.
Ontario also prohibits non-competition provi-
sions in employment agreements and requires
certain employers to have a written policy with
respect to “disconnecting from work”.
Acquirors should conduct detailed due dili-
gence on a target’s employment arrangements
to understand the potential severance costs
associated with its key employees and consider
whether any future plans (for example, the relo-
cation of a plant) could be construed as con-
structive dismissal requiring payment of termina-
tion pay or severance.
In the context of M&A transactions, while there
is no requirement to engage with employees or
pension trustees, target company directors in
discharging their fiduciary duties are encouraged
to take the interests of these stakeholders into
account.
2.6 National Security Review
See 2.3 Restrictions on Foreign Investments.
3. Recent Legal Developments
3.1 Significant Court Decisions or Legal
Developments
Rio Tinto Acquires Turquoise Hill
Rio Tinto owned 51% of the shares of Tur-
quoise Hill (a TSX-listed mining company) and
proposed a plan of arrangement to acquire the
remaining shares for cash. Rio Tinto offered two
dissenting shareholders unique deal terms with
respect to dissent and dispute resolution pro-
cesses, including immediate payment of 80%
of the transaction price. Complaints were made
to securities regulators that this deal violated the
requirement for equal treatment of shareholders.
Rio Tinto then made the same deal available to
all dissenting shareholders and the transaction
closed. The reasons of the chambers judge have
not yet been released and it remains to be seen
whether this will set a precedent in cases where
in effect there could be a two-tiered system for
determining price.
Rogers-Shaw Acquisition Appeal
One of the largest transactions announced in
2021 was a proposed transaction between two
of the largest mobile phone providers in Cana-
da, Rogers and Shaw. The Competition Tribunal
allowed the transaction to proceed, and in Janu-
ary 2023, the Federal Court of Appeal agreed
with the Tribunal. The Tribunal had determined
that the transaction would not likely prevent or
lessen competition substantially, and further that
the transactions actually promote competition,
but key to the decision was the proposed dives-
titure of the Freedom Mobile business.
Canada has some of the highest cell phone rates
in the world, making the transaction politically
sensitive. In March 2023, the federal govern-
ment finally gave its approval to the transaction
but imposed unprecedented and legally binding
commitments. The two-year regulatory approval
process and the uncertainty caused by political
interference will add to deal execution risk.
Cineplex v Cineworld
In December 2021, in an important case aris-
ing out of the disruption from the pandemic, an
Ontario court ruled that Cineplex could not be
held in default of the ordinary course covenant
under an arrangement agreement with Cine-
world when Cineplex was prevented by govern-
ment mandate from conducting normal day-to-
day operations. The appeal has been postponed

12 CHAMBERS.COM
as a result of Cineworld’s bankruptcy filing in
September 2022.
Taiga Gold Corp v Munday
A challenging aspect of a plan of arrangement
is the determination of who gets to vote. Some
types of securityholders will get a separate vote,
others may vote together as a class, and some
may not get a vote at all. In January 2023, the
Alberta Court of Appeal determined that war-
rantholders should have had a vote on a plan of
arrangement involving Taiga, but the transaction
had already closed and could not be unwound.
This decision further emphasises that, following
the final court approval of a plan of arrangement,
the parties should race to close before an appli-
cation for a stay pending appeal can be filed.
Sandpiper Real Estate Fund v First Capital
Shareholders have the right to requisition a
shareholder meeting, but the board must deter-
mine when that meeting will actually be held. In
February 2023, an Ontario court held that wait-
ing five months was unreasonable and unjusti-
fied having regard to the process and reasons
for the board’s decision.
Corporate Opportunity Waivers
Alberta recently became the first Canadian juris-
diction to, permit corporations to include a cor-
porate opportunity waiver in its articles or unani-
mous shareholder agreement, as is allowed in
Delaware. The corporate opportunity doctrine
was to prevent directors and officers from
usurping business opportunities that otherwise
rightfully belong to the corporation. Having the
waiver will make investments by private equity
firms and other active investors more attractive.
Porter Airlines v Nieuport Aviation
In October 2022, the Ontario Superior Court of
Justice held that a force majeure clause did not
excuse Porter Airlines from fulfilling its payment
obligations to Nieuport, the owner and opera-
tor of the passenger terminal from which Porter
operated. Although performance under its con-
tract may have become commercially impracti-
cal or unreasonable for Porter, the decision to
suspend operations was a commercial one and
not one caused by an event of force majeure,
such as a government order requiring Porter Air-
lines to take such action.
Boliden Mineral AB v FQM Kevitsa Sweden
In February 2023, the Ontario Court of Appeal
upheld an application judge’s decision, agree-
ing that the purchaser could recover from the
seller under a general indemnity provision in a
share purchase agreement for losses relating
to pre- and post-closing tax liabilities. These
liabilities arose from a breach of an unqualified
representation that all pre-closing tax filings
had been made and there were no grounds for
reassessment. While the representation as far
as the seller knew was true at closing, the court
held that due to a reassessment by Finnish tax
authorities and because there was no knowl-
edge qualifier included in the representation,
there was a breach of representation. Further,
the losses incurred by the purchaser relating to
the pre- and post-closing tax liabilities flowing
from this breach were reasonably foreseeable.
3.2 Significant Changes to Takeover Law
Takeover Bid Amendments
The last significant amendments to the takeover
bid rules in Canada were implemented in 2016.
These amendments included:
• the extension of the minimum bid period from
35 days to 105 days (which may be short-
ened in certain circumstances) to allow target
boards adequate time to respond to hostile
bids;

13 CHAMBERS.COM
• the introduction of a mandatory 50% mini-
mum tender condition (at least 50% of the
shares not already owned by the acquiror and
its joint actors must be tendered before any
shares can be taken up by the acquiror); and
• a mandatory ten-day extension to the bid
period if, at the end of the initial deposit
period, all terms and conditions of the bid
have been complied with or waived and the
minimum tender requirement has been met.
Securities regulators are inclined to strictly
enforce these rules in order to promote predict-
ability in the takeover bid regime. Exemptions or
variations are rare.
4. Stakebuilding
4.1 Principal Stakebuilding Strategies
It is common in Canada for prospective acqui-
rors to accumulate shares of their target prior to
launching a takeover bid or change of control
transaction. An acquiror may establish a “toe-
hold” through open market purchases or private
transactions with other shareholders.
Acquirors may also seek support from other
shareholders through accumulation of proxies
or lock-up or voting agreements in support of
a transaction.
4.2 Material Shareholding Disclosure
Threshold
An acquiror must publicly disclose its ownership
of a reporting issuer once it directly or indirectly
beneficially owns, or has control or direction
over, 10% or more of a class of securities (in
contrast to the USA, where the threshold is 5%).
This threshold is reduced to 5% in Canada if a
takeover bid for the relevant securities is out-
standing.
Beneficial ownership of securities is calculated
on a partially diluted basis by class and includes:
• all securities of that class that could be
acquired within 60 days upon the conversion
or exercise of convertible securities; and
• all securities of that class beneficially owned
by any joint actors of the acquiror.
Control or direction generally is established by
the ability to vote, or direct the voting of, shares
or the ability to acquire or dispose of, or direct
the acquisition or disposition of, shares.
Equity equivalent derivatives, such as equity
swaps, generally are not included in determining
whether the 10% ownership threshold has been
crossed, although interests in these and other
related financial instruments must be disclosed
in reporting required once the 10% ownership
threshold has been crossed.
Early Warning Disclosure
Upon crossing the 10% ownership threshold, the
acquiror is subject to the early warning regime
and must file a press release and an early warn-
ing report (similar to a Schedule 13D in the USA).
Eligible institutional investors – which includes
financial institutions, pension funds, mutual
funds, investment managers and SEC-registered
investment advisers – may file a less onerous
alternative monthly report (similar to a Schedule
13G in the USA).
Insider Reporting
Directors, officers, 10% beneficial owners and
other “reporting insiders” of reporting issuers
must file insider reports disclosing any change
to their beneficial ownership of, or control or
direction over, the reporting issuer’s securities
or interest in a related financial instrument.

14 CHAMBERS.COM
4.3 Hurdles to Stakebuilding
Unlike in the USA, structural defences to stake-
building in constating documents or by-laws are
not common in Canada because they are not
required or would be ineffective under Canadian
law.
Early Warning Standstill
An acquiror that is obligated to file an early warn-
ing report may not acquire any more securities
of that class (or securities convertible into such
securities) until the expiry of one business day
after the early warning report is filed.
Takeover Bid Rules
Once an acquiror has beneficial ownership of,
or control or direction over, 20% or more of the
outstanding voting or equity securities of a class,
any further acquisitions of outstanding securities
of that class would constitute a takeover bid that
requires an offer to be made to all security hold-
ers unless an exemption is available.
Rights Plans/Poison Pills
Before the 2016 takeover bid regime amend-
ments, the primary structural defence mecha-
nism for an issuer in Canada was a sharehold-
er rights plan (commonly known as a “poison
pill”). Rights plans are still in use since 2016,
with some differences to pre-2016 plans. Typical
features of a rights plan include the following:
• upon an acquiror’s acquisition of, or
announcement of its intent to acquire, benefi-
cial ownership of a specified percentage (typi-
cally 20% or more) of the company’s shares,
all other shareholders will be given the right
to purchase shares at a significant discount
to the market price, substantially diluting the
acquiror; and
• rights plans may allow for a “permitted
bid”, which typically now means one that is
required to stay open for at least 105 days
and includes a minimum tender condition.
The primary value of a tactical rights plan adopt-
ed following the emergence of a bid traditionally
has been to buy time for a board and sharehold-
ers to consider an offer and (where appropriate)
seek alternatives to the bid.
Because amendments to the takeover bid
rules in 2016 now require a takeover bid offer
to remain open for at least 105 days (up from
the previous minimum of 35 days), it is generally
expected that regulators will cease-trade a rights
plan after that timeframe. Even where a regulator
permits a rights plan to remain in place, certain
Canadian stock exchanges may refuse a plan if
it does not receive shareholder approval within
six months of being implemented, which often
functions as a de facto termination date for tacti-
cal rights plans.
Other Hurdles to Stakebuilding
Acquisitions of shares generally cannot be made
if a person is in a special relationship with an
issuer and possesses inside information (infor-
mation that has not been generally disclosed
and could reasonably be expected to significant-
ly affect the market price or value of a security
of the issuer).
Most private companies have restrictions on
share transfers in their articles or in unanimous
shareholder agreements that would prevent a
third party from acquiring shares without board
or shareholder approval.
For reporting issuers with a public float, it would
not be possible to restrict share transfers in the
articles or by-laws, but individual shareholders
may agree to a standstill as part of a negotiated
transaction.

15 CHAMBERS.COM
4.4 Dealings in Derivatives
Dealings in derivatives are permitted in Canada.
4.5 Filing/Reporting Obligations
Disclosure by 10% holders must be made of the
material terms of any “related financial instru-
ment” involving the issuer’s securities as well as
any other “agreement, arrangement or under-
standing that has the effect of altering, directly
or indirectly”, the investor’s economic exposure
to the issuer’s securities. Disclosure is also
required of any securities lending arrangements.
See 2.4 Antitrust Regulations for filing require-
ments under competition laws.
4.6 Transparency
Early warning reports and alternative monthly
reports require disclosure of any plans or future
intentions that the investor and any joint actors
may have relating to any changes in their secu-
rity ownership, their voting intentions or any
material transaction they may propose.
An eligible institutional investor will be disquali-
fied from filing alternative monthly reports if the
investor intends to propose a transaction that
would result in it acquiring effective control.
5. Negotiation Phase
5.1 Requirement to Disclose a Deal
Reporting issuers must immediately disclose all
“material changes”. In the context of a proposed
transaction, the threshold for a material change
requiring disclosure is typically met when both
parties have decided to proceed with a potential
transaction and there is a substantial likelihood
that the transaction will be completed. There is
no bright-line test for this determination.
Issuers listed on certain Canadian stock
exchanges must also immediately disclose all
“material information”, which generally includes
both material changes and material facts and
may, in some cases, require earlier disclosure.
Confidential material change filings and trading
halts may be made in certain circumstances.
The acquisition by a reporting issuer of a pri-
vate company will require disclosure only if the
transaction is a material change for the reporting
issuer. A transaction between two private com-
panies where neither has continuous disclosure
obligations under securities laws carries no pub-
lic disclosure obligation.
5.2 Market Practice on Timing
Most acquisitions are announced publicly only
once definitive acquisition agreements are
signed. Companies tend to avoid disclosing a
potential transaction at the non-binding letter of
intent stage because it could affect the share
price or give potential competitors or stakehold-
ers time to mobilise in opposition. If the trans-
action is announced before there is a definitive
agreement and then it fails to be entered into,
the target could suffer reputational harm or face
questions from regulators.
5.3 Scope of Due Diligence
Significant business combinations usually
involve a thorough scope of due diligence. Such
diligence often includes searches of public reg-
istries and databases, including a corporate pro-
file as well as business name, bankruptcy, lien
and litigation searches, and a review of public
filings on SEDAR, SEDI and other databases.
Searches would typically be run against the tar-
get company and its management and material
subsidiaries; for privately held companies, they

16 CHAMBERS.COM
would also be run against the selling sharehold-
ers.
Diligence documents – such as financial state-
ments, material contracts and licences or per-
mits – will typically be supplied by the target
to the buyer and its counsel via an electronic
dataroom.
Common factors that can affect the scope of
appropriate due diligence can include the nature
of the target’s industry, the jurisdiction where
assets are located, whether the target competes
with the buyer, and the access to sensitive infor-
mation the target is willing to grant.
5.4 Standstills or Exclusivity
Most letters of intent and acquisition agree-
ments include exclusivity obligations on the
target. Acquirors will usually want to know that
the target has ceased all negotiations and is not
shopping their deal to third parties.
Most targets will want a standstill arrangement
in place with the acquiror.
Fiduciary Outs
For the acquisition of a reporting issuer, it is
common for exclusivity obligations to contain
a “fiduciary out” clause allowing the target to
terminate the agreement and accept a superior
proposal if to do so would be consistent with
the target board’s fiduciary duties. The acquiror
would typically have a right to match the superior
proposal or would be entitled to be paid a break
fee (as described in 6.7 Types of Deal Security
Measures) if the agreement is terminated.
A “superior proposal” will typically need to sat-
isfy very specific negotiated conditions, includ-
ing that it is for all the target’s shares (or in some
cases substantially all assets); that it is reason-
ably capable of being completed without undue
delay with regard to all financial, legal, regulatory
and other aspects of the competing transaction;
that it is not subject to any financing condition;
and that the target board make a determination
that it is a more favourable transaction.
The existence of “hard” lock-up agreements
(ie, the shareholder is not permitted to tender
its shares to any other bid or vote in favour of
any other transaction) with one or more target
shareholders holding a significant percentage of
shares could render an offer incapable of being a
“superior proposal” because it is not reasonably
capable of being completed.
5.5 Definitive Agreements
The documentation used to set out the terms of
a deal is determined by the nature of a transac-
tion.
If the transaction is a takeover bid, the acqui-
ror must publicly file a takeover bid circular that
describes the terms of its offer and includes other
required disclosure. If the terms of the takeover
bid subsequently change, further notices must
be filed. For friendly takeover bids, the acquiror
would typically enter into a support agreement
with the target prior to launching the bid setting
out the process of the bid, conditions and cer-
tain deal protections.
If the transaction is a plan of arrangement or oth-
er negotiated business combination, the acqui-
ror and the target would enter into an arrange-
ment or combination agreement. The agreement
would set out the process of the transaction
(including shareholder, court and other approv-
als), conditions and certain deal protections.

17 CHAMBERS.COM
6. Structuring
6.1 Length of Process for Acquisition/
Sale
Parties typically will first enter into a non-bind-
ing letter of intent setting out the proposed deal
terms with binding provisions regarding exclu-
sivity, expenses and confidentiality.
The parties then conduct due diligence and
negotiate a definitive acquisition agreement over
a period of 30–90 days. The time required varies
greatly depending on the size and nature of the
target and the involvement of third parties, such
as lenders.
The timeline for a friendly takeover bid gener-
ally is 50–65 days beginning from the start of
preparation of the takeover bid circular to the
completion of the transaction, assuming the tar-
get waives the minimum bid period of 105 days
(shortening it to no less than 35 days).
A hostile takeover bid must remain open for at
least 105 days. The bid period may be shortened
by the target or reduced to no less than 35 days
if the target announces an alternative transac-
tion. A mandatory ten-day extension period will
apply if the bidder is required to take up securi-
ties that were tendered under the bid. Depend-
ing on the defensive tactics used by the target,
once a target is “in play”, it is hard to predict
how long it might take to successfully complete
the bid.
Typically, following a successful takeover bid,
the acquiror will conduct a second-step trans-
action to obtain 100% of the outstanding shares.
If the target is a private company, the parties
may sign the definitive documents and close the
transaction on the same day. Otherwise, closing
may take 30–60 days or longer depending on the
extent to which shareholder, court or regulatory
approvals are required.
Complex transactions often will have outside
dates that may be extended in some circum-
stances to accommodate regulatory approvals.
6.2 Mandatory Offer Threshold
A shareholder cannot acquire any outstanding
voting or equity securities of a reporting issuer
if such acquisition would cause the shareholder
to, together with any joint actors, have benefi-
cial ownership of and/or control or direction over
20% or more of the outstanding securities (cal-
culated on a partially diluted basis) unless:
• the shareholder makes an offer to all share-
holders of the same class by way of a takeo-
ver bid; or
• an exemption from the takeover bid rules is
available.
The takeover bid exemptions include:
• certain purchases by private agreement from
not more than five persons; and
• normal course market purchases of no more
than 5% of the outstanding securities in any
12-month period.
6.3 Consideration
Both cash and shares of the acquiror are com-
monly used in Canada as consideration in M&A
transactions.
The takeover bid rules require that identical con-
sideration be provided to all target shareholders,
with limited exceptions. Generally, no collateral
benefits are allowed to be offered selectively to
certain shareholders.

18 CHAMBERS.COM
Plans of arrangement offer flexibility on consid-
eration, so long as the arrangement overall is fair
and reasonable.
In private M&A, particularly in industries with
high valuation uncertainty, tools commonly used
to bridge value gaps between parties include
holdbacks and earn-outs.
• With a “holdback”, an acquiror will hold on to
some of the purchase price until after clos-
ing in order to satisfy indemnity or breach of
warranty claims. This holdback amount may
be provided to an escrow agent, particularly
in cases where the seller has concerns about
the creditworthiness of an acquiror.
• With an “earn-out”, part of the purchase price
will remain subject to performance require-
ments or other milestones that must be
satisfied after closing and may also be used
to set off indemnity or breach of warranty
claims. The most common criterion is finan-
cial performance, but an earn-out may also
be dependent on other performance-related
criteria.
6.4 Common Conditions for a Takeover
Offer
Some common conditions for takeover bids
include the following:
• there is no shareholder rights plan in effect or
the rights plan will be waived;
• regulatory approvals (including, where
required, approvals under the Competition
Act and the ICA) and third-party approvals or
consents have been obtained;
• there has not been a material adverse
change;
• there is no existing, pending or threatened
litigation involving the target that would lead
to a material adverse effect; and
• there are no laws that would prevent the bid-
der from taking up or paying for the securi-
ties subject to the bid and there are no laws
in effect or proposed that would have an
adverse effect on the target.
Takeover bids cannot be subject to a financing
condition as discussed in 6.6 Requirement to
Obtain Financing.
6.5 Minimum Acceptance Conditions
Since 2016, the takeover bid rules in Canada
require that all bids, even partial bids, must pro-
vide for a mandatory minimum tender condition
that 50% of securities owned by security hold-
ers other than the bidder be tendered to the bid.
This minimum tender requirement must be met
before the bidder may acquire any of the securi-
ties subject to the bid.
Bids for all of the outstanding shares may
include a higher minimum tender condition to
ensure that the bidder, through a second-step
business combination, can obtain the remain-
ing shares that are not deposited. This condition
will usually require a deposit of at least 66⅔%
of the outstanding shares and sufficient shares
to obtain approval of a majority of the minority
shareholders for the second-step transaction.
Canadian securities regulations allow securities
that were obtained under a lock-up to be voted
as part of the majority of the minority vote if the
locked-up security holder is treated identically
to all others under the offer.
If a bidder is only seeking control, it may include
a minimum tender requirement of 51% of the
outstanding shares instead. Parties may apply to
Canadian securities regulators to waive or vary
the minimum tender condition, although regula-
tors will only allow such a waiver in rare cases.

19 CHAMBERS.COM
6.6 Requirement to Obtain Financing
In an arrangement, amalgamation and other
business combinations, there is no regulatory
requirement or restriction on financing condi-
tions. However, the target will generally require
that the acquiror show evidence that it will be
able to fund the cash consideration.
In Canada, as in the UK but unlike in the USA,
there is a fully financed rule for takeover bids that
offer cash consideration. The bidder must have
pre-arranged financing before launching the bid.
The financing itself may be conditional at the
time the bid is commenced, if the bidder reason-
ably believes that the possibility is remote that
it will not be able to pay for securities deposited
under the bid.
6.7 Types of Deal Security Measures
Acquirors may seek a wide variety of deal protec-
tion measures, examples of which are described
below.
Support Agreements and Lock-Ups
In a friendly takeover, before launching the bid,
the bidder and the target may enter into a sup-
port agreement whereby the target agrees to
recommend that its shareholders tender to the
bid and the bidder agrees to launch the bid on
terms specified in the support agreement, sub-
ject to conditions such as a fiduciary out (as
described below).
The directors, officers or significant shareholders
of a target may also enter into lock-up or voting
agreements with the acquiror to deposit their
shares to the bid or vote their shares in favour
of an arrangement. These agreements may be
“hard” or “soft” (see 6.11 Irrevocable Commit-
ments).
Stock exchange rules may require that disinter-
ested securityholders approve of voting agree-
ments requiring shareholders to vote their shares
in accordance with management recommenda-
tions. Negative voting agreements (those requir-
ing a shareholder to not vote against manage-
ment’s recommendations), on the other hand,
are not required to be approved by disinterested
securityholders.
Break-Up/Break/Termination Fees
A common deal protection measure in Canada is
a break-up fee paid by the target to the acquiror
if an arrangement or other business combination
is not completed. These types of fees usually
range from 2% to 4% of the target’s equity value.
Reverse break fees requiring a payment by the
acquiror to the target if the acquiror breaches the
acquisition agreement or is not able to complete
the sale may also be provided for.
No-Shop/Go-Shop Clauses
No-shop clauses prohibit a target from soliciting
other takeover offers or providing information to
other third parties that might be used to make
an offer. These provisions will typically include
a “fiduciary out” that allows directors (in so far
as they are required by their fiduciary duties) to
negotiate with a third-party offeror if the alter-
native offer in the good faith estimation of the
directors represents a superior proposal.
Go-shop clauses, on the other hand, allow a
target to negotiate or “shop” a transaction with
third parties for a specific amount of time after
the execution of the agreement. Go-shops are
less common but may be desirable if the acqui-
ror wants to publicly announce the deal before
the target tests the market.

20 CHAMBERS.COM
Matching Rights
While a fiduciary out for the target board to
accept a superior proposal is commonly pro-
vided for in a friendly acquisition agreement, the
acquiror may also be provided the right to match
the superior proposal and hence complete the
transaction.
Managing Risk During the Interim Period
Once a definitive acquisition agreement is
signed or a takeover bid launched, the acquiror
is bound to complete the transaction unless one
of the expressly stated conditions is not satis-
fied. The pandemic has put the focus on a num-
ber of these conditions.
Definitive acquisition agreements now contain
specific COVID-19 provisions, including rep-
resentations about the impact of public health
measures on the business and the extent to
which government support has been relied on.
Material adverse effect and ordinary course
of business provisions have garnered greater
attention in recent years.
6.8 Additional Governance Rights
If an acquiror is not seeking 100% ownership of
a target, it may negotiate for additional govern-
ance rights with respect to a target outside its
shareholdings. These may include:
• the right to nominate individuals to the
target’s board and/or to sit on board commit-
tees;
• board observer rights;
• the right to participate in, or require, a public
offering of the target’s equity securities; and
• the right to approve of change of control
transactions, issuances of shares and other
major decisions.
6.9 Voting by Proxy
Shareholders are permitted to vote by proxy in
Canada.
6.10 Squeeze-Out Mechanisms
If an acquiror wishes to obtain 100% of the
shares of a target and is not able to do so through
the bid process, there are two other methods
that can be used to acquire the remaining shares
depending on the holdings of the acquiror after
the bid is complete.
Second-Step Business Combination/Going-
Private Transaction
A second-step business combination or a going-
private transaction can be implemented if the
bidder holds between 66⅔% and 90% of the
outstanding shares after the bid is complete.
Following the bid, the bidder will be able to take
the company private through an amalgamation
or a plan of arrangement.
Such a business combination will need to be
approved by a special majority of the sharehold-
ers at a shareholder meeting and will be sub-
ject to certain minority shareholder protections.
For instance, a majority of the minority of the
shareholders will be required to approve of the
business combination. However, as the major-
ity shareholder, the bidder can participate and
vote the shares that were acquired under the
takeover bid. Thus, if the bidder acquires 66⅔%
of the outstanding shares, in most cases, it will
have sufficient votes to obtain the majority of the
minority approval.
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.

21 CHAMBERS.COM
This compulsory acquisition procedure does not
require a shareholder vote.
Shareholders that did not tender to the bid are
provided 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 bid-
der 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 with-
draw and accept a higher offer, while a “hard”
or irrevocable lock-up does not. Hard lock-ups
are less common.
7. Disclosure
7.1 Making a Bid Public
A takeover bid in Canada is launched by:
• mailing the bid materials to the target share-
holders directly; or
• placing an advertisement in at least one daily
newspaper in each applicable province in
Canada and, concurrently with or prior to
such 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 shareholders.
In the context of an amalgamation, arrange-
ment or other business combination, public
companies in Canada are required to disclose
material changes, which may include the deci-
sion to implement these kinds of transactions at
the board level or by senior management if they
believe board approval is probable.
7.2 Type of Disclosure Required
If the consideration for a bid is to be shares or
partly shares, the bidder must provide prospec-
tus-level disclosure.
The target must publicly file a directors’ circu-
lar, prepared by its board, which includes the
board’s recommendations regarding the bid and
other information.
7.3 Producing Financial Statements
An acquiror providing share consideration must
provide its audited financial statements for the
past three years as well as interim financial
statements if available, and pro forma financial
statements that give effect to the acquisition.
The financials must include a statement of the
financial position of the issuer as at the begin-
ning of the earliest comparative period for which
financial statements that are included comply
with the International Financial Reporting Stand-
ards (IFRS) in certain cases. If the statements are
the first IFRS financial statements prepared by
the issuer, the issuer must include the opening
IFRS statement of financial position at the date
of transition to 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 acquisition is a significant
acquisition for the acquiror.

22 CHAMBERS.COM
If the acquiror is a reporting issuer, it may incor-
porate by reference its existing continuous dis-
closure.
More generally, 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). GAAP, in the context of Cana-
dian securities regulation, must be determined in
accordance with the Handbook of the Canadian
Institute of Chartered Accountants.
7.4 Transaction Documents
In the context of a takeover bid, the following
transaction documents are required to be dis-
closed in full:
• the takeover bid circular, including prospec-
tus-level disclosure, if required, and any
documents incorporated by reference;
• the directors’ circular;
• any lock-up agreements; and
• any support agreement.
In the context of a plan of arrangement or other
business combination, the following documents
are required to be disclosed in full:
• the management information circular deliv-
ered with the meeting materials, including
prospectus-level disclosure, if required, and
any documents incorporated by reference;
• any support agreements; and
• the arrangement or business combination
agreement.
Reporting issuers are also generally required to
meet certain continuous disclosure obligations
and file material contracts on SEDAR.
8. Duties of Directors
8.1 Principal Directors’ Duties
Directors’ duties in Canada include the follow-
ing:
• to act honestly and in good faith, with a view
to the best interests of the corporation; and
• to exercise the care, diligence and skill of a
reasonably prudent person in comparable
circumstances.
In discharging their fiduciary duties, directors
must exercise their powers for the benefit of the
corporation and not for an improper purpose.
These duties are owed to the corporation even
in the context of a business combination or a
hostile bid. However, the Supreme Court of
Canada has confirmed that directors are per-
mitted to consider the interests of a variety of
stakeholders in fulfilling their responsibilities.
This stakeholder-friendly corporate governance
model has been codified in the Canadian federal
corporate statute.
The common law provides guidance as to which
stakeholders’ interests may be considered by
directors, but does not provide guidance on
whose interests, if any, should be prioritised.
Although directors do not owe a fiduciary duty
to shareholders and the “Revlon duty” (ie, when
a break-up or change of control transaction is
inevitable, the board’s fiduciary duty is to max-
imise shareholder value) has not been upheld
by Canadian courts, directors are not prohibited
from taking steps to maximise shareholder value
or prioritise shareholders over other stakehold-
ers.

23 CHAMBERS.COM
8.2 Special or Ad Hoc Committees
Special committees comprised of target direc-
tors who are independent of a proposed trans-
action are often established to evaluate and con-
sider the terms of the transaction. Their mandate
often also includes:
• considering strategic alternatives;
• negotiating the proposed transaction;
• providing a recommendation to the rest of the
board about the proposed transaction; and
• if applicable, supervising a valuation or fair-
ness opinion.
It is common for target boards to establish
special committees in business combinations
involving a related party. Special committees are
required by MI 61-101 in certain circumstanc-
es when one or more directors have a conflict
of interest. Members of the special commit-
tee must be free of real or perceived conflicts.
Multilateral Instrument 61-101 (MI 61-101) also
encourages the formation of a special commit-
tee in a broader range of circumstances than
what is legally required.
Special committees and the timing of their for-
mation are important ways to show that direc-
tors’ decisions have been made without con-
flicts. Courts will often consider whether and
at what time in the process of a transaction a
special committee was formed and the proce-
dures it followed in evaluating the transaction.
A special committee should be established as
soon as possible and before the material terms
of a transaction are in place.
8.3 Business Judgement Rule
Directors are provided a high level of deference
at common law. Like in the USA, Canadian
courts have recognised the “business judge-
ment rule”. According to the business judge-
ment rule, a court should not substitute its own
decisions for those decisions made by directors,
and deference should be accorded to business
decisions of directors provided they are taken in
good faith and within a range of reasonableness
in the performance of the functions the directors
were elected to perform by the shareholders.
If directors are acting independently, in good
faith and on an informed basis in a way that they
reasonably believe is in the best interests of the
corporation, courts generally will defer to their
judgement.
8.4 Independent Outside Advice
Independent outside advice is commonly given
to directors in a business combination from:
• investment bankers;
• outside legal counsel;
• financial and tax advisers;
• public relations firms; and
• proxy solicitation firms.
8.5 Conflicts of Interest
Corporate and Securities Laws
Both Canadian corporate statutes and securities
laws contain conflict of interest provisions.
Under Canadian corporate law, if a director is a
party to a transaction with the corporation, is a
director or officer of a party to the transaction or
has material interest in a party to transaction, the
director must disclose the nature and extent of
this interest and may be required to refrain from
voting on the matter.
In securities law, MI 61-101 regulates transac-
tions where potential conflicts of interest are
present. This instrument provides procedural
protections for minority shareholders. Depend-

24 CHAMBERS.COM
ing on the type of transaction, the following may
be required under MI 61-101:
• a formal valuation by an independent valuator
supervised by a special committee;
• majority of the minority shareholder approval;
and
• enhanced disclosure, including disclosure
of prior valuations prepared for, and offers
received by, the target in the past two years.
MI 61-101 encourages, but does not require,
targets to form special committees and encour-
ages the formation of a special committee in any
transaction to which MI 61-101 applies.
Judicial and Regulatory Scrutiny
Conflicts of interest of directors, managers,
shareholders or advisers have been the sub-
ject of judicial and regulatory scrutiny as well.
Securities regulators in Canada have, in particu-
lar, examined the question of whether a party is
a joint actor with the acquiror. This is a factual
analysis, and its finding may have an impact
on whether the transaction is an insider bid or
related party transaction and hence subject to
enhanced disclosure, formal valuation require-
ments and majority of the minority approval
under MI 61-101.
9. Defensive Measures
9.1 Hostile Tender Offers
Hostile takeover bids are permitted in Cana-
da but have not been very common since the
implementation of the 2016 takeover bid amend-
ments, which made the takeover bid regime
more target friendly.
9.2 Directors’ Use of Defensive
Measures
Canadian securities laws allow directors to use
measures to defend against hostile takeovers.
Regulators may intervene when defensive meas-
ures are likely to deny or severely limit the ability
of shareholders to respond to a takeover bid.
9.3 Common Defensive Measures
There does not appear to have been a change to
the use of defensive measures during the pan-
demic, but some examples of defensive meas-
ures are as follows.
Shareholder Rights Plans/Poison Pills
Shareholder rights plans or poison pills are often
used by target companies to defend against
hostile bids. Many companies have continued to
adopt poison pills even after the 2016 takeover
bid amendments, despite speculation that the
amendments might eliminate the use of poison
pills in Canada because of the longer minimum
bid period. Rights plans will not block hostile
bids entirely but are instead a way to encour-
age the fair treatment of shareholders in con-
nection with a bid and to allow the target board
and shareholders to respond to and consider the
bid. They also allow time for the target board to
seek available alternatives and prevent creeping
takeovers.
Crown Jewel/Scorched Earth
A target may attempt to restructure or recapi-
talise so as to provide shareholders with cash
value, for instance, by selling a significant asset
in order to become less attractive to a bidder.
The directors must undertake a “crown jewel”
transaction with a view to the best interests
of the corporation, and the sale must have a
demonstrable business purpose. The board of a
target may also decide to substantially increase

25 CHAMBERS.COM
long-term debt and concurrently declare special
dividends to distribute cash to its shareholders.
Defensive Private Placements
Private placements that have the effect of block-
ing a bid have been recognised by Canadian
securities regulators as a possible defensive tac-
tic, but they could be found to be inappropriate if
they are abusive or frustrate the ability of share-
holders to respond to a bid or competing bids.
Golden Parachutes
Golden parachutes for key employees may be
triggered if such employees are terminated after
a third-party acquisition.
White Knight
Targets may seek an alternative transaction with
a friendly party or a “white knight” that might
offer more value (or in some cases more prefer-
ential terms or deal certainty) to its shareholders
than the original bidder.
Issuer Bid
If a target is unable to find a white knight, it may
itself offer to repurchase its outstanding shares.
Pac-Man
A target might flip the script and make a bid for
the shares of the hostile bidder.
Advance Notice By-Law
A target’s by-laws or other constating docu-
ments may be amended to require advance
notice of shareholder nominations for members
to the board of directors, thereby giving the tar-
get the time to strategically respond to a proxy
fight in the context of a hostile bid.
9.4 Directors’ Duties
Canadian directors owe the same duties when
they are enacting defensive measures as in any
other context. Boards in Canada owe a fiduciary
duty to the corporation, not to the shareholders,
and are not required to conduct an auction once
a company is “in play”.
Canadian courts have held that the conduct of
directors will be analysed on an objective stand-
ard of what a reasonably prudent person would
do in comparable circumstances. A court gen-
erally will not replace the decisions of directors
if they acted independently, in good faith and
on an informed basis and such decisions were
selected from a range of reasonable alternatives.
9.5 Directors’ Ability to “Just Say No”
Target boards in Canada cannot “just say no” in
the same way that this strategy is understood in
the USA. Canadian directors of public compa-
nies, while they may implement defensive meas-
ures, are not able to indefinitely prevent a bid
from being presented to the shareholders.
10. Litigation
10.1 Frequency of Litigation
M&A litigation in Canada is not as prevalent as in
other jurisdictions such as the USA. Class action
securities litigation is relatively new in Canada.
Parties involved in private acquisitions will often
choose arbitration over litigation to provide them
with greater efficiency and confidentiality.
10.2 Stage of Deal
Litigation can occur at any stage of a transaction.
A plan of arrangement requires court approval,
which provides a forum for aggrieved stakehold-
ers. However, as discussed in 3.1 Significant
Court Decisions or Legal Developments (Taiga
Gold Corp v Munday), stakeholders should act
quickly and follow the proper channels in Cana-
dian courts for the best chance of obtaining a

26 CHAMBERS.COM
remedy. A party may seek a cease-trade order
or other relief preventing the consummation of a
takeover bid from a securities regulator.
10.3 “Broken-Deal” Disputes
In general, Canadian courts have not permitted
acquirors to terminate acquisition agreements
solely because of the occurrence of the pan-
demic where such completion risk has been
allocated to the acquiror.
For instance, in Cineplex v Cineworld, the court
ordered damages against Cineworld for failing to
close the transaction, because, according to the
judge, Cineplex, despite having to close down
many of its theatres, was not offside its ordinary
course covenant.
Further, as described in 3.1 Significant Court
Decisions or Legal Developments (Porter Air-
lines v Nieuport Aviation), the court found that
an airline that drastically reduced its flights as
a result of the pandemic could not avoid its
payment obligations under a contract because
it was not legally or physically restrained from
performing its obligations. The case may have
turned out differently if the government had
mandated that the airline suspend operations.
The outcome of each case will depend on the
language used in the agreement and the facts
of the case.
See 3.1 Significant Court Decisions or Legal
Developments for further details.
11. Activism
11.1 Shareholder Activism
Although Canada is seen by some as an activist-
friendly jurisdiction, levels of shareholder activ-
ism tend to lag behind levels of activity in the
USA and Europe, particularly among large-cap
Canadian issuers.
Activist proposals are overwhelmingly focused
on ESG. Companies in the mining and oil and
gas sectors have represented some of the most
noteworthy targets of recent Canadian share-
holder activism.
11.2 Aims of Activists
Typically, an activist’s first step is to approach a
board confidentially with their demands, with the
implicit or explicit threat of a public battle if the
requests are not met. From there, activism can
take many forms.
Board activism and proxy fights are prominent
forms of activism in Canada, in which sharehold-
ers seek to have their nominees put forward for
election to the board.
Shareholder proposals also continue to be an
important form of activism. While shareholder
proposals on matters within the board’s purview
are only advisory and not binding, the publicity
they attract can create pressure for change.
Transactional activists sometimes demand stra-
tegic reviews, divestitures, share buy-backs or
increased dividends. They might requisition a
shareholder meeting, wage a public broadcast
campaign in the media or on social media, or
launch their own competing tender offer. Some-
times the goal is to see an alternative transac-
tion implemented; other times, activists try to
improve the terms of the original deal.
11.3 Interference With Completion
In transactional shareholder activism, announced
transactions are frequently a target for cam-
paigns. In some of the most notable recent

27 CHAMBERS.COM
examples, shareholders issued open letters
advocating for higher values for their shares and
engaged securities regulators to address claims
of unequal treatment, called on a board to launch
strategic reviews of fossil-fuel assets, and req-
uisitioned a shareholder meeting in response to
a REIT’s plan to sell off some real estate assets.

CANADA Trends and Developments
28 CHAMBERS.COM
Trends and Developments
Contributed by:
Kevin West, Andrea Hill, Priya Ratti and Diana Nicholls Mutter
SkyLaw
SkyLaw is a premier corporate and securities
firm in Canada. The SkyLaw team has an un-
paralleled practice in international M&A, gov-
ernance and corporate finance. SkyLaw law-
yers have worked at top-tier global law firms in
Toronto, New York, London, Sydney and Dubai,
providing the firm with a unique reach into major
global financial centres. The firm excels in major
acquisitions, bespoke equity and debt invest-
ments, joint ventures and reorganisations. The
majority of SkyLaw’s M&A work involves acqui-
rors based in the USA, the Middle East, Aus-
tralia, China, Europe and elsewhere around the
world. Recent engagements include high-pro-
file private equity investments and strategic ac-
quisitions by Fortune 500 companies. The firm
has once again been voted as one of Canada’s
Top 10 corporate law boutiques.
Authors
Kevin West is a senior corporate
and securities lawyer with 25
years of experience. Kevin has
led countless corporate
transactions, including mergers
and acquisitions, financings and
joint ventures. He also has significant
experience advising companies on corporate
governance, disclosure and compliance
issues. Prior to launching SkyLaw in 2010,
Kevin was a partner at Davies Ward Phillips &
Vineberg LLP, where he represented a number
of foreign companies making acquisitions in
Canada. Before joining Davies, he practised
with Sullivan & Cromwell LLP in New York and
Sydney, Australia, and clerked for Justice Ian
Binnie at the Supreme Court of Canada.
Andrea Hill is a corporate and
securities lawyer with nearly a
decade of experience in a broad
corporate practice. Her areas of
expertise include establishing,
structuring and governing
corporations, raising capital, mergers and
acquisitions, and general corporate and
securities matters. Andrea has published
multiple articles in national Canadian media
and is a repeat contributor by invitation to the
Globe and Mail’s Report on Business. She was
also one of the first corporate lawyers in
Canada to advise regulated cannabis firms,
and she has spoken about Canadian cannabis
laws at some of the industry’s highest profile
conferences.

29 CHAMBERS.COM
Priya Ratti is a corporate and
securities lawyer with a focus on
M&A transactions. Prior to
joining SkyLaw, she ran her own
practice, representing clients in
a wide range of civil litigation
and corporate matters. Priya completed her
law degree at the University of Ottawa, where
she worked with a select team to establish
Canada’s first national, bilingual and student-
run business law clinic providing pro bono
legal services to local entrepreneurs and
start-ups. Priya currently manages
SkyCounsel, SkyLaw’s practice support
platform for independent legal professionals,
and is an active contributor to the firm’s Our
Insights blog.
Diana Nicholls Mutter is a
lawyer at SkyLaw who advises
on and assists clients with a
wide range of M&A, financing,
and corporate and securities law
matters. Diana has published
several articles analysing securities law
developments in both Canadian and USA law
journals, including the American Bar
Association’s The International Lawyer, the
Canadian Business Law Journal, and the
Banking and Finance Law Review. Before
joining the firm, she completed a research
based LLM at Osgoode Hall Law School with a
focus on securities and corporate governance
and obtained a JD from Western Law.
SkyLaw Professional Corporation
3 Bridgman Avenue, Suite 204
Toronto, Ontario M5R 3V4
Canada
Tel: +1 416 759 5299
Fax: +1 866 832 0623
Email: kevin.west@skylaw.ca
Web: www.skylaw.ca

30 CHAMBERS.COM
Introduction
Each year, The Economist publishes its word
of the year. The winner for 2022 was “hybrid
work”, a pandemic-induced shift in work habits
that is either a blessing or a scourge, depend-
ing on which side of the payroll ledger you sit
on. A notable runner-up was the newish term
“friend-shoring”, which first gained prominence
when it was used by Janet Yellen, the US Treas-
ury Secretary, in a speech in Toronto in April
2022. A term used by optimistic investors is
“soft landing”, which would occur if a recession
were avoided following the aggressive interest
rate hikes over the past year, while some com-
mentators are predicting a “rolling recession”,
where only certain sectors of the economy are
impacted. However, with the recent shocks to
the banking system and continued economic
uncertainty, there now seems to be a greater
likelihood of a “hard landing”.
These terms capture the essence of some of
the significant trends that have emerged as a
result of the twin shocks of pandemic and war.
In a speech in Washington, DC in October 2022,
Chrystia Freeland, the Deputy Prime Minister and
Minister of Finance of Canada, claimed: “This is
a moment of extreme economic upheaval…”.
Few would disagree.
Canada is well placed to manage the global eco-
nomic turmoil through the strength of its labour
market, banks and natural resources, as well as
increased government investment in key indus-
tries. While M&A activity in Canada declined
significantly in 2022 from the blockbuster activ-
ity of 2021, the volume of announced transac-
tions began to increase in the fourth quarter and
may exceed pre-pandemic levels in 2023. There
have been a number of significant transactions
announced recently, lending support to the view
that market participants have adjusted to the
current macro-economic challenges and valua-
tions have reset in line with the current environ-
ment.
It is yet to be seen if investor confidence will
continue to be sustained or if the fear of another
global shock or more bank failures will cause
investors to stay on the sidelines.
Global Shocks, Inflation and Interest Rates
At the beginning of 2022, the world was still
grappling with the ravages of the COVID-19
pandemic, which not only caused incalcula-
ble death and suffering, but also saw unprec-
edented government intervention with closed
borders, lockdowns and massive handouts.
The resulting disruption of global supply chains,
combined with the sudden consumer demand
surge supercharged by the wave of cash from
governments, sparked rapid inflation and fears
of a global recession. Then on 24 February 2022,
Russia invaded Ukraine, creating a humanitarian
disaster and disrupting essential trade in food,
energy and resources. Supply chain issues were
exacerbated as China stuck to its “zero-COVID”
policy for much of 2022, the USA ratcheted up
its “tech war” with China over chip production,
and Canada’s relations with China turned frosty.
Central banks, including the Bank of Canada,
responded with aggressive interest rate hikes
in 2022 to tackle inflation. The sudden rise in
interest rates, among other factors, put signifi-
cant stress on the financial system and led to the
dramatic failure in March 2023 of Silicon Valley
Bank and, shortly thereafter, the 166-year-old
Credit Suisse collapsed. The resulting tightening
of credit markets and the fear of further bank fail-
ures make for eerie parallels to the 2008 global
financial crisis.

31 CHAMBERS.COM
The long-held view that globalisation would lead
to peace through prosperity has been shattered.
The war in Ukraine continues to rage. Tensions
between China and Western countries continue
to be strained, particularly in relation to trade
and Taiwan. Canada and other countries have
imposed increasingly tighter restrictions on for-
eign investment as they pursue friend-shoring
policies and protect critical minerals, technolo-
gies, and supply chains. The risks of further eco-
nomic upheaval still exist. A new shock could
trigger a global recession.
The Outlook for M&A in Canada in 2023
The Canadian economy continues to grapple
with rapidly rising interest rates, stubborn infla-
tion and a lower Canadian dollar. The Governor
of the Bank of Canada, Tiff Macklem, recently
appeared before the House of Commons finance
committee and confirmed that the Canadian
economy is on track for a recession this year, but
in his view, it should be mild primarily because of
the continued healthy labour market.
The Bank of Canada raised its key policy rate
seven times since the beginning of 2022, from
0.75% to 4.75%. While the Bank of Canada has
not ruled out further rate increases in 2023, it
became the first central bank across the G10
group of large economies to pause its rate-
tightening cycle at the end of March 2023 as
economic indicators are signaling a reduction in
the rate of inflation in Canada.
The stated goal of the Bank of Canada is to pre-
vent high inflation from becoming “entrenched”,
which would occur if prices rise because other
prices are rising and because the cost of labour is
going up, making inflation self-fulfilling because
households and businesses expect that it will
stay high or keep rising, and they act accord-
ingly. Similarly, one of the key drivers for M&A
activity in Canada is confidence and the expec-
tations of market participants. When there is, as
now, “extreme economic upheaval”, decision-
makers may choose to sit on the sidelines to see
how things shake out. Financing an acquisition
is more expensive; other uses of capital, such
as share buy-backs, can be more compelling.
Valuations are more difficult and complex as the
spread between buyer and seller expectations
widen when near-term economic prospects are
hard to predict. Government intervention can
further skew the markets and make planning dif-
ficult. Those factors, combined with increased
activist pressure, particularly on environmental,
social and governance (ESG) matters, tend to
dampen the enthusiasm for deal-making and
increase the time it takes to complete a trans-
action.
However, as with any crisis, there will be win-
ners and losers. The best-placed companies in
Canada are those with a strong balance sheet
that are less impacted by rising financing costs.
Restrictions on foreign investment increase
opportunities for buyers from “friendly” shores.
Distressed M&A opportunities should increase
significantly, particularly in commercial real
estate, retail, crypto-assets and cannabis. Rising
interest rates and the end of government hand-
outs have caused a dramatic increase in insol-
vencies; corporate insolvency filings are up over
55% in 2023 as compared to the same period
in 2022. More private business owners are likely
to sell as they near retirement and worry about
the future. Companies that embrace hybrid work
will find greater opportunities to hire the best and
brightest without regard to geography.
Looking at the numbers, deal activity in Canada
is down from the frenzied action of 2021, but it is
not too far off pre-pandemic activity. If the Bank
of Canada successfully reins in inflation this year

32 CHAMBERS.COM
and we return to a more predictable interest rate
and inflationary environment, financial markets
should stabilise. As markets conditions set-
tle, the authors anticipate a renewed focus on
deal-making with market participants adjusting
to a “new normal” and demonstrating renewed
confidence in investing for growth. The increase
in deal activity so far this year suggests this is
already beginning to happen. Barring any further
global shocks, the authors anticipate that this
trajectory will continue as confidence increases,
and deal-making will be strong throughout 2023,
albeit perhaps more complex and cautious.
The Pandemic, Three Years Later
Canada’s response to the COVID-19 crisis
All jurisdictions in Canada implemented to vary-
ing degrees public health measures to address
the COVID-19 pandemic, ranging from mask-
ing and social distancing requirements to lock-
downs and stay-at-home orders. The federal
government closed the border to non-essential
visitors and imposed vaccination, testing and
mandatory quarantine requirements. Virtually all
of these restrictions have now been lifted.
The pandemic’s impact on employment
The job market in Canada is close to full employ-
ment, with roughly as many people looking for
work as there are available jobs. While the tech-
nology and cannabis sectors saw significant
workforce lay-offs, many industries are strug-
gling to fill positions, particularly in the service
industry and in manufacturing.
The pandemic dramatically impacted employ-
ment practices in Canada. Canada was already
facing a demographic shift upwards in the aver-
age age of its workforce, and many older work-
ers are retiring earlier than usual. Many workers,
particularly those laid off in the service industry,
have moved on to other jobs, making it harder
for employers to rehire.
According to Statistics Canada, at the beginning
of 2021, 32% of Canadian employees worked
from home, compared to only 4% in 2016. While
most employers have since required employ-
ees to return to work, many businesses have
adopted a hybrid work model, allowing some
employees to work from home for some of the
time, and other businesses have continued to
be fully remote. While employees tend to claim
to be just as efficient at home as they are at the
office, many employers find productivity, quality
and morale can suffer. This tension is likely to
continue for some time.
Many businesses, particularly in the tech indus-
try, have embraced remote working as it allows
them to hire the best people regardless of geo-
graphic location. Canada is home to two of
the top ten cities for tech talent professionals,
and many US tech companies set up offices
in Canada because of the talent and Canada’s
more favourable immigration policies. Canada
announced in late 2022 an aggressive plan
to take in 500,000 immigrants a year by 2025
(roughly four times the number welcomed by the
United States, despite Canada being one-tenth
of the size).
Once a remote work policy is implemented,
it may prove hard to unwind. Many of these
employers are taking steps to address the
shortcomings of remote work, including regu-
lar in-person group meetings. Some employers
are using some of the money saved on office
space to pay for travel to bring remote workers
together.
While the ability to simply hire their workforce
wherever they are located can attract top tal-

33 CHAMBERS.COM
ent, there can be real challenges to the hybrid
workforce in an M&A context. Employees are an
integral asset that gets acquired in M&A transac-
tions, and with companies implementing cus-
tomised remote work practices, which inevita-
bly look different across the map, a few issues
can arise in an M&A context. Firstly, there may
be a heightened risk that integration of work-
forces can be more difficult if they have differ-
ent approaches to remote work. Without bring-
ing employees together in person to have them
buy-in to the vision of the merger, the success
of integrating employees to work well together
is threatened. Second, an acquiror needs to be
extra cautious when pursuing changes in the
work practice model post-merger as there can
be legal and financial implications for changing a
structure that employees have previously agreed
to.
Trends in Activism
According to data from Laurel Hill Advisory
Group, a leading North American shareholder
communications and advisory firm, the overall
number of activism cases was lower in 2022
relative to the blockbuster year of 2021, in which
activists disrupted by the pandemic got back
to business. However, targets were on average
bigger, and included two companies with market
capitalisations of over CAD10 billion for the first
time in a decade. Other trends include:
• Mining and oil & gas sector targets: As a
global hub for publicly traded companies
in these sectors, Canada also represents a
prominent battleground for their activists.
Some notable recent targets include Suncor
Energy Inc. and Turquoise Hill Resources Ltd.
• Majority voting: While shareholders can
generally only vote “for” directors or withhold
their vote (they cannot vote “against” direc-
tors), recent introductions of majority voting
policies on major stock exchanges such as
the TSX and in certain corporate statutes can
effectively force directors to resign if more
than 50% of votes are withheld from their
re-election at a meeting. In August 2022,
the Canada Business Corporations Act was
amended to require shareholders of a public
company to vote “for” or “against” directors
at annual meetings, subject to certain con-
ditions. A director must receive more “for”
votes than “against” votes in order to be
elected. This change does not apply where
there are more nominees than board seats
available. These changes have increasingly
been put to use: seven nominees failed to
gain at least 50% support last year (up from
one nominee in 2020), and 41 found them-
selves with only 50-60% support (up from 13
in 2020).
• Shareholder proposals: Changes to the Cana-
dian federal corporate statute in 2022 allow
shareholders to submit proposals later in the
annual meeting cycle, giving companies less
time to respond. Sixty-seven proposals were
submitted to a vote, nearly twice the num-
ber from the prior year, but only two passed,
roughly half of the typical proportion.
• ESG: Shareholder proposals are overwhelm-
ingly focused on environmental and social
considerations. Environmental proposals
which found the most support included
calls to limit fossil fuel financing, strengthen
environmental commitments, and establish a
say-on-climate advisory vote. Social propos-
als that attracted the most votes focused on
gender diversity and Indigenous community
relations (the latter was supported by man-
agement and was one of the two proposals to
be passed last year).
One of the reasons shareholder activism may
be popular in Canada is that certain aspects of

34 CHAMBERS.COM
the corporate and securities framework can be
advantageous to activist shareholders, such as:
• shareholders holding 5% of a company’s
shares can requisition a meeting, and only
1% ownership is required to submit most
proposals;
• no disclosure of a shareholder’s identity, hold-
ings or intentions is required until the share-
holder beneficially owns 10% or more of a
reporting issuer’s shares;
• shareholders are entitled to their company’s
shareholder list, and may be reimbursed for
costs associated with proxy contests;
• shareholders can communicate with up to 15
other shareholders without needing to issue a
dissident proxy circular;
• securities regulators are typically less defer-
ential to corporate defensive tactics such as
shareholder rights plans; and
• broad remedial provisions such as the
oppression remedy are available to stake-
holders in corporate law if a corporation has
unfairly disregarded their interests.
Friend-Shoring and Canada’s Increased
Regulatory Hurdles
In her speech in Toronto, Secretary Yellen was
highly critical of those countries that were “sitting
on the fence” and refusing to take action against
Russia for its abhorrent invasion of Ukraine on
24 February 2022. Secretary Yellen stated:
“The future of our international order, both for
peaceful security and economic prosperity, is at
stake.” She directed her most poignant criticism
at China for having affirmed its special relation-
ship with Russia.
In response to Russia’s invasion of Ukraine,
the federal government of Canada, in concert
with its allies, imposed wide-ranging economic
sanctions on Russia. Sanctions were already
in place following Russia’s disputed annexa-
tion of Crimea in 2014. The additional sanctions
imposed following the invasion of Ukraine in
2022 have been severe.
Many countries, including Canada and the Unit-
ed States, are increasingly protectionist and
providing generous subsidies to keep indus-
tries located at home. Europe heavily relied on
Russian gas before the invasion of Ukraine; the
United States frets about dependence on other
countries, particularly China, for batteries and
semiconductors. These interdependent relation-
ships are being fractured as governments pour
significant subsidies into domestic businesses.
There is a fear that these protectionist measures
will corrode global security, hold back growth,
skew markets and raise the cost of innovation,
particularly in the green economy.
Stricter Requirements for Acquisitions by
Non-Canadians
The past year has brought a sea change in the
federal government’s approach toward foreign
investment and national security review. Invest-
ments by entities with ties to Russia and Chi-
na, and any foreign investments into the criti-
cal minerals sector and certain other protected
industries, will now be scrutinised on national
security grounds. Proposed amendments would
grant the relevant Ministry new negotiation and
enforcement powers.
Under the Investment Canada Act, the acquisi-
tion of control of a Canadian business by a non-
Canadian, depending on its value and structure,
is either notifiable or reviewable. The establish-
ment of a new Canadian business by a non-
Canadian, regardless of its value or structure, is
subject to mandatory notification.

CHAMBERS GUIDE: Canada Corporate M&A Law and Trends 2023

CHAMBERS GUIDE: Canada Corporate M&A Law and Trends 2023

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CHAMBERS GUIDE: Canada Corporate M&A Law and Trends 2023