Selective repurchase exemption: The CSA’s bold bid to reshape Canada’s issuer bid, take-over bid and beneficial ownership reporting regimes

On May 14, 2026, the Canadian Securities Administrators (CSA) released a comprehensive package of proposed amendments and accompanying policy changes targeting the issuer bid, take-over bid, and early warning reporting regimes under Canadian securities law (Proposed Amendments). The proposals span amendments to National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104), National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues (NI 62-103), National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), and related companion policies, National Policies, and consequential instruments. Stakeholder comments are invited until August 12, 2026.

The Proposed Amendments touch nearly every corner of the bid and beneficial ownership reporting landscape. In the CSA’s words, the objectives are to “provide issuers with greater flexibility to repurchase their own securities, enhance transparency of ownership of derivative interests in specified circumstances, and reduce regulatory burden”. The Proposed Amendments are relevant to public companies, private companies, institutional investors, and parties engaged in take-over bids, issuer bids, and proxy solicitations. This article sets out the principal elements of the proposals and offers initial observations for market participants.

A new private repurchase tool for issuers: The selective repurchase exemption

At present, Canadian securities law does not provide a “private agreement” exemption from the issuer bid requirements, a notable gap vis-à-vis the take-over bid regime, which permits purchases from a limited number of sellers under section 4.2 of NI 62-104. The CSA has long received representations that this restriction places Canadian issuers at a competitive disadvantage relative to the United States, where selective repurchases are generally permissible, and that it can lead to potential market dispositions by blockholders, creating downward pricing pressure on the affected securities.

In an attempt to address this gap, the CSA has proposed a new Selective Repurchase Exemption (SRE) permitting issuers to buy back securities outside the formal issuer bid framework, subject to a set of carefully calibrated conditions:

• Repurchase limit. The issuer may acquire no more than 5% of the outstanding securities of the relevant class in any 12-month period.
  
  
• Counterparty and transaction limits. Purchases may be made from a maximum of five persons in no more than five transactions during any 12-month period.
  
  
• Discount and timing requirements. The value of consideration paid, inclusive of any brokerage fees and commissions, must be less than the closing price of the class on its principal trading market on the date of the bid. In addition, the bid must be made outside of regular trading hours of that market.
  
  
• Liquid market. A liquid market, determined in accordance with criteria derived from section 1.2 of MI 61-101, must exist for the class at the date of the bid. The CSA estimates that approximately 75% of TSX-listed issuers, but fewer than 10% of those on the TSX Venture Exchange, would satisfy this standard.
  
  
• Board determinations. The issuer’s board must conclude that the repurchase would not reasonably be expected to make the market for the class materially less liquid, or to have a significant negative effect on the market price or value of the securities.
  
  
• Disclosure requirements. The issuer must issue and file a news release after making the bid and before the opening of trading on the next trading day, disclosing the name of the selling securityholder, the number of securities acquired, the value of the consideration paid per security and in total, the market price of the security at the date of the bid and the aggregate number of securities acquired by the issuer in reliance on the SRE within the preceding 12-month period.
  
  
• No material undisclosed information. Neither the issuer nor (to the issuer’s knowledge after reasonable inquiry) the selling securityholder has knowledge of any undisclosed material facts or material changes concerning the issuer or its securities at the date of the bid.

• Importantly, securities acquired under the SRE will not count towards the limits available under the normal course issuer bid (NCIB) exemption or the employee, officer, director, and consultant exemption, meaning that, in the aggregate, an issuer could potentially repurchase up to 20% of securities of a class in a 12-month period through a combination of these exemptions. The CSA has indicated it will engage with the designated exchanges on potential corresponding amendments to their rules or guidance.
  

Increased transparency of equity equivalent derivative positions in specified circumstances

The second major pillar of the Proposed Amendments addresses the use and disclosure of equity equivalent derivatives during take-over bids and contested proxy solicitations for which an information circular is required to be sent.

Generally, equity equivalent derivatives do not have to be counted for the purposes of determining whether an investor has triggered early warning reporting obligations, unless the investor can obtain the voting or equity securities or direct the voting of securities held by derivative counterparties.

The CSA recognized that insiders of reporting issuers are already required to disclose their aggregate economic positions through insider reporting obligations, yet there is no express comparable requirement for bidders or soliciting securityholders who are not insiders to disclose their aggregate economic positions in an information circular or otherwise. The result is that, at the commencement of a take-over bid or contested proxy solicitation, the bidder or soliciting securityholder may be the only party aware of the existence, terms, and duration of its derivative arrangements, which gap the CSA views as undermining the quality of information available to securityholders who are being asked to make tendering or voting decisions.

Notwithstanding this concern, the CSA has opted against requiring aggregation of beneficial ownership and derivative interests for general early-warning threshold purposes, concluding that there is insufficient evidence of misuse in Canadian markets with any regularity and that full aggregation could impose disproportionate burdens relative to potential concerns. Instead, the proposed new disclosure requirements would apply only in the context of a formal bid or contested proxy solicitation – what the CSA describes as “a formal, public overture for control”.

The newly defined concept of “equity equivalent derivative” captures derivatives, whether individually or in combination, that provide economic exposure substantially equivalent to beneficial ownership. The CSA’s proposed guidance in NP 62-203 indicates that a rate of return between 90% and 110% of the reference security would generally meet this standard. A cash-settled equity total return swap or substantially similar derivative would be captured by the proposed definition of “equity equivalent derivative”.

For bidders

Take-over bid circulars would be required to include prescribed disclosure of interests in equity equivalent derivatives and related arrangements affecting economic exposure to the target, with a six-month look-back period, in order to provide enhanced transparency of trading activities that may have impacted the price of the offeree issuer’s securities in the period preceding a bid. Offerors would also be required to issue a news release before the opening of trading on the next business day if, during the currency of a bid, they acquire or dispose of such interests or enter into, amend, or terminate related arrangements. A notable feature is the requirement to describe any past or present relationships between the offeror (and its joint actors) and counterparties (or their affiliates) that, to a reasonable person, could be perceived to affect the counterparty's investment or voting decisions, or, if no such relationship exists, to include a statement to that effect. Relationships that terminated more than 24 months before the bid was commenced would generally not require disclosure.

For soliciting securityholders

New deeming provisions would treat reference securities underlying equity equivalent derivatives as being controlled by a soliciting securityholder for the purposes of sections 5.2 and 5.4 of NI 62-104 during a proxy solicitation campaign, so that changes in a soliciting securityholder's aggregate economic position, whether arising from beneficial ownership of securities or from economic interests in equity equivalent derivatives, are disclosed through the early warning system following the filing of its proxy circular, where its aggregate economic position is equivalent to beneficial ownership of 10% or more of the outstanding securities of the class. Amendments to NI 51-102 would also extend a more limited disclosure obligation to persons soliciting proxies in reliance on the public broadcast, speech, or publication exemption.

In addition, new information circular disclosure requirements would apply to solicitations made other than by management, requiring prescribed disclosure of (i) beneficial ownership of, or control or direction over, voting securities, (ii) interests in related financial instruments (including equity equivalent derivatives), and (iii) other agreements or arrangements affecting such persons’ economic exposure to the company.

Guidance on disclosure and use of derivatives

The CSA has also proposed guidance which indicates that the disclosure or use of equity equivalent derivatives in a manner that is abusive of the capital markets may engage the regulators’ public interest jurisdiction. For example, public interest concerns may arise where public disclosures do not clearly differentiate between beneficial ownership and economic interests, or express them as an aggregated interest, or where a holder accumulates substantial derivative positions and seeks to influence a counterparty's handling of reference securities by communicating expectations of commercial incentives or disincentives tied to a take-over bid or matter subject to securityholder approval.

Sharpening the early warning reporting regime

Plans and future intentions

The CSA has observed a pattern of acquirors relying on broad, boilerplate language in their early warning reports, potentially allowing them to avoid filing updates when their intentions evolve or they take concrete steps toward a transaction, and only file updated reports upon entering into a definitive agreement in respect of securities. Proposed guidance in section 3.3 of NP 62-203 would clarify that acquirors must reassess the accuracy of their plans-and-future-intentions disclosure each time a reporting obligation is triggered, and must update that disclosure as soon as a change in plans or future intentions occurs, or where irrevocable steps have been taken in connection with a transaction, notwithstanding existing boilerplate reservations.

New deemed acquisition triggers

The Proposed Amendments include two targeted changes to the early warning system designed to close gaps in existing reporting obligations:

• Securities held by any person who beneficially owns or controls 10% or more of the outstanding voting or equity securities of a class at the time an issuer becomes a reporting issuer would be deemed to have been acquired at that time, thereby triggering an early warning report filing requirement. However, the associated news release and moratorium requirements would not apply in these circumstances.
  
  
• The establishment (or cessation) of a joint actor relationship would trigger the early warning filing obligation, without any requirement for a concurrent acquisition or disposition of securities. However, the CSA clarifies that the crystallization of a joint actor relationship would not, in itself, constitute a take-over bid in the absence of a subsequent acquisition by one or more of the joint actors.

Subsequent filing triggers and AMR clarifications

The Proposed Amendments introduce the defined term “securityholding percentage” and clarify the prior language that the trigger for filing a subsequent early warning report is a 2% or greater change in the acquiror’s post-event ownership, measured against the percentage reported in its most recently filed report. For eligible institutional investors (EIIs) filing under the alternative monthly reporting (AMR) system, the threshold is confirmed as based on fixed 2.5% increments starting at 10% (i.e., 12.5%, 15%, 17.5%, and so forth).

EIIs that have been disqualified from the AMR system (for example, in connection with a formal bid, business combination, or proxy solicitation) would be permitted to re-enter the system once the disqualifying circumstances have ended, subject to the issuance of a news release and the filing of a report.

EWR threshold calculations

Proposed guidance has been included, along with illustrative examples, for determining whether the early warning requirements have been triggered. The guidance specifically addresses the treatment of convertible securities that are not exercisable within 60 days, and confirms that beneficial ownership may be calculated on a fully diluted basis in limited circumstances, such as subscription receipt offerings or fully backstopped rights offerings.

Codifying common discretionary exemptive relief and amending exemptions

The CSA proposes to codify several forms of discretionary exemptive relief that have become routine in practice, while simultaneously removing an exemption which lacks a compelling policy basis to retain.

Elimination of the 5% market purchase exemption

The exemption currently allowing offerors to make market purchases of up to 5% of the outstanding securities of a class during a pending take-over bid would be repealed. The CSA notes that the exemption was relied upon in only a single disclosed instance between January 2021 and December 2023, and expresses concern that it could be used tactically to frustrate an open take-over bid process, particularly given the 50% minimum tender requirement adopted in 2016.

Modified Dutch auction issuer bids

Exemptive relief from the extension take-up requirement under subsection 2.32(4) of NI 62-104, which has been routinely granted to accommodate the mechanics of modified Dutch auction issuer bids, would be codified, subject to safeguards protecting securityholders where the bid is not undersubscribed, or the market price exceeds the highest price offered.

Proportionate tenders

Discretionary relief from the proportionate take-up requirement, previously granted only in the Dutch auction context, would be codified and extended to issuer bids generally, allowing securityholders to elect to tender a number of securities that preserves their pro rata interest following completion of a bid.

Non-reporting issuer exemptions

The categories of persons excluded from the 50-securityholder threshold under the non-reporting issuer exemptions for both take-over bids and issuer bids would be expanded to include officers, directors, consultants, and their spouses where the relevant person has control or direction over the securities that are beneficially owned by the spouse. The Proposed Amendments would codify positions previously taken in frequent individual exemptive relief decisions.

Convertible securities

Issuers conducting issuer bids would be permitted to acquire securities convertible into the class subject to the bid in reliance on the exemptions in paragraph 4.6(a), (b) or (c) of NI 62-104 (certain repurchase or redemption exemptions).

Settlement timing

Currently, the settlement period for securities trades in Canada is a T+1 settlement cycle. The settlement cycle and take-over bid and issuer bid tendering process payment periods historically have not been linked, as it generally takes up to three days for an offeror’s designated depositary to coordinate payment to registered holders whose securities are taken up after it receives the necessary funds from the offeror. Under the Proposed Amendments, the existing three-business-day payment window following take-up would be replaced with a general requirement to pay “promptly,” accompanied by guidance that one business day from take-up is the expected standard in a T+1 settlement environment.

What this means for market participants

The Proposed Amendments, if adopted in their current form, would represent a meaningful overhaul of the regulatory framework for certain Canadian capital markets transactions. Taken together, they pair expanded flexibility for issuers and investors, most notably through the SRE and the codification of previously ad hoc exemptive relief, with heightened transparency obligations at key junctures. The new derivative disclosure and counterparty identification requirements, coupled with the tightened expectations around plans-and-future-intentions reporting, materially raise the bar for the specificity expected in early warning filings. At the same time, the CSA’s decision not to require full aggregation of derivative and beneficial ownership positions for general early warning purposes, while simultaneously introducing deeming provisions that treat derivative positions as owned securities during proxy solicitations, creates a nuanced and context-dependent regime that will require careful navigation.

The cumulative effect of the Selective Repurchase Exemption, along with the existing NCIB exemption and the employee/officer/director/consultant exemption, which could in theory permit an issuer to repurchase up to 20% of a class in a single 12-month period (assuming, in the case of the NCIB, that the public float equals the total issued and outstanding securities), is also likely to attract market attention and may itself become a focal point of the comment process.

The CSA has posed 22 specific questions alongside the Proposed Amendments. Market participants with a stake in these issues are well advised to engage with the consultation process before the August 12, 2026, deadline.

Please contact a member of our Capital Markets group for further guidance on how the Proposed Amendments may affect your specific circumstances. The foregoing is for general information purposes only and does not constitute legal advice.