Private Placement Upheld in Context of Hostile Bid

 On November 3, 2015, the British Columbia Securities Commission (BCSC) released the reasons for its decision in Red Eagle, affirming that private placements can be made by target companies to a white knight in the context of a hostile bid where there is a legitimate need for the financing and where the purpose of the private placement is not to serve as a defensive tactic to thwart the competing bid.

The reasons are noteworthy in their acknowledgment of long-standing tensions between corporate law questions regarding fiduciary duties and securities regulators’ views on defensive tactics. These tensions have previously been highlighted by the Autorité des marchés financiers of Québec (AMF)  in its March 14, 2013, Consultation Paper, in which the AMF noted that the decision of the Bureau de décision et révision to cease trade a private placement by Fibrek to a white knight had led some to suggest that it was time to re-evaluate the approach securities regulators were taking to defensive tactics. However, defensive tactics were notably not addressed in the significant amendments to the Canadian take-over bid regime that the Canadian Securities Administrators (CSA) proposed earlier this year....

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