In a move seen as a barrier to acquisitions, but also a major step forward for shareholder democracy, the Toronto Stock Exchange unveiled last week a proposed new rule that would require listed companies to seek approval from their shareholders when they issue more than 50% of their outstanding shares to buy another public company.
"This is going to affect the level of transactions for certain," says Michael Siltala. He warns that the proposed rule would require companies to conduct potentially lengthy and expensive public relations campaigns to bring shareholders onside: "It will add a new hurdle to negotiations and in some cases it will be a significant hurdle." It will create incentive for "the target to sell itself to someone who can complete a deal, which might be just a bigger company or one in a jurisdiction that doesn't have the same rules."
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