Alberta Securities Commission Releases Reasons for Cease-Trading Retroactive Poison Pill

On July 22, 2025, the Alberta Securities Commission (ASC) released reasons for its decision to cease-trade a shareholder rights plan of Greenfire Resources Ltd. The rights plan had been adopted in response to the announcement of a private agreement for the purchase of a large block of Greenfire common shares.

Background

On September 16, 2024, certain funds managed by Waterous Energy Fund Management Corp. (WEF) announced that they had entered into share purchase agreements with three Greenfire shareholders to acquire 43.3% of Greenfire’s common shares (the Share Acquisition). The transaction was not a takeover bid, as the selling shareholders were not located in Canada. However, the transaction was nonetheless structured to comply with the Private Agreement Exemption under the takeover bid regime (TOB Regime) set out in National Instrument 62-104 – Take-Over Bids and Issuer Bids.

Following the execution and announcement of the share purchase agreements, Greenfire adopted a rights plan that prohibited a transfer of 20% or more of the Greenfire shares unless structured as a non-exempt takeover bid. The rights plan expressly deemed that WEF was not a pre-existing beneficial owner of Greenfire shares notwithstanding the share purchase agreements. As a result, the completion of the transaction would cause a significant dilution of WEF’s interest upon closing.

WEF applied to the ASC to cease-trade the rights plan. Greenfire cross-applied to challenge the share purchase agreements. On November 6, 2024, the ASC granted WEF’s Application and dismissed Greenfire’s Cross-Application.

Reasons

The ASC found that Greenfire’s adoption of the rights plan was both clearly abusive of the capital markets and contrary to the animating principles of securities laws. These are the two traditionally recognized standards for the exercise of public interest jurisdiction.

Central to its conclusion was the ASC’s finding that the transaction did not infringe either the letter or spirit of the TOB Regime. The TOB Regime was not engaged, since the Selling Shareholders were not located in Canada. Nonetheless, the transaction complied with the Private Agreement Exemption, which the ASC confirmed was a long-standing, well-supported and integral feature of the TOB Regime. The ASC rejected Greenfire’s argument that reliance on the Private Agreement Exemption could defeat the policy objectives of the TOB Regime.

The ASC further found that the rights plan’s retroactive application to a legitimate transaction would “gravely affect the efficiency of and confidence in our capital market.” The ASC held that this interference would not promote fairness but undermine it and defeat market certainty. Market participants have a reasonable expectation that the TOB Regime will be respected and that the ASC will promote market certainty and confidence: “Our capital market has operated for years under the expectation that the TOB Regime, including the Private Agreement Exemption, is a consistent and certain system governing share transactions.”

In its Cross-Application, Greenfire relied on principles of corporate law to defend the adoption of the rights plan by its Board and to impugn the conduct of certain of the principals of the selling shareholders who had served as directors of Greenfire. The ASC rejected Greenfire’s argument that the adoption of the rights plan could be justified by the business judgment rule. The decision to adopt a retroactive rights plan fell outside the range of reasonable alternatives protected under this rule. The ASC also rejected Greenfire’s invitation to expand directors’ fiduciary duties from a capital-market public policy perspective, noting, however, that it may consider director conduct when determining whether to exercise public interest jurisdiction.

Greenfire had presented significant expert evidence about business judgment and the fiduciary obligations of directors. The ASC commented that this evidence was unnecessary given its specialized expertise, but acknowledged that expert evidence is commonly admitted if it is useful or confirmatory of the ASC’s independent conclusions. The ASC discouraged parties from submitting such evidence where efficiency concerns outweigh potential usefulness.

Following the hearing and oral ruling in Greenfire, the Ontario Capital Markets Tribunal (OCMT) released its reasons in Riot Platforms, Inc v. Bitfarms Ltd, which formulated an approach to reconcile the “clear abuse” and “contrary to the animating principles” standards for the exercise of public interest jurisdiction. In its reasons, the ASC declined to resolve whether the OCMT approach should be adopted in Alberta, leaving that issue to be addressed in a future case.

Takeaways

• Market certainty remains a crucial factor in the ASC’s consideration of whether to exercise its public interest jurisdiction.
• The animating principles of the TOB Regime are not undermined by adherence to the letter and spirit of exemptions to the TOB Regime.
• The ASC’s jurisdiction to address allegations of director misconduct is limited and generally only a factor to be considered in determining whether to exercise its public interest jurisdiction.
• Expert evidence should be tendered sparingly, if at all, on matters within the ASC’s specialized expertise. Expert evidence will face increased scrutiny if it approaches opinion on ultimate issues.

For more information, please contact any of the authors of this bulletin.

This bulletin was prepared with the assistance of Chaein Lee (Summer Law Student).