No Representation without Valuation: Bidder and Target Directors' Duties under Canada's New Take-over Bid Regime: Re Hecla Mining Company

Abstract

Canada’s takeover bid regime was fundamentally changed in May 2016, when National Instrument 62-104 came into force. Corporate and securities lawyers have debated how the new rules might affect the conduct of hostile takeover bids and the use of defensive tactics by companies that are the targets of such bids. In October 2016, the Ontario Securities Commission (OSC) and the British Columbia Securities Commission (BCSC) provided a partial answer in Re Hecla Mining Co., the first hostile takeover bid decision rendered under the new takeover bid regime. This decision is important not only for the light it sheds on Canada’s new takeover bid requirements, but also because of its important consideration of the relationship between securities law and the corporate law business judgement rule. This case may set target boards’ minds at ease when attempting to raise capital, an especially important issue for junior mining companies which already face major challenges raising capital in today’s market. Both commissions agreed that a private placement of shares by Dolly Varden Silver Corporation (“Dolly Varden”) that had the effect of blocking a hostile takeover bid by Hecla Mining Company (“Hecla”) was permissible, given all the circumstances. The commissions were divided, however, on the question of whether Hecla, which was making an insider bid on somewhat unusual facts, should be required to obtain a formal valuation. This case comment provides a critical analysis of both commissions' decisions and what these may mean for future target and bidder director duties under the new takeover bid regime.