Not all shareholders are created equal, says Karrin Powys-Lybbe in The Globe and Mail

OSC Looks to Rewrite Rule Book on Poison Pills

November 29, 2011

Hostile corporate takeovers and "related-party transactions," such as Magna International Inc.'s controversial buyout of founder Frank Stronach’s multiple-voting shares last year, may soon become more difficult to do in Ontario.

Securities lawyers on Bay Street have been buzzing about remarks made at an event earlier this month by Naizam Kanji, the Ontario Securities Commission's deputy director of corporate finance, who laid out two key policy changes the OSC is considering in the wake of recent high-profile cases.

Karrin Powys-Lybbe said the OSC's newest proposal is meant to clarify the confusion around poison pills and to get the regulator out of the business of having to oversee so many hostile-takeover disputes. On the proposed to change to the related-party transaction rules, she said the move could end up being "disproportionate," by subjecting many more transactions to greater scrutiny, even if the problems identified by critics of the Magna deal are not present.

The current poison-pill policy, which generally puts the right of shareholders to vote on a takeover deal above the board's longer-term view of the company's best interests, also ignores the fact that different shareholders have different interests, Karrin said.

"Not all shareholders are created equal. … Is it the guy who's trying to flip the shares for a quick profit, or is it the person who’s there for a long-term hold?" she said. "The board I think should be in a position where it is thinking not just about individual shareholders and what their desires might be, but what is in the best interests of the company."

Read the full article here.

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