During a CCAA restructuring of Stelco Inc., the board of directors appointed two new directors who were associated with major shareholders.
Employee stakeholders, fearing the new directors would favour shareholder interests over employee interests in the restructuring, successfully applied to the supervising judge to have the directors removed based on a reasonable apprehension of bias.
The Court of Appeal granted leave to appeal and allowed the appeal, holding that the supervising judge lacked inherent jurisdiction or statutory authority under section 11 of the CCAA to remove duly appointed directors.
The Court further held that the administrative law concept of reasonable apprehension of bias does not apply to corporate directors, whose conduct is governed by fiduciary duties and the business judgment rule.
