Post-Bid: Directors’ Circular (Response) – Securities Regulation

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You can grab notes on other topic from here.

  • The directors of the target company have an obligation to deliver a director’s circular to all their shareholders within 15 days from the date of the bid

o They must tell SHs that they recommend that the shareholders accept the bid, reject the bid, make no recommendation at all, or say that they’ll let them know at a later time, and give their reasons for any of these decisions

o If within the 15 day period you aren’t ready to give your reasons, you can do it later in a second document as long as it is 7 days BEFORE the expiry of the bid

  • As SHs, you are entitled to know what your directors/managers think of this bid!

o *and keep in mind that directors don’t always act in the company’s best interest b/c it conflicts with their own interests

  1. Section 95: Offeree Issuer’s Obligations
  • (1) Duty to Prepare and Send Directors’ Circular: If a formal take-over bid has been made, the board of directors of the offeree issuer shall prepare and send, not later than 15 days after the date of the bid, a directors ’ circular to every person or company to whom the bid was required to be sent.
  • (2) Duty to Evaluate and Advise: The board of directors of the offeree issuer shall evaluate the terms of a formal take-over bid and, in the directors ’ circular,

o (a) shall recommend to security holders that they accept or reject the bid and give reasons for the recommendation;

o (b) shall advise security holders that the board is unable to make, or is not making, a

recommendation and state the reasons for being unable to make a recommendation or for not making a recommendation; or

o (c) shall advise security holders that the board is considering whether to make a recommendation to accept or reject the bid, shall state the reasons for not making a recommendation in the directorscircular and may advise security holders that they should not deposit their securities under the bid until they receive further communication from the board in accordance with clause (a) or (b).

• (3) Further Communication: If clause (2) (c) applies, the board of directors shall communicate to security holders a recommendation or the decision that it is unable to make, or is not making, a recommendation, together with the reasons for the recommendation or the decision, at least seven days before the scheduled expiry of the period during which securities may be deposited under the bid.

  1. Legislative Goal Met Information and time
  2. Shareholders are entitled to know what the directors think: gives them sufficient information, considering they may have less knowledge than the individuals working on the inside
  3. Have enough time to make an informed decision: If they’re going to give a recommendation (or not give one), they have to let the SHs know of their decision with enough time for the SHs to make an informed decision about tendering

You can grab notes on other topic from here.


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