03. S take-Building and Beneficial Ownership Reporting Shareholders acquiring a significant position in a Canadian listed company are required to publicly disclose their ownership once they acquire beneficial ownership of 10% or more of any class of equity or voting securities of the company. Beneficial ownership includes shares that the filing shareholder has the right or obligation to acquire within 60 days, whether or not such right or obligation is conditional (for example, shares underlying options and other convertible securities or shares underlying physically settled derivatives). Equity derivatives may constitute beneficial ownership of the reference shares if the filer has the ability, formally or informally, to obtain the shares or to direct the voting of the shares held by the counterparty. Upon reaching 10%, the shareholder is required to promptly announce its acquisition by press release, file an early warning report within two trading days of the acquisition and stop acquiring any further securities of the relevant class for one full trading day after filing the early warning report. 6 Thereafter, the shareholder must report increases and decreases in its holdings of 2% or more, as well as when shareholdings fall below the 10% ownership threshold. Similar to the requirements of Rule 13d under the U.S. Securities Exchange Act of 1934, the early warning reporting rules require disclosure of the purpose of the shareholder and its joint actors in acquiring or disposing of the issuer’s securities and any plans or future intentions the shareholder and its joint actors may have that relate to or would result in, among other things, a corporate transaction, changes to the issuer’s capitalization or dividend policy, board or management changes or proxy solicitations. 7 Canadian early warning reporting requirements are regarded by some as being more lenient than those under Rule 13d because the Canadian requirement is triggered at 10%, whereas the U.S. requirement is triggered at 5%. However, the U.S. rules provide a considerably longer grace period for disclosing one’s position — the initial report must be filed within 10 calendar days (soon to be 5 business days 8 ) in contrast to Canada’s requirement for an immediate press release — and the U.S. rules do not impose a trading moratorium. ALTERNATIVE MONTHLY REPORTING For institutional investors, such as investment funds eligible to use the Alternative Monthly Reporting System (AMRS), 9 there is an exception from the trading moratorium and the obligation to issue an immediate press release and file an early warning report within two days. To rely on the AMRS, the shareholder must be an “eligible institutional investor.” This includes financial institutions, mutual funds and pension funds, and generally includes investment funds such as hedge funds that are managed by a registered investment adviser (including advisers registered by the U.S. Securities and Exchange Commission (SEC) under the
6 N ational Instrument 62-103, Early Warning System and Related Take-Over Bid and Insider Reporting Issues (NI 62-103), Part 3 and National Instrument 62-104, Take-Over Bids and Issuer Bids (NI 62-104), Part 5. 7 NI 62-103, Form 62-103F1, Item 5 and Form 62-103F2, Item 5. 8 See https://www.dwpv.com/en/Insights/Publications/2023/SEC-Amends-Beneficial-Ownership-Reporting-Rules. 9 NI 62-103, Part 4.
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