It believes the domestic takeover bid regime has become too ‘bidder friendly’ and is inconsistent with its stated goal of neutrality between bidders and target boards and their management. The AMF has suggested regulating all defensive tactics employed by target companies.

The AMF released a paper called An Alternative Approach to Securities Regulators’ Intervention in Defensive Tactics concurrently with the recent CSA proposals, both of which aimed to address the same issue, albeit through different methods. Both the CSA and the l’Autorité des marchés financiers (AMF) launched proposals aimed at overhauling the existing system. This is not the first time that regulators in Canada have moved to reform the country’s shareholder rights plans. The CSA noted in the past that “there is a possibility that the interests of management of the target company will differ from those of its shareholders”.

Indeed, the CSA has been divided on the issue of poison pills for years, going back and forth over which group should be allowed the greater input into a company’s future – the target’s board or its shareholders. The proposed changes have arisen from a prolonged period of uncertainty within the regulatory body.

The Canadian Securities Administrators (CSA) recently proposed a number of changes to the country’s takeover legislation which would dramatically impact the effectiveness of poison pills. Yet the tide appears to be turning against poison pills, at least in Canada. Companies have been quick to adopt this flexible defence when management has sought to protect their position or when the target firm is not interested in selling to a particular party. By diluting the acquiring company’s ownership stake in its target, the poison pill can be effective for both shareholders and management alike. While it has never successfully blocked an unsolicited takeover attempt, the poison pill approach has provided many companies with a strong negotiating position. Since its inception in the 1980s, the poison pill has proven to be a controversial tactic.

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