CHAPTER 03 Pre-bid Considerations
Public Disclosure of Accumulations
EARLY WARNING REPORTING – Similar to U.S. 13D/13G filings, intended to alert the market to the acquisition of significant holdings in a public company. – Acquisition of equity or voting securities representing 10% or more of the class (together with securities beneficially owned by purchaser and its joint actors) requires purchaser to issue a press release no later than opening of trading on the business day following the acquisition, and to file an “early warning” report within two business days. – The purchaser and its joint actors are prohibited from making additional acquisitions of the shares until the expiry of one business day from the date the early warning report is filed, unless the purchaser and its joint actors beneficially own 20% or more of the class of securities (no similar moratorium on purchases under U.S. law). – Applies to acquisition of beneficial ownership of securities and to the acquisition of the power to exercise control or direction over securities. Must count in the 10% any securities that a person has the right or obligation, whether or not on conditions, to acquire within 60 days (e.g., options, warrants, share purchase agreement). – Equity derivatives may constitute beneficial ownership of underlying securities if the investor has the ability, formally or informally, to obtain the securities or to direct the voting of securities held by a counterparty. – No requirement for non-insiders to report economic interest under cash-settled equity swap, although there could be “public interest” considerations which militate in favour of disclosure. – Disclosure must include the terms of any agreement with respect to the acquired securities, the price paid and the purpose of the purchase. Must also disclose any “plans or future intentions” with respect to specific actions enumerated in the rule, including the acquisition or disposition of additional securities, corporate transaction, board change or proxy solicitation. – Disclosure must include the material terms of related financial instruments, any securities lending agreements and any other arrangements involving the securities. – Trap for the unwary: disclosure threshold is reduced to 5% when a takeover bid by another party or an issuer bid is outstanding, but the restriction on acquisitions until after the report is filed does not apply. – For a target whose shares are registered with the SEC in the United States (e.g., targets with a U.S. listing), the disclosure of accumulations on Form 13D is required at the 5% level, but the purchaser is not prohibited from acquiring further securities pending filing of the 13D. – A change in material fact in the report or an increase or decrease in ownership equal to 2% of the outstanding shares requires the purchaser to “promptly” issue a further press release and file a report. In addition, shareholders are required to report when they have fallen below the 10% threshold.
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Davies | dwpv.com
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