CANADA LAW AND PRACTICE Contributed by: Kevin West, Andrea Hill, Priya Ratti and Meryam Kellow, SkyLaw
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. “soft” lock- up allows a shareholder the right to withdraw and accept a higher offer, while “hard” or irrevo- cable lock-up does not. Hard lock-ups are less common, and are generally time-limited. 7. Disclosure 7.1 Making a Bid Public A takeover bid in Canada is launched by: • mailing the bid materials to the target 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, 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. If the acquiror is a reporting issuer, it may incor - porate by reference its existing continuous dis - closure. Securities laws in Canada require that annual and quarterly financial statements of reporting issuers be prepared in accordance with Cana - dian generally accepted accounting principles
21
CHAMBERS.COM
Made with FlippingBook Ebook Creator