December 20, 2010
With the release of the Ontario Securities Commission's reasons in the Baffinland Iron Mines matter earlier this month, Ontario and Canadian law on the use of poison pills certainly become less murky.
In July, the British Columbia Securities Commission's reasons in the Lions Gate Entertainment matter rejected the notion that the Neo and Pulse matters had altered the traditional approach. Although the facts differed substantially from those in the Neo matter, the OSC took the occasion to clarify its position on poison pills: The panel explained that the Neo case had not altered the law and that the deciding factor was shareholder approval of the rights plan in the face of the hostile bid. In its view, whether the board was acting within its fiduciary duties was a secondary matter, relevant only after the OSC had determined that leaving the rights plan in place was consistent with shareholders' wishes.
"Baffinland brings the thinking of Ontario and B.C. regulators closer, but does not fully reconcile their views because in Ontario, the question remains open as to whether continued deployment of a rights plan is justified on the basis of a shareholder vote when the board is not seeking an alternative bid," says Thomas Yeo. "Lions Gate said that a vote was irrelevant in those circumstances, but the OSC did not."
Read the full article here.