Canada: Key Lessons From The BCE Decision

Last Updated: December 23 2008

The Supreme Court of Canada (SCC) released the long-awaited reasons for its decision in the BCE Inc. v. 1976 Debentureholders case on December 19, 2008. The SCC reaffirmed its decision in Peoples Department Stores Inc. (Trustee of) v. Wise that the directors' fiduciary duty is owed to the corporation, and not any particular constituency, thereby rejecting a "Revlon" duty to maximize shareholder value in change of control transactions.

Although the SCC said that directors "may" but are not required to give consideration to the interests of a range of stakeholders, including shareholders, employees, suppliers, creditors, consumers, governments and the environment, the practical effect of the SCC's decision is that directors will need to assess a range of interests when exercising their business judgment. This is because the SCC:

  • characterized the fiduciary duty of directors as a "broad, contextual concept";
  • made it clear that the oppression remedy, with its focus on fair treatment, is highly relevant to understanding the nature of the fiduciary duty;
  • noted that "[t]he corporation and shareholders are entitled to maximize profit and share value, to be sure, but not by treating individual stakeholders unfairly"; and
  • found that "the duty of the directors to act in the best interests of the corporation comprehends a duty to treat individual stakeholders affected by corporate actions fairly and equitably".

Nevertheless, it is important to note that the SCC implicitly recognized the importance of shareholder interests in director decision-making. In the change of control context, market pressures and the reality that shareholder acceptance is critical to allowing a transaction to proceed mean that, in practice, directors will continue to make a central focus of their analysis whether a transaction offers the highest value reasonably available to shareholders, even as they consider the best interests of the corporation and the impact of the transaction on other stakeholders.

The SCC also strongly endorsed the business judgment rule, both in the language of the decision and, more importantly, in the substance of the decision, when it stated that "[p]rovided that, as here, the directors' decision is found to have been within the range of reasonable choices that they could have made in weighing conflicting interests, the court will not go on to determine whether their decision was a perfect one". The result is a board-friendly decision that provides directors with protection provided that they follow a proper process that takes into account the interests of affected stakeholders.

The decision also provides guidance on the threshold considerations for an oppression claim. The SCC found that in assessing a claim of oppression, a court must focus on whether the evidence supports the claim that a stakeholder entitled to bring an oppression action had a reasonable expectation and, in turn, whether that reasonable expectation was violated as a result of conduct that amounted to "oppression", "unfair prejudice" or "unfair disregard" of the relevant interest. The SCC stated that in considering such claims, courts should look at "business realities, not merely narrow legalities". The SCC went on to note that the reasonable expectations of stakeholders, which are the "cornerstone of the oppression remedy", are "objective and contextual" and to be assessed with reference to, among other things, general commercial practice, the nature of the corporation, the relationship between the parties, past practice, steps the claimant could have taken to protect itself, representations and agreements and the fair resolution of conflicting interests between corporate stakeholders.

Applying these principles to the case at hand, the SCC found that although the evidence supported a reasonable expectation that the directors, in making their decisions, would consider the position of the debentureholders, the evidence showed that the directors did consider their interests. Moreover, the evidence did not support a reasonable expectation on the part of the debentureholders that the directors would set as a transaction constraint that the trading value of the debentures had to be preserved. Notwithstanding the broad, contextual discussion of the board's fiduciary duty and the oppression remedy, the SCC found no grounds to disturb the trial judge's approval of the directors' business judgment that the transaction was in the best interests of the corporation and did not violate the reasonable expectations of the debentureholders in all the circumstances.

The SCC's decision will be helpful to directors in considering not only change of control situations but, more broadly, corporate actions in general. The decision reminds directors and their advisors of the importance of a deliberate and robust process and maintaining a complete and accurate record. Corporations should also be mindful of their statements and actions in instances where these might be taken to create reasonable expectations for particular stakeholders (a concept that the SCC defines expansively), lest disgruntled parties subsequently seek to bring actions alleging that they are stakeholders entitled to bring a claim and that their reasonable expectations have not been adequately considered in connection with particular corporate decisions.

The decision also deals with several technical issues relating to plans of arrangement under the CBCA. The SCC clarified the test for determining whether an arrangement is fair and reasonable. This determination involves two inquiries: first, whether the arrangement has a valid business purpose; and second, whether it resolves the objections of those whose rights are being arranged in a fair and balanced way. Importantly, the SCC stressed that the determination as to whether a plan of arrangement is substantively and objectively fair and reasonable is to be made by reference to the "legal rights" that are being arranged and, absent "extraordinary circumstances", directors need not structure a transaction to accommodate those "whose legal rights remain intact but whose economic interests may be prejudiced". The SCC decided that the reduction in the trading value of the debentureholders' securities did not, without more, constitute an extraordinary circumstance.

For more detailed analysis, click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.