BURLINGTON BUSINESS LAWYER ontario business corporations act

ONTARIO BUSINESS CORPORATIONS ACT 05/12/2009

Important Notice: The following statute is subject to amendment and legislative changes, so particular attention should be directed to the date of the statute, with reference being made to the official government website for the most current version of a statute at www.e-laws.gov.on.ca.

PART XV

COMPULSORY ACQUISITIONS

Application and definitions
187. (1) This Part applies only to an offering corporation. R.S.O. 1990, c. B.16, s. 187 (1).
Definitions
(2) In this Part,
“dissenting offeree” means a person to whom a take-over bid or issuer bid is made who does not accept the take-over bid or issuer bid and includes a person who subsequently acquires a security that is the subject of the bid; (“pollicité dissident”)
“equity security” means any security other than a debt obligation of a corporation; (“titre de participation”)
“issuer bid” means an offer made by a corporation to security holders to purchase, redeem or otherwise acquire any or all of a class of the securities of the corporation, other than where,
(a) the securities to be purchased, redeemed or otherwise acquired are debt securities that are not convertible into equity securities,
(b) the securities are to be purchased, redeemed or otherwise acquired in accordance with the terms and conditions thereof or otherwise agreed to at the time they were issued or subsequently varied by amendment of the documents setting out those terms and conditions, or are acquired to meet sinking fund requirements or from an employee or a former employee of the issuer or of an affiliate, or
(c) the purchases, redemptions or other acquisitions to be made are required by the instrument creating or governing the class of securities or by this Act; (“offre de l’émetteur”)
“offeree” means a person to whom a take-over bid or an issuer bid is made; (“pollicité”)
“offeree corporation” means a corporation whose securities are the subject of a take-over bid; (“société pollicitée”)
“offeror” means a person, other than an agent, who makes a take-over bid or an issuer bid; (“pollicitant”)
“take-over bid” means an offer made to security holders of an offeree corporation to purchase directly or indirectly voting securities of the offeree corporation, where the voting securities that are the subject of the offer to purchase, the acceptance of the offer to sell or the combination thereof, as the case may be, together with the securities currently owned by the offeror, its affiliates and associates will carry, in the aggregate, 10 per cent or more of the voting rights attached to the voting securities of the offeree corporation that would be outstanding on exercise of all currently exercisable rights of purchase, conversion or exchange relating to voting securities of the offeree corporation; (“offre d’achat visant à la mainmise”)
“voting security” includes,
(a) a security currently convertible into a voting security or into another security that is convertible into a voting security,
(b) a currently exercisable option or right to acquire a voting security or another security that is convertible into a voting security, or
(c) a security carrying an option or right referred to in clause (b). (“valeur mobilière avec droit de vote”) R.S.O. 1990, c. B.16, s. 187 (2).
Take-over or issuer bid
188. (1) If within 120 days after the date of a take-over bid or an issuer bid, the bid is accepted by the holders of not less than 90 per cent of the securities of any class of securities to which the bid relates, other than securities held at the date of the bid by or on behalf of the offeror, or an affiliate or associate of the offeror, the offeror is entitled, upon complying with this section, to acquire the securities held by dissenting offerees. R.S.O. 1990, c. B.16, s. 188 (1).
Shares of dissenting offeree
(2) An offeror may acquire the securities of any class to which the bid relates that are held by a dissenting offeree by sending, on or before the earlier of the sixtieth day following the termination of the bid and the one hundred and eightieth day following the date of the bid, an offeror’s notice to each dissenting offeree stating in substance that,
(a) offerees holding more than 90 per cent of the securities to which the bid relates other than securities held at the date of the bid by or on behalf of the offeror or an affiliate or associate of the offeror have accepted the bid;
(b) the offeror is bound to take up and pay for or has taken up and paid for the securities of the offerees who accepted the bid;
(c) a dissenting offeree is required to elect,
(i) to transfer his, her or its securities to the offeror on the terms on which the offeror acquired the securities of the offerees who accepted the bid, or
(ii) to demand payment of the fair value of his, her or its securities in accordance with subsections (13) to (21) by notifying the offeror within twenty days after receipt of the offeror’s notice;
(d) a dissenting offeree who does not notify the offeror in accordance with subclause (c) (ii) is deemed to have elected to transfer his, her or its securities to the offeror on the same terms that the offeror acquired the securities from the offerees who accepted the bid; and
(e) a dissenting offeree must send the certificates representing his, her or its securities to which the bid relates to the offeree corporation or, in the case of an issuer bid, to the offeror within twenty days after the dissenting offeree receives the offeror’s notice. R.S.O. 1990, c. B.16, s. 188 (2); 2000, c. 26, Sched. B, s. 3 (10).
Notice
(3) In the case of a take-over bid, concurrently with sending the offeror’s notice under subsection (2), the offeror shall send or deliver to the offeree corporation a copy of the offeror’s notice, which constitutes a demand under subsection 88 (1) of the Securities Transfer Act, 2006, that the offeree corporation not register a transfer with respect to each share held by a dissenting offeree. 2006, c. 8, s. 122.
Sending in share certificates
(4) A dissenting offeree to whom an offeror’s notice is sent under subsection (2) shall, within twenty days after receiving that notice,
(a) send the certificates representing his, her or its securities to which the take-over bid relates to the offeree corporation; or
(b) send the certificates representing his, her or its securities to which the issuer bid relates to the offeror. R.S.O. 1990, c. B.16, s. 188 (4).
Payment by offeror
(5) Within twenty days after the offeror sends an offeror’s notice under subsection (2), the offeror shall pay or transfer to the offeree corporation the amount of money or other consideration that the offeror would have had to pay or transfer to all dissenting offerees if they had elected to accept the take-over bid under subclause (2) (c) (i). R.S.O. 1990, c. B.16, s. 188 (5).
Trust funds
(6) An offeree corporation is deemed to hold in trust for dissenting offerees the money or other consideration it receives under subsection (5), and the offeree corporation shall deposit the money in a separate account in a bank or other body corporate any of whose deposits are insured by the Canada Deposit Insurance Corporation and shall place the other consideration in the custody of a bank or other such body corporate. R.S.O. 1990, c. B.16, s. 188 (6).
Note: On a day to be named by proclamation of the Lieutenant Governor, subsection (6) is repealed by the Statutes of Ontario, 2007, chapter 7, Schedule 7, subsection 181 (1) and the following substituted:

Trust funds
(6) An offeree corporation is deemed to hold in trust for dissenting offerees the money or other consideration it receives under subsection (5), and the offeree corporation shall deposit the money in a separate account in a financial institution described in subsection (7.1) and shall place the other consideration in the custody of such a financial institution. 2007, c. 7, Sched. 7, s. 181 (1).
See: 2007, c. 7, Sched. 7, ss. 181 (1), 192 (2).

Idem
(7) The offeror making an issuer bid is deemed to hold in trust for dissenting offerees the money or other consideration that the offeror would have had to pay or transfer to all dissenting offerees if they had elected to accept the issuer bid under subclause (2) (c) (i) and, within twenty days after the issuer sends an offeror’s notice under subsection (2), the issuer shall deposit any such money in a separate account in a bank or other body corporate any of whose deposits are insured by the Canada Deposit Insurance Corporation and shall place the other consideration in the custody of a bank or such other body corporate within twenty days after the offeror sends an offeror’s notice under subsection (2). R.S.O. 1990, c. B.16, s. 188 (7).
Note: On a day to be named by proclamation of the Lieutenant Governor, subsection (7) is repealed by the Statutes of Ontario, 2007, chapter 7, Schedule 7, subsection 181 (1) and the following substituted:

Same
(7) The offeror making an issuer bid is deemed to hold in trust for dissenting offerees the money or other consideration that the offeror would have had to pay or transfer to all dissenting offerees if they had elected to accept the issuer bid under subclause (2) (c) (i) and, within 20 days after the issuer sends an offeror’s notice under subsection (2), the issuer shall deposit any such money in a separate account in a financial institution described in subsection (7.1) and shall place the other consideration in the custody of such a financial institution within 20 days after the offeror sends an offeror’s notice under subsection (2). 2007, c. 7, Sched. 7, s. 181 (1).
Same
(7.1) A financial institution referred to in subsection (6) or (7) is,
(a) a bank or authorized foreign bank within the meaning of section 2 of the Bank Act (Canada);
(b) a corporation registered under the Loan and Trust Corporations Act;
(c) a credit union within the meaning of the Credit Unions and Caisses Populaires Act, 1994; or
(d) a retail association as defined under the Cooperative Credit Associations Act (Canada). 2007, c. 7, Sched. 7, s. 181 (1).
See: 2007, c. 7, Sched. 7, ss. 181 (1), 192 (2).

Notice of compliance
(8) Within ten days after the offeror complies with subsection (5) or subsection (7), as the case may be, the offeror shall give notice of the date of such compliance to all dissenting offerees. R.S.O. 1990, c. B.16, s. 188 (8).
Application to court
(9) At any time prior to the thirtieth day following the day upon which the offeror’s notice referred to in subsection (2) is sent to dissenting offerees, a dissenting offeree who has demanded payment of the fair value of his, her or its securities in accordance with subclause (2) (c) (ii) may apply to the court for an order requiring the person who has sent the offeror’s notice to provide, in such form as the court considers appropriate, such additional security for payment to dissenting offerees of the fair value of their securities as the court may determine to be necessary, pending the determination of such fair value. R.S.O. 1990, c. B.16, s. 188 (9).
Where shares deemed acquired
(10) The securities of all dissenting offerees shall be deemed to have been acquired by the offeror,
(a) where an application under subsection (9) has not been made within the time set out in subsection (9), upon the expiration of that time; or
(b) where an application has been made under subsection (9), upon compliance with the order made in respect of the application. R.S.O. 1990, c. B.16, s. 188 (10).
Duties of offeree corporation
(11) Within ten days after the acquisition of the securities of dissenting offerees under subsection (10) by an offeror who has made a take-over bid, the offeree corporation shall,
(a) issue to the offeror a security certificate in respect of the securities that were held by dissenting offerees;
(b) send to each dissenting offeree who elects to accept the take-over bid terms under subclause (2) (c) (i) and who sends his, her or its security certificates as required under clause (4) (a), the money or other consideration to which the dissenting offeree is entitled; and
(c) send to each dissenting offeree who has not sent his, her or its security certificates as required under clause (4) (a), notice stating in substance that,
(i) the certificates representing the dissenting offeree’s securities have been cancelled,
(ii) the offeree corporation or some designated person holds in trust for the dissenting offeree the money or other consideration to which the dissenting offeree is entitled as payment for or in exchange for his, her or its securities, and
(iii) the offeree corporation will, subject to subsections (13) to (21), send that money or other consideration to the dissenting offeree forthwith after receiving his, her or its securities. R.S.O. 1990, c. B.16, s. 188 (11).
Payment by offeror
(12) Within ten days after the acquisition of the securities of dissenting offerees under subsection (10) by an offeror who has made an issuer bid, the offeror shall,
(a) send to each dissenting offeree who elects to accept the issuer bid terms under subclause (2) (c) (i) and who sends his, her or its security certificates as required under clause (4) (b), the money or other consideration to which the dissenting offeree is entitled; and
(b) send to each dissenting offeree who has not sent his, her or its security certificates as required under clause (4) (b) a notice stating in substance that,
(i) the certificates representing the dissenting offeree’s securities have been cancelled,
(ii) the offeror or some designated person holds in trust for the dissenting offeree the money or other consideration to which the dissenting offeree is entitled as payment for or in exchange for his, her or its securities, and
(iii) the offeror will, subject to subsections (13) to (21), send that money or other consideration to the dissenting offeree forthwith after receiving his, her or its securities. R.S.O. 1990, c. B.16, s. 188 (12).
Application to fix fair value
(13) If a dissenting offeree has elected to demand payment of the fair value of his, her or its securities under subclause (2) (c) (ii), the offeror may, in the case of a take-over bid, within twenty days after it has complied with subsection (5) or, in the case of an issuer bid, within twenty days after it has complied with subsection (7), apply to the court to fix the fair value of the securities of that dissenting offeree. R.S.O. 1990, c. B.16, s. 188 (13).
Idem
(14) If an offeror fails to apply to the court under subsection (13), a dissenting offeree may apply to the court for the same purpose within a further period of twenty days. R.S.O. 1990, c. B.16, s. 188 (14).
Where no application
(15) If no application is made to the court under subsection (13) or (14) within the periods set out in those subsections, a dissenting offeree is deemed to have elected to transfer his, her or its securities to the offeror on the same terms that the offeror acquired the securities from offerees who accepted the take-over or issuer bid and, provided that the dissenting offeree has complied with subsection (4), the issuer or the offeree corporation, as the case may be, shall pay or transfer to the dissenting offeree the money or other consideration to which the dissenting offeree is entitled. R.S.O. 1990, c. B.16, s. 188 (15).
Security for costs not required
(16) A dissenting offeree is not required to give security for costs in an application made under subsection (13) or (14). R.S.O. 1990, c. B.16, s. 188 (16).
Parties
(17) Upon an application under subsection (13) or (14),
(a) all dissenting offerees referred to in subclause (2) (c) (ii) whose securities have not been acquired by the offeror shall be joined as parties and are bound by the decision of the court; and
(b) the offeror shall notify each such dissenting offeree of the date, place and consequences of the application and of the dissenting offeree’s right to appear and be heard in person or by counsel. R.S.O. 1990, c. B.16, s. 188 (17).
Idem
(18) Upon an application to the court under subsection (13) or (14), the court may determine whether any other person is a dissenting offeree who should be joined as a party, and the court shall then fix a fair value for the securities of all dissenting offerees. R.S.O. 1990, c. B.16, s. 188 (18).
Appointment of appraisers
(19) The court may appoint one or more appraisers to assist the court in fixing a fair value for the securities of each dissenting offeree. R.S.O. 1990, c. B.16, s. 188 (19).
Final order
(20) The final order of the court shall be made against the offeror in favour of each dissenting offeree. R.S.O. 1990, c. B.16, s. 188 (20).
What court may order
(21) In connection with proceedings under this section, the court may make any order it thinks fit and, without limiting the generality of the foregoing, it may,
(a) fix the amount of money or other consideration that is required to be held in trust under subsection (6) or (7);
(b) order that the money or other consideration be held in trust by a person other than,
(i) the offeree corporation, or
(ii) in the case of an issuer bid, the offeror corporation;
(c) allow a reasonable rate of interest on the amount payable to each dissenting offeree from the date the dissenting offeree sends his, her or its security certificates under subsection (4) until the date of payment; or
(d) order that any money payable to a dissenting offeree who cannot be found be paid to the Public Trustee. R.S.O. 1990, c. B.16, s. 188 (21).
Where corporation required to acquire securities
189. (1) Where 90 per cent or more of a class of securities of a corporation, other than debt obligations, are acquired by or on behalf of a person, the person’s affiliates and the person’s associates, then the holder of any securities of that class not counted for the purposes of calculating such percentage shall be entitled in accordance with this section to require the corporation to acquire the holder’s securities of that class. R.S.O. 1990, c. B.16, s. 189 (1).
Notice
(2) Every corporation, within thirty days after it becomes aware that security holders are entitled to require it to acquire their securities under subsection (1), shall send a written notice to each such security holder that the security holder may within sixty days after the date of such notice require the corporation to acquire his, her or its securities. R.S.O. 1990, c. B.16, s. 189 (2).
Idem
(3) The notice sent by the corporation under subsection (2) shall,
(a) set out a price that the corporation is willing to pay for the securities;
(b) give the basis for arriving at the price;
(c) state the location where any supporting material used for arriving at the price may be examined and extracts taken therefrom by the security holder or a duly authorized agent; and
(d) state that if the security holder is not satisfied with the price offered by the corporation in the notice, the security holder is entitled to have the fair value of his, her or its securities fixed by the court. R.S.O. 1990, c. B.16, s. 189 (3).
Election by security holder
(4) Where a security holder receives a notice under subsection (2) and wishes the corporation to acquire his, her or its securities, the security holder may, within sixty days after the date of the notice,
(a) elect to accept the price offered by the corporation by giving notice of acceptance to the corporation and by forthwith sending his, her or its security certificates to the corporation; or
(b) notify the corporation that the security holder wishes to have the fair value of his, her or its securities fixed by the court. R.S.O. 1990, c. B.16, s. 189 (4).
Application to fix fair value
(5) Where a security holder wishes to have the fair value of his, her or its securities fixed by the court, the corporation shall make an application to the court within ninety days after the date of the notice under subsection (2). R.S.O. 1990, c. B.16, s. 189 (5).
Idem
(6) If a corporation fails to send notice under subsection (2), a security holder, after giving the corporation thirty days notice of intention so to do, may apply to the court to have the fair value of his, her or its securities fixed. R.S.O. 1990, c. B.16, s. 189 (6).
Idem
(7) If a corporation fails to make an application to the court as required under subsection (5), a security holder may make the application. R.S.O. 1990, c. B.16, s. 189 (7).
Parties
(8) Upon an application to the court under subsection (5), (6) or (7),
(a) all security holders who have notified the corporation under clause (4)(b) may be joined as parties as the court thinks fit and, if so joined, are bound by the decision of the court; and
(b) the corporation shall notify each security holder entitled to notice under subsection (2) of the date, place and purpose of the application and of the security holder’s right to appear and be heard in person or by counsel. R.S.O. 1990, c. B.16, s. 189 (8).
Idem
(9) Upon an application to the court under subsection (5), (6) or (7), the court may determine whether any security holders should properly be sent or have been sent notice and whether such security holders should be joined as parties. R.S.O. 1990, c. B.16, s. 189 (9).
Appointment of appraiser
(10) The court may appoint one or more appraisers to assist the court in fixing a fair value for the securities. R.S.O. 1990, c. B.16, s. 189 (10).
Final order
(11) The final order of the court shall be made against the corporation in favour of each entitled security holder. R.S.O. 1990, c. B.16, s. 189 (11).
Security not required
(12) A security holder requesting the court to fix the fair value of his, her or its securities is not required to give security for costs on the application. R.S.O. 1990, c. B.16, s. 189 (12).
Costs
(13) The costs under this section shall be on a solicitor and client basis. R.S.O. 1990, c. B.16, s. 189 (13).
Going private transaction
190. (1) In this section,
“affected security” means a participating security of a corporation in which the interest of the holder would be terminated by reason of a going private transaction; (“valeur mobilière visée”)
“going private transaction” means an amalgamation, arrangement, consolidation or other transaction carried out under this Act by a corporation that would cause the interest of a holder of a participating security of the corporation to be terminated without the consent of the holder and without the substitution therefor of an interest of equivalent value in a participating security that,
(a) is issued by the corporation, an affiliate of the corporation or a successor body corporate, and
(b) is not limited in the extent of its participation in earnings to any greater extent than the participating security for which it is substituted,
but does not include,
(c) an acquisition under section 188,
(d) a redemption of, or other compulsory termination of the interest of the holder in, a security if the security is redeemed or otherwise acquired in accordance with the terms and conditions attaching thereto or under a requirement of the articles relating to the class of securities or of this Act, or
(e) a proceeding under Part XVI; (“transformation en société fermée”)
“participating security” means a security issued by a body corporate other than a security that is, in all circumstances, limited in the extent of its participation in earnings and includes,
(a) a security currently convertible into such a security, and
(b) currently exercisable warrants entitling the holder to acquire such a security or such a convertible security. (“valeur mobilière participante”) R.S.O. 1990, c. B.16, s. 190 (1).
Valuation
(2) A corporation that proposes to carry out a going private transaction shall have prepared by an independent, qualified valuer a written valuation indicating a per security value or range of values for each class of affected securities, and,
(a) the valuation shall be prepared or revised as of a date not more than 120 days before the announcement of the going private transaction, with appropriate adjustments for subsequent events other than the going private transaction;
(b) the valuation shall not contain a downward adjustment to reflect the fact that the affected securities do not form part of a controlling interest; and
(c) if the consideration to be received by the holders of the affected securities is wholly or partly other than cash, or a right to receive cash within ninety days after the approval by security holders of the going private transaction, the valuation shall include the valuer’s opinion whether the value of each affected security to be surrendered is equal to or greater than the total value of the consideration to be received therefor. R.S.O. 1990, c. B.16, s. 190 (2).
Information circular
(3) The corporation shall send a management information circular to the holders of the affected securities not less than forty days prior to the date of a meeting which shall be called by it to consider that transaction, and the information circular shall contain, in addition to any other required information and subject to any exemption granted under subsection (6),
(a) a summary of the valuation prepared in compliance with subsection (2) and a statement that a holder of an affected security may inspect a copy of the valuation at the registered office of the corporation or may obtain a copy of the valuation upon request and payment of a specified amount sufficient to cover reasonable costs of reproduction and mailing;
(b) a statement of the approval or approvals of holders of affected securities required to be obtained in accordance with this section;
(c) a certificate signed by a senior officer or a director of the corporation certifying that he or she and, to his or her knowledge, the corporation are unaware of any material fact relevant to the valuation prepared in compliance with subsection (2) that was not disclosed to the valuer; and
(d) a statement of the class or classes of affected securities and of the number of securities of each class and, if any securities of any such class are, under paragraph 3 of subsection (4), not to be taken into account in the vote required by subsection (4), a statement of the number thereof and why they are not to be taken into account,
but if all or any portion of a class of affected securities is represented by certificates that are not in registered form, it shall be sufficient to make the information circular available to the holders of such affected securities in the manner provided for in the terms of the securities for sending notice to such holders or otherwise in such manner as may be prescribed. R.S.O. 1990, c. B.16, s. 190 (3).
Idem
(4) A corporation shall not carry out a going private transaction unless, in addition to any other required security holder approval, the transaction is approved by the holders of each class of affected securities by a vote in accordance with the following provisions:
1. If the consideration to be received by a holder of an affected security of the particular class is,
i. payable wholly or partly other than in cash or a right to receive cash within ninety days after the approval of the going private transaction, or
ii. payable entirely in cash and is less in amount than the per security value or the mid-point of the range of per security values, arrived at by the valuation prepared in compliance with subsection (2),
then the approval shall be given by a special resolution.
2. In cases other than those referred to in paragraph 1, the approval shall be given by an ordinary resolution.
3. In determining whether the transaction has been approved by the requisite majority, the votes of,
i. securities held by affiliates of the corporation,
ii. securities the beneficial owners of which will, consequent upon the going private transaction, be entitled to a per security consideration greater than that available to other holders of affected securities of the same class,
iii. securities the beneficial owners of which, alone or in concert with others, effectively control the corporation and who, prior to distribution of the information circular, entered into an understanding that they would support the going private transaction,
shall be disregarded both in determining the total number of votes cast and in determining the number of votes cast in favour of or against the transaction. R.S.O. 1990, c. B.16, s. 190 (4).
Effect of section
(5) The rights provided by this section are in addition to any other rights of a holder of affected securities. R.S.O. 1990, c. B.16, s. 190 (5).
Powers of Commission
(6) Upon an application by an interested person, the Commission may, subject to such terms and conditions as it may impose, exempt any person from any requirement of this section where in its opinion to do so would not be prejudicial to the public interest, and the Commission may publish guidelines as to the manner and circumstances in which it will exercise this discretion. R.S.O. 1990, c. B.16, s. 190 (6).
Rights of security holder
(7) A holder of an affected security that is a share of any class of a corporation may dissent from a going private transaction upon compliance with the procedures set out in section 185, in which case the holder shall be entitled to the rights and remedies provided by that section. R.S.O. 1990, c. B.16, s. 190 (7).

Burlington Business Lawyer Christopher R. Neufeld is a corporate attorney admitted to practice law in both Ontario (Canada) and New York (U.S.A.). Christopher's legal practice focuses primarily on business law, in particular corporate commercial transactions. The law firm of Neufeld Legal Professional Corporation is headquartered at 719 Catalina Crescent, Burlington, Ontario L7L 5B9, and as such is in immediate proximity to downtown Toronto, Mississauga, Hamilton, Oakville, Brampton, Milton, Guelph and Kitchener Waterloo. COPYRIGHT 2009.

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