Nov 26, 2014

BCE Inc v 1976 Debentureholders Case Brief

BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 SCR 560


-The directors wanted to get court approval for a plan of arrangement that involved a leverage buyout. This would involve BCE taking on more debt, which would reduce the value of the plaintiff’s debentures.


-Was the duty of loyalty breached?


-It was not breached


·There is a ‘fair treatment’ aspect of the fiduciary duty

oThe corporation is entitled to maximize SH profit, as long as they do not treat other stakeholders unfairly


·The ‘fair treatment’ aspect has never been mentioned before

·This case will be significant for the future

oBoards will now engage in token consultation

§Just to show that they are consulting all stakeholders


Court says that this case involves the fair treatment component of the fiduciary duty (the court talks about this like it has always been there, which it hasn’t). The court then went on to explain it: The Corporation is entitled to maximize profit and share value, but cannot do this by treating individual stakeholders unfairly. The duty to act in the best interests of the corporation involves a duty to treat individual stakeholders effective by corporate act ions equitably and fairly (this is where we are WRT positive obligations). Question in each case is whether the director acted in the best interests of the corporation- includes the need to treat the stakeholders in a fair manner. Also, court says that the corporation is to be viewed as a good corporate citizen.

§If reduction in trading value is not unfair treatment for debenture holders then what is?? There is nothing else that they would care about – this will affect solicitor practice and litigation in the future.

Key point:

·Impact on practice and litigation?Boards will now engage in token consultation – just keeping potential litigation in mind – more process involved AND now – every single trust indenture – will have drafted in it protection from this kind of situation.

will effect how trust indentures are drafted – will contain provisions that will contemplate these types of transactions – protection in the form of negative covenants imposed on the corporation – practice will reduce or eliminate this kind of litigation