Canadian regulators seek more leeway for boards battling hostile takeovers

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TORONTO - Canada's provincial security regulators are proposing a new set of rules for so-called poison pills, a type of defence against hostile corporate takeovers.

The Canadian Securities Regulators say the changes would give a target company's board of directors more discretion about when to lift the defence.

Under current rules, Canadian regulators will generally suspend a shareholder rights plan after a limited time.

The CSA says regulators wouldn't intervene under the new rules except under extraordinary circumstances.

However, shareholders could terminate a plan at any time with a majority vote.

The proposed changes will be open for comment until June 12.

The typical shareholder rights plan gives a company's board the discretion to issue additional stock, usually at a cheap price and with conditions that make a hostile takeover too expensive — financially poisonous.

However, the plans are primarily intended to give boards enough time to find another deal to compete with the hostile bid, rather than stop a takeover completely.

"The CSA believe that the proposed rule will modernize, harmonize and codify an appropriate regulatory approach to rights plans in Canada," said Bill Rice, chairman of the Alberta Securities Commission and the CSA.

"Barring exceptional circumstances, the decision to adopt and maintain a rights plan would be a matter for company boards and shareholders, not securities regulators."

Organizations: CSA, Canadian Securities Regulators, Alberta Securities Commission

Geographic location: Canada, TORONTO

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