This is the second installment of a series of posts in which I will be critically examining a number of arguments made by proponents of the view that the time has come for Canadian securities regulators to “vacate the field” of poison pill regulation, leaving oversight of shareholder rights plans to the courts. Evaluating the soundness of their arguments has become a matter of potentially far-reaching consequence following a proposal to reform poison pill regulation put forth earlier this year by the Canadian securities regulators, in which they effectively propose to adopt — in my view, inappropriately — the recommendation that they “vacate the field” of poison pill regulation. The views expressed in this post, as in all of my posts, are mine alone and should not be taken to represent the views of my partners.
In my last contribution to Timely Disclosure I highlighted the repeated failure by proponents of the “vacate the field” perspective on poison pill regulation to appreciate that Canadian securities regulators have a legitimate basis, firmly rooted in their statutory mandates of investor protection and capital market fairness and efficiency, and quite independent of any basis the courts may have, for regulating poison pills. Their oversight in this regard has spawned a confused belief that, in applying the defensive tactics policy to prevent poison pills from interfering indefinitely with the ability of target company shareholders to respond to an unsolicited takeover bid, Canadian securities regulators have been specifying the contents, and monitoring the observance, of the fiduciary duties of target company directors. Echoes of that confusion reverberate through a number of the arguments made by the “vacate the field” crowd.
How the confusion underpinning the “vacate the field” perspective undermines the argument that poison pill regulation by the Canadian securities regulators is ultra vires
The most straight-forward version of the “vacate the field” argument, and the one that most obviously suffers from the confusion at issue, invites us to conclude, based upon little more than the observation (admittedly correct, so far as it goes) that it is the proper function of courts to interpret and enforce rights and duties that arise under corporate law, that the regulation of poison pills by Canadian securities regulators is, ipso facto, ultra vires and places a “thumb on the scale” of poison pill regulation, generating (perverse) adjudicative outcomes that depart from those one might expect were poison pill regulation left to the courts (as it is in the United States).
Continue Reading Give to Caesar what is due to Caesar II: On the supposed inconsistency between corporate law and poison pill regulation by the Canadian Securities Regulators