In our April 4, 2014 client update, we summarized a recent
decision of the Ontario Superior Court of Justice (the
"Champion Iron Mines Decision") with
potentially important implications for how corporate arrangements
are done and, in particular, for the manner in which fairness
opinions for arrangements are drafted.1 Among other
things, the Court in the Champion Iron Mines Decision held that a
fairness opinion was not admissible to assist the Court in
determining whether the arrangement was "fair and
reasonable" because it did not satisfy the civil procedure
requirements for expert evidence. Two recent decisions of the same
Court appear to have significantly reduced the potential
implications of the Champion Iron Mines Decision.
Bear Lake Gold Ltd. Endorsement
In an endorsement dated June 5, 2014, Wilton-Siegel J. provided
the Court's reasons for approving a plan of arrangement
pursuant to which Kerr Lake Mines Inc.
("Kerr") would acquire all of the
outstanding common shares of Bear Lake Gold Ltd.
("Bear Lake") in exchange for securities
After reiterating and applying the legal test that must be met
for plan approval, Wilton-Siegel J. commented on the fairness
opinion provided to the board of directors of Bear Lake and
included in the information circular sent to its shareholders.
Referring to the comments made by Brown J. in the Champion Iron
Mines Decision, Wilton-Siegel noted that a fairness opinion in
M&A transactions need not, nor is it intended to, satisfy the
requirements of expert evidence under the Rules of Civil Procedure.
Rather, a fairness opinion in M&A transactions is "an
indicia of a good faith transaction as well as of the fairness and
reasonableness of the proposed transaction."
Specifically, the Court noted that a fairness opinion: (a)
serves as evidence that the special committee or board of directors
has considered the proposed transaction on the basis of objective
criteria, and (b) allows shareholders to reach their own
conclusions regarding the integrity of the directors'
recommendations and the fairness of the transaction.
Accordingly, notwithstanding the Champion Iron Mines Decision,
the Court found "no compelling reason to depart from the
existing practice regarding the use of fairness opinions" in
Royal Host Inc. Endorsement
Similarly, in an endorsement dated June 6, 2014, Newbould J.
provided the Court's reasons for approving a plan of
arrangement pursuant to which Holloway Lodging Corporation would
acquire all of the outstanding common shares of Royal Host Inc. in
exchange for cash and securities. Referring to the Champion Iron
Mines Decision, and agreeing with its treatment by Wilton-Siegel J.
in the Bear Lake matter, Newbould J. noted that: (a) the purpose of
a fairness opinion is a commercial one, (b) it is not an expert
report in a litigation context, and (c) a fairness opinion serves
as an indicia of the fairness and reasonableness of the proposed
While careful consideration should continue to be given to the
court process and scheduling in light of the Champion Iron Mines
Decision, it appears that, notwithstanding that decision, the
established practice surrounding fairness opinions in M&A
transactions has been reaffirmed.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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