CSA Proposes Amendments To Issuer Bid, Take-Over Bid, And Beneficial Ownership Reporting Regimes

Overview

On May 14, 2026, the Canadian Securities Administrators (the “CSA”) published proposed amendments and changes to the rules and policies governing the early warning system (the “EWS”), issuer bids (including a new selective repurchase exemption), and take-over bids (collectively, the “Proposed Amendments”):

The Proposed Amendments would:

i.  close gaps and clarify ambiguities in the early warning reporting regime, including new filing obligations upon an issuer becoming a reporting issuer and upon the formation of joint actor relationships;

ii.  introduce enhanced disclosure requirements for derivatives in the context of take-over bids and proxy solicitations;

iii.  create a new selective repurchase exemption allowing issuers to repurchase up to 5% of a class of securities in a 12-month period through bilateral private transactions; and

iv.  codify several exemptions that previously required case-by-case exemptive relief and address various housekeeping matters.

The Proposed Amendments are intended to enhance the integrity of the early warning reporting regime, improve transparency around certain derivative positions, and give issuers greater flexibility to repurchase their own securities, while addressing various interpretive and procedural issues through clarifying amendments and supplemental policy guidance. The Proposed Amendments would also introduce new disclosure and filing obligations in certain circumstances.

1.   Early Warning System Changes

The EWS requires significant shareholders to publicly disclose their ownership positions when they cross or fall below certain thresholds. The CSA has proposed several targeted amendments and guidance to close gaps, clarify ambiguities, and update market practices.

(a)  Filing Obligations on Becoming a Reporting Issuer

Currently, large shareholders of a company that becomes a reporting issuer (e.g. upon completing an initial public offering or reverse takeover) generally do not file early warning reports (“EWRs”) on the basis that they have not “acquired” additional securities.

The CSA does not believe that disclosure in a prospectus, filing statement, or information circular is an adequate substitute for the full disclosure required under the early warning requirements. There is also a practical gap: without an initial EWR on file, there is no obligation to update that report when material facts change.

To fix this, the CSA proposes to deem a person who holds 10% or more of a class of voting or equity securities at the time an issuer becomes a reporting issuer to have “acquired” those securities at that moment, thereby triggering the obligation to file an EWR.

However, recognizing that this is a deemed (not actual) acquisition, the CSA is not proposing to require an accompanying news release in connection with this initial deemed acquisition, and the moratorium on further acquisitions that normally follows an EWR filing would not apply in respect of that deemed acquisition.

(b)  Joint Actor Relationships

Currently, when two or more shareholders begin acting jointly or in concert and together hold 10% or more of a class, no EWR is required unless one of them individually crosses the 10% threshold through a subsequent acquisition.

The CSA’s view is that the policy purpose of the EWS – alerting the market to the identity of those who may influence control, board composition, or significant votes – applies equally when joint actors collectively hold 10% or more, regardless of where each actor stands individually. Accordingly, the CSA proposes to deem the formation of a joint actor relationship (and its subsequent dissolution) to constitute an acquisition (or disposition) for EWS purposes, triggering the corresponding EWR filing obligations.

Importantly, this deemed acquisition applies only to the early warning reporting requirements and will not, by itself, apply to take-over bids, even if the joint actors collectively own 20% or more of the class.

(c)  Re-Entry into the AMR System

The CSA proposes that eligible institutional investors who re-enter the alternative monthly reporting (“AMR”) system following disqualification (e.g. from involvement in a formal bid, business combination, or proxy contest), issue and file a news release announcing their eligibility and intention to do so, followed by a report under the applicable AMR rules.

(d)  Plans and Future Intentions

The CSA has observed that disclosure of acquirors’ plans and future intentions in EWRs is often boilerplate and generic. The CSA believes that acquirors have used broad language as a reason not to file updated EWRs when their intentions become more concrete; moreover, the market practice has been to update only when a definitive agreement is signed.

The CSA proposes guidance clarifying that: (i) acquirors must reassess the accuracy of their stated intentions every time an EWR filing is triggered; (ii) an update is required as soon as a change in plans occurs or irrevocable steps are taken, not just when a definitive agreement is executed; and (iii) significant steps toward a particular transaction may, individually or collectively, constitute a change that requires updated disclosure, even if a prior EWR contained language reserving the right to take any enumerated action.

(e)  Threshold Calculations

The CSA also proposes guidance to resolve a recurring ambiguity in how EWR thresholds are calculated. The central question is whether securities convertible into voting or equity securities, such as convertible debentures, warrants, or physically-settled options or forwards that are not convertible, exercisable, or settled within 60 days of their acquisition, must be included in the numerator when determining whether a reporting threshold has been crossed. The answer has practical significance in both directions. An investor acquiring a large block of long-dated convertible instruments could immediately trigger an EWR filing obligation even though such instruments cannot be converted into voting or equity shares for more than 60 days. Conversely, if such securities need not be counted, an investor could accumulate a significant economic position through convertible instruments without triggering any filing until the conversion date approaches. The proposed guidance confirms that the current EWR regime requires the numerator to consist of two components.

The first component is the securities that are the subject of the transaction at hand: where the transaction involves convertible securities, those convertible securities are included irrespective of whether they are convertible within 60 days and irrespective of any conditions attached to them. The second component is the “acquiror’s securities”, being the securities already beneficially owned, or over which control or direction is exercised, by the acquiror and any joint actors. Whether previously held convertible securities form part of this second component is determined by reference to section 1.8 of National Instrument 62-104 – Take-Over Bids and Issuer Bids (“NI 62-104”), which deems an acquiror to beneficially own the underlying securities only if the convertible security is exercisable within 60 days. Accordingly, previously held convertible securities that are not exercisable within 60 days are excluded from the numerator.

The proposed guidance also clarifies that the early warning threshold calculation must be repeated each time a convertible security that was not previously exercisable within 60 days becomes exercisable within 60 days as a result of the passage of time, or when a convertible security that was exercisable within 60 days expires, lapses, or terminates.

In addition, the CSA proposes guidance providing a limited exception to the partially diluted calculation method: where an acquiror is acquiring convertible securities as part of a treasury offering and the terms of those securities provide that either all of the convertible securities issued pursuant to the offering convert into the underlying voting or equity securities, or none of them do (e.g. in a subscription receipt offering), beneficial ownership may be calculated on a fully diluted basis, as it would not be possible for only some (but not all) of the underlying securities in respect of that offering to be issued.

2.   Derivatives – Enhanced Disclosure Requirements

Background

Under the current regime, derivatives or the economic interest of an investor do not generally count toward its early warning reporting threshold unless the investor is able to, formally or informally, obtain the voting or equity securities or direct the voting of such securities. However, EWRs require disclosure with respect to an investor’s economic and voting interests in the class of securities of a reporting issuer, including disclosure about the material terms of “related financial instruments”, securities lending arrangements, and other agreements, arrangements, or understandings that have the effect of altering the acquiror’s economic exposure.

The CSA maintains that the current EWS should not be amended to require aggregation of beneficial ownership and economic interests for the calculation of early warning reporting triggers. Unlike in other jurisdictions such as the United Kingdom, France, Hong Kong, and Australia, the CSA believes that the requirement of aggregating beneficial ownership and economic interests would cause undue burden given that there is no clear evidence of inappropriate or abusive use of derivatives with any regularity in Canadian capital markets. The CSA’s position is that the associated risks are largely addressed through existing early warning obligations and the related guidance when an investor is deemed to beneficially own, or to have control or direction over, the underlying voting or equity securities. However, the CSA does have concerns over the impact of “equity equivalent derivatives” (as described below) and has proposed new deeming rules that could have an impact on beneficial ownership for EWS purposes.

While the threshold calculation rules remain unchanged, the CSA is proposing significant new disclosure requirements for formal, public bids for control to address what it believes is an information asymmetry among insiders, bidders, and soliciting securityholders. Insider reporting obligations require insiders to disclose their aggregate economic positions (including their “related financial instruments”); however, no analogous requirement applies to bidders and soliciting securityholders who are not insiders despite their knowledge of the existence, terms, and duration of their derivative arrangements, and of the likelihood of counterparties hedging their positions through the acquisition of reference securities. The CSA believes this information is important for understanding a securityholder’s influence and leverage in a matter, the impact of counterparty tendering and voting practices, and the likelihood of the bid or solicitation succeeding. The proposed disclosure requirements are therefore targeted at (i) bidders launching a formal take-over bid; and (ii) soliciting securityholders sending an information circular in connection with a proxy solicitation. They do not apply to proxy solicitations made in reliance on the “quiet solicitation” (i.e. less than 15 securityholders solicited) or “public broadcast” exemptions. There is also no real-time disclosure obligation during stake-building in order to minimize the intrusion into take-over bids and shareholder activism, as well as maintain a balance between the issuer of securities and investors and activists.

The proposed disclosure obligations include disclosure related to an investor’s “equity equivalent derivatives”. This is a new term that is defined as one or more derivatives that are referenced to, or derived from, a voting or equity security of an issuer and which provide the holder, directly or indirectly, with an economic interest that is substantially equivalent to the economic interest associated with beneficial ownership of the security. The CSA is proposing guidance to the effect that it would generally consider a derivative or combination of derivatives to substantially replicate the economic interest of owning a reference security if it provides a rate of return between 90% and 110% of the rate of return of the reference security. Equity equivalent derivatives would therefore include a cash settled equity total return swap (or substantially similar derivative); moreover, the term would have a narrower application than related financial instrument and would seek to substantially replicate the effect of beneficial ownership.

The proposed new disclosure requirements for bidders in connection with take-over bids and soliciting securityholders for non-management proxy solicitations are summarized below.

For Bidders

Six-month look-back. The proposed amendments would require take-over bid circulars to include prescribed disclosure if the bidder, or any joint actor, has or had at any time, during the six-month period preceding the bid, an interest in a related financial instrument (including an equity equivalent derivative) involving the offeree issuer’s securities, or has been party to any agreement, arrangement, or understanding that altered their economic exposure to said issuer where disclosure is not otherwise required.

News release. Once a bid is live, bidders would also be required to issue and file a news release before the opening of trading on the following business day if they acquire, dispose of, or change a position in a related financial instrument, including an equity equivalent derivative, or enter into, terminate, or amend any arrangement altering their economic exposure to the offeree issuer.

Disclosure of relationship with counterparty. Bidders would also be required to describe any past or present relationship between themselves (or any joint actor) and their derivative counterparty (or an affiliate of that counterparty) that a reasonable person could perceive as capable of affecting that counterparty’s decision to acquire, dispose of, or vote shares of the target, or otherwise confirm that no such relationship exists.

For Soliciting Securityholders

Disclosure of beneficial ownership, financial instruments, and economic exposure. The proposed amendments would require proxy circulars for non-management solicitations to disclose the soliciting party’s: (i) beneficial ownership of, or control or direction over, the company’s voting securities; (ii) any interests in related financial instruments, including equity equivalent derivatives; and (iii) any agreements, arrangements, or understandings that alter their economic exposure to the company.

Deemed beneficial ownership of equity equivalent derivatives during proxy campaigns. During the pendency of a proxy campaign, a new deeming provision would treat a soliciting securityholder or persons acting jointly or in concert with a soliciting securityholder as holding any securities underlying their equity equivalent derivative positions (but not their positions for all related financial instruments) for purposes of the EWS. This means that where a soliciting securityholder’s aggregate economic position – through securities and equity equivalent derivatives exposure – is broadly equivalent to a beneficial ownership position of 10% or more of the outstanding securities of a class, changes to that aggregate economic position would trigger ongoing early warning reporting obligations subsequent to the filing of its proxy circular for the duration of the campaign. This provision is limited to equity equivalent derivatives rather than all related financial instruments because equity equivalent derivatives are those which would likely require that the soliciting securityholder’s derivatives counterparty hold hedge positions, which involve owning shares in amounts roughly equal to the notional value of equity being referenced. This provision is intended to provide the market with information that there is a significant voting stake which, while not owned by the soliciting securityholder directly, may be subject to influence by the soliciting securityholder with respect to how it is voted.

Limitations of quiet solicitation or public broadcast exemptions. Notably, the full equity equivalent derivative disclosure requirements would not apply to proxy solicitations conducted in reliance on the “quiet solicitation” or “public broadcast” exemptions. However, clients relying on the public broadcast exemption should be aware that the proposed amendments would introduce a new requirement to disclose beneficial ownership of, or control or direction over, voting securities of the company, meaning that exemption would not entirely insulate soliciting securityholders from new disclosure obligations.

Disclosure of relationship with counterparty. The same counterparty relationship disclosure that applies to bidders would apply equally to soliciting securityholders.

Guidance on Disclosure and Use of Derivatives

The CSA is also proposing guidance to clarify that the disclosure or use of equity equivalent derivatives (but importantly not all related financial instruments) may engage securities regulatory authorities’ public interest jurisdiction. The proposed guidance identifies two key areas of concern: (i) situations where investors fail to clearly and accurately distinguish between beneficial ownership of securities and economic interests in their public disclosures, which risks misleading the market; and (ii) situations where equity equivalent derivatives are deliberately used to accumulate substantial economic positions in an issuer in order to pressure the counterparties to such equity equivalent derivatives into acquiring, disposing of, or voting securities in a manner that benefits the derivative holder. This guidance signals regulatory willingness to intervene even where technical disclosure requirements have been met, as illustrated by a recent securities regulatory decision in which an Alberta Securities Commission panel found a bidder’s use of cash-settled total return swaps, while technically compliant, to be clearly abusive of the capital markets and the target’s securityholders.

3.  New Issuer Bid Exemption – Selective Repurchases

Background

Under the current regime, an issuer wishing to repurchase its own securities must either comply with the formal issuer bid requirements under NI 62-104 or rely on an existing exemption. While a private agreement exemption is available for take-over bids (i.e. purchases from a limited number of sellers according to pricing restrictions), there is no corresponding exemption from the issuer bid requirements. Accordingly, issuers that wish to repurchase securities from a specific shareholder must comply with the full formal bid process or seek case-by-case exemptive relief.

Stakeholders have argued that the Canadian issuer bid regime is overly restrictive compared to the United States where selective repurchases are allowed.

In response, the CSA has proposed a new selective repurchase exemption for issuers to repurchase up to 5% of the outstanding securities of a class over a 12-month period, subject to the satisfaction of certain conditions (the “Selective Repurchase Exemption”).

Key Conditions

The Selective Repurchase Exemption is subject to the following conditions:

(a)  Repurchase limit

Issuers may only repurchase up to 5% of the outstanding securities of a class within any 12-month period. Combined with the normal course issuer bid (“NCIB”) exemption and the employee, officer, director, and consultant exemption, an issuer could repurchase up to 20% of the securities of a class in a 12-month period.

(b)  Purchaser and transaction limits

Issuers may only acquire their own securities from a maximum of five persons in a maximum of five transactions within a 12-month period.

(c)  Requirements for discount and liquid market

The consideration paid for the acquired securities, inclusive of any brokerage fees or commissions, must be less than the closing price of the class of securities on the market on which it is principally traded on the date of the bid. In addition, a liquid market must exist for the class of securities on the date of the bid.

(d)  Disclosure requirements

Issuers must issue and file a news release after making the bid and before trading opens on the market on which the class of securities is principally traded. The news release must disclose the particulars of the transaction, together with the number or principal amount of securities acquired by the issuer under the Selective Repurchase Exemption within the prior 12 months.

(e)  Interaction with other issuer bid exemptions

Securities acquired by an issuer pursuant to a non-exempt issuer bid or other exemption, including the NCIB exemption, do not reduce the aggregate number or principal amount of securities available to the issuer under the Selective Repurchase Exemption. The CSA similarly believes that securities acquired under the Selective Repurchase Exemption should not reduce the maximum number of securities available for acquisition under the NCIB exemption. The CSA will engage with the designated exchanges about corresponding rule amendments or clarifying guidance to confirm this since NCIBs are subject to the applicable requirements of designated exchanges.

4.  Housekeeping and Other Amendments

(a)  Removal of the 5% Market Purchase Exemption

The CSA proposes to remove the existing exemption that allows a bidder to make open-market purchases of up to 5% of the target’s securities during the pendency of a take-over bid.

The rationale is that this exemption has little practical value (securities bought under it cannot count toward the non-waivable 50%+ minimum tender requirement), has rarely been used (only one instance was identified between 2021 and 2023), and can potentially be exploited tactically by a bidder to reduce the float available to a competing bidder. The CSA concludes there is no compelling policy basis to keep it.

(b)  Expanded Non-Reporting Issuer Exemptions

The existing exemption from the take-over bid and issuer bid requirements for non-reporting issuers applies only where the issuer has 50 or fewer securityholders (excluding current and former employees).

Regulators have sometimes granted discretionary relief where the issuer exceeded the 50-holder limit by a small margin due to shareholders who are economically similar to employees (e.g. officers, directors, contractors, consultants, and spouses of qualifying persons). The CSA proposes to formally codify these additional categories, eliminating the need for case-by-case applications in such circumstances.

(c)  Dutch Auction Issuer Bids – Extension Mechanics

Under current rules, an issuer cannot extend a bid without first purchasing all deposited securities, a requirement that is mechanically incompatible with Dutch auction bids, where the final purchase price depends on the full pool of securities tendered, including any tendered during the extension period.

The CSA has been granting case-by-case exemptive relief to accommodate Dutch auction extensions and now proposes to codify this relief. However, the exemption would not be available where the bid is oversubscribed (since an extension in those circumstances would only dilute tendering shareholders’ pro-rata entitlement) or where the market price already exceeds the highest price in the offering range.

(d)  Proportionate Tenders in Issuer Bids

Some Dutch auction issuer bids have offered shareholders the option to tender a number of securities that would result in them maintaining their proportionate ownership following completion of the bid. Under current rules, this “proportionate tender” option is technically not permissible without exemptive relief.

The CSA proposes to codify the exemptive relief that it has been granting to facilitate proportionate tenders and has deliberately drafted the new rule to apply broadly — not just to Dutch auction bids.

(e)  Additional Policy Guidance

The CSA is also proposing supplemental policy guidance in National Policy 62-203 – Take-Over Bids and Issuer Bids on several other topics, including bid conditions that may engage regulators’ public interest jurisdiction, mini-tender offers, the determination of the “date of the bid” for purposes of certain exemptions, and selective offshore repurchases by issuers from non-Canadian holders.

5.  Next Steps

The Proposed Amendments represent a broad and significant update to the Canadian M&A and beneficial ownership reporting framework. Although several of the Proposed Amendments were expected and should reduce regulatory burden and improve transparency, we expect that there will be significant discussion with the CSA regarding several of the proposed amendments to National and Multilateral Instruments and certain proposed changes to guidance under National and Companion Policies.

Comments on the Proposed Amendments are due by August 12, 2026. We would be happy to assist clients in reviewing the Proposed Amendments and preparing submissions to the CSA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.