A recent ruling by the British Columbia Securities Commission points to a rift between regulators in Canada’s different provinces when it comes to shareholder rights during unsolicited share acquisition offers.
BCSC sided with Icahn Partners LP when it stopped Lions Gate Entertainment Corp., the Vancouver and California-based film and television studio, from implementing a shareholder rights plan to stop an attempt by American financier Carl Icahn to take a larger share of the company. Lions Gate wanted to stop trading on its shares and have its shareholders vote to stop Icahn’s share in the company from growing.
When the B.C. securities regulator released its explanation in Icahn Partners LP v. Lions Gate Entertainment Corp. last week, it attracted the attention of Canadian securities lawyers because it went against rulings in similar cases by the securities commissions in Alberta and Ontario.
The B.C. commissioners said they were aware they were going in another direction from the decisions of the Alberta Securities Commission in Pulse Data Inc. and the Ontario Securities Commission in Neo Material Technologies Inc.
“Those cases may be distinguishable on the facts, but we also have reservations about them. Our reservations centre around their apparent departure from the Canadian securities regulators’ view of the public interest as it relates to shareholder rights plan prior to those decisions,” the B.C. commissioners said in Icahn. “We will elaborate further on our reservations about those decisions in our final reasons.”
There may also be a split in the B.C. commission with only two out of the three commissioners supporting the decision, and the appeal process might reverse matters, says Seumas Woods, a partner at Blake Cassels & Graydon LLP.
“What you have here is British Columbia telling Ontario and Alberta, ‘We don’t think you are right,’” says Woods. “It is unusual for the commissions to differ in opinion. However, the appeal process on this case is still on and it might take months to complete.”
A shareholder rights plan, also known as a poison pill, is an important tool available to the directors of a publicly traded corporation to maximize shareholder value in the face of a hostile takeover bid.
The latest disparities between the different provincial regulators come at a time when Canada’s federal government is getting ready to make a decision on whether it wants to have a national securities regulator.
Quebec and Alberta have already voiced their opposition to a single regulator, citing fears that it will hurt their businesses and cause massive job losses in the case of Quebec, if Montreal is not selected as the regulator’s seat.
Clarification: It is the full decision that might take months to arrive in Icahn Partners LP v. Lions Gate. The appeal process is over.
