The future of poison pills in Canada

But, by empowering management and the board, the pill also places a wedge between the bidder and the target shareholders to whom it has made the offer. [...] If triggered, the poison pill allows all existing shareholders, other than the original bidder, to purchase shares at a discount, which has the effect of diluting the bidder’s holdings in the target and making its bid more expensive.1 The target may adopt a poison pill prior to any hostile bid being launched or it may do so in the face of a bid (a so-called “tactical” pill). [...] Once shareholders ratify the pill, the decision rests with the board regarding whether to trigger it; in reality, this rarely happens as the hostile bidder typically negotiates with the target or launches a proxy contest to replace the target board altogether. [...] Essential Policy Intelligence e 3 -Brief The Weaknesses of Poison Pills Because of the potential dilution effect of triggered pills, the pill (and by implication, the legal rules that permit the use of this defensive tactic) allows discrimination between the bidder and all other shareholders of the target. [...] Securities commissions, which are administrative bodies and are not required to adhere to a system of precedent, have held that a number of factors must be considered in making the determination of whether a defensive tactic can remain in place, including: whether the bid is coercive or unfair to target shareholders; when the pill was adopted; whether the board obtained shareholder approval of the