Guide to Shareholder Activism and Proxy Contests in Canada

U.S. Investment Advisers Act of 1940 ). Under the AMRS, the shareholder must file a report within 10 days of the end of the month in which the 10% threshold is crossed and thereafter must file updated reports when its ownership increases or decreases above or below specified levels (i.e., 12.5%, 15%, 17.5%, etc.), when the filer’s ownership falls below 10% or there is a change in a material fact contained in the prior report. DISQUALIFICATION FROM AMRS A shareholder will be disqualified from AMRS eligibility if it intends to make a formal takeover bid for the company or to propose a transaction that would give the shareholder effective control over the company. A shareholder is also disqualified if it solicits proxies (including via private solicitation under an exemption) in support of dissident board nominees or in support of a merger not supported by the issuer’s management or in opposition to a merger proposed by the issuer’s management. 10 Notably, merely having an intention to propose a dissident slate at a shareholders’ meeting or holding securities for the purpose of influencing the control or management of the company does not disqualify the shareholder from relying on the AMRS. This is in contrast to Rule 13d, which requires a shareholder to switch from a Schedule 13G filing to a Schedule 13D filing if its intention changes from being a passive investor to being active (for example, as a result of deciding to propose a nominee for the board or merely having the purpose or effect of influencing the control of the company). TREATMENT OF DERIVATIVES Cash-settled equity derivatives are not required to be included in determining whether an early warning report obligation is triggered. However, for a filer that is otherwise a 10% or greater holder, any equity derivatives it holds must be described in the early warning report, including a description of the material terms of the derivatives and their impact on the filer’s security holdings. To address concerns that derivatives could be used to “park” or hide ownership of shares, the Canadian Securities Administrators (CSA) has provided guidance regarding circumstances in which an investor will be deemed to beneficially own shares underlying an equity derivative. For example, an investor could be deemed to beneficially own shares underlying a derivative (whether or not cash-settled) when it has the ability, formally or informally, to obtain the securities or to direct the voting of securities held by a counterparty to the derivative. The CSA announced in 2022 that it was undertaking a review of the early warning reporting regime to consider the scope of disclosure requirements relating to equity derivatives. This was prompted, in part, by a 2021 decision of the Alberta Securities Commission (ASC) in Re Bison Acquisition Corp. 11 ( Re Bison ), in which the ASC found the use and non-disclosure of cash-settled total return swaps by a hostile bidder in a competitive bid situation to be “contrary to the public interest” in the circumstances of that case.

10 NI 62-103, s. 4.2. 11 2021 ABASC 188.