Conflict of interest transactions
Conflict of interest protections are designed to mitigate risks to minority security holders when a related party of the issuer—who may have superior access to information or significant influence (by virtue of voting power or board representation)—is involved in a conflict of interest transaction with the issuer.
Protections for minority security holders
Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) regulates conflict of interest transactions including:
- insider bids
- issuer bids
- business combinations
- related party transactions
The objective of MI 61-101 is to ensure that all security holders of issuers involved in conflict of interest transactions are treated in a manner that is fair, and that is perceived to be fair. This is achieved through procedural protections, including:
- enhanced disclosure, including disclosure of prior valuations in respect of, and prior offers for, the target
- independent valuations
- minority shareholder approval
- independent committee review (which is recommended for all transactions regulated by MI 61-101, but only specifically mandated for insider bids)
MI 61-101 provides exemptions from the independent valuation and minority shareholder approval requirements in certain circumstances.