RE:RE:RE:RE:When Buyout happens As indicated, not as simple as having a board meeting and 51%.
Individual shareholders have to tender their shares putrsuant to takeover bid, unless done via Plan of Arrangement.
Here are some comments from major Bay Street law firm:
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There is a 50% minimum tender requirement for all formal bids. The bid is open for a minimum of 105 days, subject to the target board’s ability to shorten the period, to permit shareholders adequate time to consider the offer and tender their securities. If at the expiry of the initial bid period the minimum tender requirements and all other conditions of the bid have been satisfied or waived, the purchaser must extend the period for at least 10 days to allow additional shareholders to tender. At the expiration of the bid period, the purchaser takes up the shares and pays the tendering shareholders. If 90% of the shares have been tendered and taken up, the shareholders of the remaining 10% can be forced to tender their shares. However, where fewer than 90% but more than 66 2/3% of the shares (or 75% in the case of some British Columbia corporations) have been taken up and the purchaser wishes to acquire the remainder, the purchaser will then be required to do a second-stage squeeze-out, which generally requires the approval of two-thirds (or 75% in the case of some British Columbia corporations) of the shareholders and possibly a majority of the minority shareholders. Locked-up shares can be counted as part of the minority vote if the shares were given identical treatment. Shareholders will be accorded dissent rights when being forced out or during the second-stage squeeze-out.
There can be no discrimination (except with the approval of the securities commissions) between shareholders under a take-over bid. This means that significant shareholders must receive the same consideration per share as an individual who owns a single share of the company.
There are also restrictions on the purchases of the target’s securities prior to the bid. Essentially, the terms of the bid must be as favourable to the target’s shareholders as any pre-bid transactions. French translations of the bid documents will be required if the target company has shareholders in the province of Quebec.
In a friendly context, the takeover bid process will take approximately 50 to 65 days (from commencement of the preparation of the circular) to complete. However, the process may take longer if the purchaser is forced to go through with a second-stage squeeze-out.
(b) Plan of Arrangement
Plans of arrangement are used very often in friendly transactions, particularly where the buyer is a private equity fund. This form of transaction allows for a significant amount of structuring flexibility. In a plan of arrangement, the parties enter into an agreement. Often, the purchaser will seek out significant shareholders and enter into support agreements with them whereby the shareholders commit to vote in favour of the arrangement. The purchaser will then apply to the court for approval and direction as to how to proceed.
Once the approval has been obtained, the purchaser will mail out a proxy circular and the board of the target will call a meeting of its shareholders to approve the arrangement (a two-thirds majority for federally incorporated and most provincially incorporated companies and a majority of minority if the related party receives a collateral benefit). Once the arrangement has been completed, the purchaser then returns to court to obtain final approval. It is important to note that the court is not bound by the vote of the shareholders. The key consideration for court approval in an arrangement transaction is fairness to both the corporation and the affected stakeholders.
Different prices can be offered to different shareholders in an arrangement transaction, subject to the court’s fairness review and shareholder approval.
To proceed by way of an arrangement, the corporation applying to the court must be solvent. Shareholders are usually accorded dissent rights, and there is no restriction on the purchase of the target’s shares prior to the transaction, subject to insider trading restrictions. A French translation of the arrangement documents may be required, depending on the extent of the transaction’s connection to Quebec and the number of shareholders located in that province.
The entire process (ending with final court approval) takes approximately 50 to 65 days (from commencement of the preparation of the circular) to complete. An arrangement can be faster than a take-over bid if the take-over involves a second-stage squeeze-out.