By seamus white on December 19, 2016
Had Tim Cook been head of a Canadian corporation, and had the NCPPR tried to sue him for breaching his fiduciary obligation to the company, he would have a very good argument in his favor that pursing environmental initiatives is often going to be in the best interests of the company. As Peoples and BCE established, the best interests of the company are not merely maximizing shareholder value. Instead, directors and officers must take the company’s long term interests into account. Other stakeholders, including the environment, can be considered when making decisions for the company.
Because of the business judgement rule, the court would be unlikely to interfere in this situation, unless it looked like Cook was pursuing environmental initiatives for some fraudulent purpose. The NCPPR would surely love to classify all environmental initiatives as some sort of fraudulent hippy scheme concocted by Al Gore, but I find it doubtful that the court would side with them there. Given that carbon taxes are slowly starting to emerge, there is a good argument that getting a head start on reducing carbon footprint are in the best interests of the company. The issue of brand image should also factor into business decisions, and environmentalism can now be an important consideration for consumers when they choose products. Because of all these factors, I think it would be extremely unlikely that Tim Cook would run into much trouble, should he be challenged on his environmental corporate policy decisions.
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By Aashish Kohli on December 18, 2016
In BCE, the court affirms Peoples‘ criteria on how to think about the fiduciary duty of directors to the best interests of the corporation, saying that it is appropriate to consider – when trying to find what those best interests are – the interests of various stakeholders (eg. shareholders, creditors, employees, the government, etc). However, how those stakeholder interests are weighed and balanced in each case does seem to have to do with the facts of the cases themselves and how those parties’ interests are perceived by the courts.
From the facts of BCE, the court concludes that there was a reasonable expectation that the board of directors would consider the interests of the debentureholders when ascertaining the best interests of the company – however they also concluded that the board fulfilled this expectation by deciding that the bare contractual terms with the debentureholders would be met even though no further commitments would be made – such as structuring an arrangement to preserve the economic interests (eg. the investment grade rating) of the debentureholders during and after the buyout, like they wanted. This is because they were a sophisticated party, and could have arranged for this in the contract if that’s the outcome they wanted.
There, in my opinion , is the crux of where the facts turn on the equality of the parties when discussing oppression remedies. Where the party is sophisticated enough to have dealt with corporate clients and partners, they can therefore have realistic expectations based on the parties contractual obligations with each other, rather than a more inexperienced party (such as, perhaps, an individual shareholder) who may not have this clarity of corporate realities. This, in my mind, modifies “reasonable” expectations to include the context of the situation (ie. a modified objective test, rather than just objective), much the same way the court had conceptualized the duty of care of directors in Peoples. Personally, I quite like the symmetry – or perhaps more accurately, consistency – in the way the court here deals with objectivity in the corporate world.
As a final thought, I do not believe this flexibility precludes the oppression remedy from being used as a right to reform corporate conduct – all it needs in order to be used to its intended purpose is a clarity in language and tests, much the same way Peoples clarified the duties of directors. The facts of BCE do this, true, but it would be nice to have the SCC back it up with a solid test. After all, what corporate law really seems to suffer from is that it’s a huge inconsistent mess that too often turns on the facts in ways that we can’t easily predict – so being able to form tests to predict the direction of corporate law is, in my opinion, a definitive step in the right direction
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By cindy on December 16, 2016
In preparing for the statutory drafting exercise for the exam, I’ve been thinking about whether and why sole shareholder corps should benefit from limited liability. In Kosmopoulos II (the 1987 case) Wilson J refused to pierce the corporate veil because it would create ‘an arbitrary difference between sole shareholder and multiple shareholder corps’. In my eyes, however, the difference isn’t arbitrary at all: the policy considerations that justify limited liability in multiple shareholder corps do not apply to sole shareholder corps, because neither efficiency nor outside investment, in this context, require limited liability. A sole shareholder corp, by definition, has no outside investment, and that shareholder (if also director) will be signing contracts and engaging in activities on the corp’s behalf, with or without limited liability. Allowing shareholders in such corporations to shield themselves with limited liability seems like an arbitrary license for them to avoid responsibility by simply donning their ‘corporate hat’. Why should there be any corporate veil when it is the same person investing and managing the corporation?
The biggest counter-arguments, and the reason I didn’t pursue this line of argument, are (1) that people would likely take most of the shares to themselves but give a few away to nominal shareholders, in order to avoid being a sole shareholder corp. And (2) the ethical concerns about limited liability tend to stem from huge multinational corporations, whose numerous directors, shareholders and officers allow for a diffusion of responsibility. Going after the smaller, sole shareholder corps might not be the best use of our time if the aim is to increase corporate social responsibility.
Still, the underlying policy rationale just doesn’t seem to be there in the case of sole shareholder corps. If such corporations were not protected by limited liability, I wonder if the Salomon judgement would still stand, and if not, how corporate law might look today.
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By alexandra scott on December 14, 2016
Consider whether a corporation can be a “Shadow Director” of another corporation?
In British Columbia Securities Commission v. Alexander, 2013 BCCA 111 per Madam Justice D. Smith:
“The legal test for a finding that an individual acted as a de facto director or officer is “’whether, under the particular circumstances, the alleged director is an integral part of the mind and management of the company, taking into account the entirety of the alleged director’s involvement within the context of the business activities at issue. In Re IMAGIN Diagnostic Centres Inc., 2010 LNONOSC 632, the Ontario Securities Commission said (at para. 138) that a de facto director is one “…who maintains control over the affairs of the company and exercises the powers of a director and/or officer…”.
Given this test, I think it could be possible for a corporation to become a shadow director, due to corporations’ recognized personhood found under s. 30 of the BCBCA:
- A company has the capacity and the rights, powers and privileges of an individual of full capacity.
It is important then, to be aware of this test as s. 138 of the BCBCA designates certain obligations, including the duty directors have under s. 142 to “(a) act honestly and in good faith with a view to the best interests of the company, and (b) exercise the care, diligence and skill that a reasonably prudent individual would exercise in comparable circumstances – when they have been found to be acting like a director for a company.
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By floriana costea on December 13, 2016
I don’t think the corporate personhood should be abandoned despite the issues related to it that we have studied this term. One reason is the fact that the legal concept of corporate personhood is now so pervasive globally that we would be doing a disservice to our own corporations by limiting their rights to a set list in a statute. In a corporate world ruled by transnational corporations it is helpful to have at least a basic common concept of personhood across domestic legal systems. As the corporate landscape continues to evolve and change, it is unclear what rights, powers and privileges our corporations might be in need of in order to be competitive on a global scale. By having the personhood concept, it will allow the law to change through legal decisions in response to the changes taking place in the corporate world.
Another reason is that if we make a list of rights and privileges, without specifying responsibilities and liabilities, we haven’t solved many of the issues exhibited by the corporate person. Perhaps if in addition to the list of rights we would include a regime for attaching liability to people in control of the company it would make more sense. Otherwise we would still be left with the issue of finding a directing mind.
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By caitlyn fleck on December 12, 2016
https://www.thestar.com/news/world/2016/12/07/report-corporate-secrecy-makes-canada-a-haven-for-white-collar-crime.html\
Transparency International (whose website describes them as a global civil society organization leading the fight against corruption..) is calling for a public registry of the real owners behind corporations. According to them, it’s easier to incorporate a company in Canada than it is to get a library card (which I can attest to having recently tried to get a VPL card…). Canada is apparently becoming a “safe haven” for white collar crime due to in large part the fact that no corporate registry in Canada requires the disclosure of the beneficial owner behind the corporation. What’s with all the secrecy? If you have nothing to hide… why hide?
I guess you could call this “lifting up the veil and peaking behind it”, without ever really piercing it. Just checking in on who the actors are behind the scene… We should have legislation which regulates and enforces this more. I don’t think this type of legislation would be a disincentive for businesses to come to Canada because Transparency International makes a good point – legal entities and arrangements can be transparent while still preserving what they’re intended to do – limit liability, grant legitimate tax benefits and enable people to manage assets on another person’s behalf. I only see it dis-incentivizing people and companies that want to come here and do something sketchy…
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By alisa koebel on December 11, 2016
On my reading of the provision, the effect is roughly that of a strong admonition. Subsection (1) commands that a corporate person refrain from certain actions. It is worded as if it were mandatory, and its codification in statute would appear to lend it gravity. But while its practical effect is almost entirely undermined by subsection (2), it continues to express a forceful position.
For me, subsection (2) epitomizes the malleability and unprincipled basis of corporate law. It maintains the overwhelmingly fact-based and contextual analysis found in most of the areas we have studied, and provides for huge judicial discretion.
Together, it seems that this section is the legislature saying, you really shouldn’t act outside of your stated purpose, but, we leave it to the judge.
More practically, subsection (1) may not go as far as to set a presumption that such acts will be invalid which can then be rebutted, but it does allow you to say you’ve gone part of the way to establishing that they should be invalid. It is sort of a two part test – (1) asks whether they were outside the purpose, and (2) asks you to look at the entirety of the context to see if it provides an (equitable?) reason to find the acts invalid.
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By rosegentry on December 11, 2016
I think that s. 30 of the BC Business Corporations Act could and should simply be eliminated and replaced by an inclusive list of rights, powers and privileges. Simply put, corporations are not people. I do not believe that they should be considered people. I personally don’t believe that there is any benefit to invoking them with “personhood” or perpetuating the legal fiction that they are persons. Instead, I find it detrimental, and feel believe that it helps corporations get away with wrongdoings. Corporations cannot go to jail and are not thinking, feeling beings. They do not decide to take actions on their own, instead they depend on many minds to create a “controlling mind” and do not have access to the same rights, powers, and privileges as humans.
As we have seen from case law, especially regarding section 7 of the Charter, humans and corporations have different rights and I believe that it would be more beneficial to simply state what rights, powers, and privileges they are entitled to. I think that it would be advisable because it would eliminate the courts need to interpret what rights should/are meant to apply to companies and which rights are reserved only for “individuals” or “natural persons”. It would also do away with costly and time consuming court cases that deal with this issue and allow the courts to deal with more serious matters.
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By kelly gale on December 11, 2016
Encana, Talisman Energy, Suncor Energy, Husky Energy, Nexen, Syncrude.
All Canadian petroleum companies. More importantly, all publicly traded companies.
Strike suits have been long considered nuisance actions, meant to make a quick buck at the expense of the corporation.
My proposal is this: purchase shares in oil companies, and then file class actions whenever a pipeline bursts or a spill occurs, because the company has breached their fiduciary interest to shareholders.
Scenario #1: A nice little settlement. The big bad oil corp pays us all off to make it go away. I can pay off my student loan debt, and maybe do some investing. Maybe I’ll buy myself a nice electric bicycle.
Scenario #2: A nice little settlement. The court accepts our complaint, rules in our favour (“um yes, i totally reasonably expected there to not be any pipeline bursts which could affect the price of my shares” & “my interests were totally unfairly disregarded when they decided to build that pipeline”), and awards us hella damages. They also order the oil company to stop polluting, or something. I don’t know. I’ll probably buy myself two electric bicycles.
Scenario #3: There is no scenario #3. This is a win-win.
Who’s with me?
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