Steve Tenai

The Supreme Court of Canada considered a proposed plan of arrangement for a leveraged buyout of BCE Inc. that would add substantial debt to Bell Canada, reducing the trading value of its debentures.

The debentureholders opposed the arrangement, claiming oppression under s. 241 of the CBCA and arguing the arrangement was not fair and reasonable under s. 192.

The Court held that the directors' fiduciary duty is owed to the corporation, not to specific stakeholders, though directors may consider stakeholder interests.

The debentureholders failed to establish a reasonable expectation that their investment grade rating would be maintained.

The Court affirmed the trial judge's approval of the arrangement, finding it had a valid business purpose and resolved objections in a fair and balanced way.

The appellant appealed the order of the motion judge.

The Court of Appeal agreed with the analysis and conclusions of the motion judge and dismissed the appeal, awarding costs to the respondents.

The applicants sought to vary management cease trade orders (MCTOs) under section 144 of the Securities Act to permit trading in connection with a proposed going private transaction by Hollinger Inc. The Commission found that the applicants failed to demonstrate that varying the MCTOs would not be prejudicial to the public interest.

The Commission cited concerns regarding the lack of current audited financial statements, the adequacy of the independent valuation, the potential conflicts of interest in the proposed litigation trust, and evidence of undue influence exerted by related parties on the independent committee and valuator.

The applications were denied.

The appellants appealed an order striking out their proposed class action statements of claim for oppression against the respondents.

The claims alleged that a recapitalization plan was oppressive to minority shareholders.

The Court of Appeal dismissed the appeal, finding the claims failed to disclose a reasonable cause of action because the prospectus explicitly warned of the financial risks, the recapitalization plan benefited the company by preventing immediate collapse, and the appellants failed to plead any specific loss or damage.