University of Toronto Law School Faculty Blog

Copthorne Holdings and the Future of the GAAR: January 6, 2012

On December 16, 2011, the Supreme Court of Canada released its much-anticipated decision in Copthorne Holdings Ltd. v. Canada, in which the Court considered the General Anti-Avoidance Rule (GAAR) for the fourth time.

In contrast to its previous GAAR decision in Lipson, the Court arrived at a unanimous decision in Copthorne, applying the GAAR to a number of transactions designed to preserve paid-up capital and redeem shares on a tax-free basis. In order to review the decision and its implications, the University of British Columbia’s National Centre for Business Law and the University of Toronto Faculty of Law are co-sponsoring a symposium on Copthorne Holdings Ltd. and the Future of the GAAR, which will be held at the University of Toronto Faculty of Law on the afternoon of Friday, January 6, 2012. 

Confirmed speakers include Ben Alarie (U of T Law), Hon. Donald G.H. Bowman (FMC Law and former Chief Justice of the Tax Court of Canada), Mark Brender (Osler), Robert Couzin (Couzin Taylor), David Duff (UBC Law), Tim Edgar (Osgoode Hall Law School), Phil Jolie (Canada Revenue Agency), and Deen Olsen (Department of Justice). Space is quite limited. Please go to http://www.copthorne.ca for registration information.

Adjunct Prof. Kenneth Jull: "The Canadian Corruption of Foreign Public Officials Act: Mandatory Risk Assessment"

Kenneth Jull is an adjunct professor at the University of Toronto Faculty of Law, teaching the course "Financial Crimes and Corporate Compliance".

The Canadian Corruption of Foreign Public Officials Act ("CFPOA") has been in force since 1999.  In June of 2011 the CFPOA  streaked across the radar screens of compliance officers when Niko Resources Ltd. ("Niko"), a Canadian energy company, plead guilty and paid a fine of almost $10 million  as a result of bribes paid to a Bangladeshi official.  The bribes included a luxury SUV [Toyota Land Cruiser] and a trip to New York and Calgary. 

The large fine is only half of the story. Niko Canada and its subsidiaries were placed on probation requiring that the companies develop compliance procedures based on risk assessment.   The concepts in the prior sentence bear repeating as they are novel in Canada.  The Order pierces the corporate veil to include subsidiaries, places a corporation on probation (as now authorized by the Criminal Code sentencing provisions dealing with organizations) and requires a system of risk assessment. The following paragraph from the probation Order demonstrates the extent to which risk assessment is now a mandatory element of compliance in the anti-corruption arena:

The company will develop these compliance standards and procedures, including internal controls, ethics and compliance programs on the basis of a risk assessment addressing the individual circumstances of the company, in particular foreign bribery risks facing the company, including but not limited to, its geographical organization, interactions with various types and levels of government officials, industrial sectors of operation, involvement in joint venture agreements, importance of licences and permits in the company's operations, degree of governmental oversight and inspection, and volume and importance of goods and personnel clearing through customs and immigration.[emphasis added]

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.