What constitutes a formal take-over bid?

• A. A bid to acquire any amount of voting stock
• B. A bid to acquire 15% or more of the outstanding voting stock
• C. A bid to acquire 20% or more of the outstanding voting stock
• D. A bid to acquire less than 20% of the voting stock

Answer: (C)

A formal take-over bid is specifically defined within securities regulation as an offer to acquire a significant amount of a company's voting stock, reflecting a serious intent to gain control or influence over the company. In many jurisdictions, including Canada, the threshold that triggers the requirements for a formal take-over bid is set at 20% or more of the outstanding voting stock.

When an entity proposes to purchase 20% or more of the voting shares, this often necessitates stricter regulatory scrutiny and formal processes to ensure transparency and fairness for all shareholders. A formal take-over bid typically involves comprehensive disclosure and procedural guidelines to protect the interests of shareholders who might be adversely affected by such a significant ownership change.

The other options do not align with this formal definition. For instance, a bid for less than 20% does not constitute a formal take-over bid, as it does not meet the regulatory thresholds that would trigger the obligations associated with a full take-over bid. Bids aiming for 15% or any amount less than 20% are generally still subject to different regulatory frameworks that do not encapsulate the same level of detailed scrutiny required for a formal bid of 20% or more.