University of Toronto Law School Faculty Blog

BCE Decision Roundtable, March 27, 2009

Faculty of Law, University Of Toronto

Flavelle House, 78 Queen's Park, 

McCarthy Tétrault Classroom (FLA) 

In December 2008, the Supreme Court of Canada released its reasons in the highly publicized BCE case, affirming that Canadian corporate directors owe their fiduciary duty to the corporation and only the corporation. The decision stands to have a significant impact on merger and acquisition transactions in Canada, and is of fundamental importance to boards of directors as well as to shareholders, creditors and corporate stakeholders generally.  We look forward to an interactive roundtable discussion on the implications of the Supreme Court's decision.

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Webcast of roundtable on the creation of a national securities regulator

On January 30, 2009, the Faculty of Law hosted a roundtable on the creation of a national securities regulator and the report of the Expert Panel on Securities Regulation, featuring Profs. Anita Anand and Jeffrey MacIntosh, as well as experts Jeremy Fraiberg and Peter Hogg. The webcast of the event is available on the Faculty of Law website.

• Click here to see the event description and speaker biographies (with a link to the webcast)
• Click here to go directly to the webcast

Anita Anand - "Backing the BCE Board"

Today, the Supreme Court of Canada released its long-awaited judgment in the BCE case.  The Supreme Court had previously indicated that it would overturn the decision of the Quebec Court of Appeal but today we found out the bases on which it did so.  We also found out the current thinking from the Court on directors duties.  The gist of the Court’s decision is two fold.  First, it upheld the principle that the board owes its fiduciary duty to the corporation not to any one particular stakeholder group.  In addition, the Court held that there is a distinction between the legal considerations applicable to the oppression remedy and CBCA arrangements that the Quebec Court of Appeal had overlooked.  The Supreme Court held true to the wording of the corporate statute with perhaps one exception: it introduced the concept of the corporation as a “responsible corporate citizen”, thereby raising questions about what this term means in terms of directors’ duties generally.

As we know, the central fact of the case was that BCE proposed an arrangement in which certain bondholders stood to be disadvantaged because the level of BCE's debt would be increased.  The higher level of debt would in turn decrease the value of the existing debt as well as occasion a loss of investment grade status. The QCA held that the bondholders' interests must be considered when the board is discharging its fiduciary duties.  But in reaching its decision, the QCA pushed the concept of fiduciary duties into new territory, a move that stretched existing law.  In particular, the QCA conceived directors' fiduciary duties extremely broadly, criticizing the BCE board for not considering how the plan of arrangement at issue might be unfair to bondholders.

Jacob Ziegel: "Unsecured creditors have the most to lose"

This commentary was first published in the Financial Post on November 4, 2008.

Last August, 4,500 Zoom Airlines passengers found themselves stranded across North America, the West Indies and various European countries when the airline ran out of money and grounded its planes. Passengers were left to pay for their return journey home and figure out how to recover the payments they had made to the airline. Their prospects were dim.

Since Zoom Airlines had declared bankruptcy, the best the passengers could expect was to be treated as unsecured creditors of the airline-- ranking at the bottom of the ladder in the distribution of Zoom's assets. Passengers must yield to the prior claims of Crown trust claims (for unremitted employment insurance premiums and tax deductions), secured creditors and preferential creditors. Typically, unsecured creditors recover no more than five cents on the dollar of their claims and often nothing at all.