Contentious Issues in the Boardroom

The August Issue of the Director's Briefing is now available via LexisNexis.

I am thrilled to announce the release of the latest edition of the Director’s Briefing, co-authored by myself, Laura Wolfe, and Hartley R. Nathan, K.C. In this issue, we delve into several topics that directors and officers may encounter and provide insights on how to navigate these challenges effectively:

1. Amendments to the Ontario Business Corporations Act (OBCA):

   • We discuss the changes brought by Bill 91, the Less Red Tape, Stronger Economy Act, 2023, which came into effect on October 1, 2023. These amendments modernize the OBCA, particularly in facilitating electronic and telephonic participation in corporate governance for directors and shareholders. Directors should familiarize themselves with these changes to leverage the opportunities for improved operational efficiency.

2. Advance Notice By-law Requirements:

   • We examine the importance of advance notice by-laws in preventing dissident shareholders from nominating board candidates without prior notice. We discuss recent Delaware Court guidance on the validity of these by-laws and suggest provisions to ensure compliance and effectiveness during proxy battles.

3. Independence of Committees:

   • While Ontario securities laws define independence for audits and special transactions, U.S. case law provides additional insights, highlighting the importance of actual and perceived independence in maintaining committee integrity. The Delaware Court of Chancery emphasized in Teamsters Local 443 Health Services & Insurance Plan v. Chou that committee decisions should be based on merits and not influenced by relationships. Even minor affiliations can raise questions about a committee member’s impartiality.

4. Keeping Family Company Minute Books Up to Date:

   • In Southwell v. Carlgate Development Inc., the Ontario Superior Court of Justice discusses several points regarding corporate governance and directorship disputes, especially in the context of closely held family businesses. Proper minutes and up-to-date minute books can help prevent disputes and resolve conflicts when they arise. This case highlights that courts will consider the substantive intent of parties and equitable principles, making record-keeping essential for family-run companies, even where they are closely held.

Recent Cases

Summaries and analyses of recent court decisions and topics that have implications for directors and corporate governance are also highlighted, including:

• Expert in Powder-Coating Substrates Owed Fiduciary and Contractual Duties to Former Investment Partners: Court of Appeal for Ontario, May 9, 2024

• Parties Expressly Agreed to Allocate Risk Using Direct, Clear, and Express Language in Contract Dealing with Delivery of Topsoil: Supreme Court of Canada, May 31, 2024

• Part-time Security Supervisors Had No Fiduciary Duty to Security Company: Ontario Superior Court of Justice, March 1, 2024

• Injunctions Granted Against Private Tutor to Prevent Use of Confidential Information and Disparagement of Company: Supreme Court of British Columbia, April 9, 2024

• Owner and Son Not Personally Liable in Tort for Alleged Misrepresentations: Court of King’s Bench of Alberta, April 16, 2024

To read the full Director’s Briefing for August 2024, click here or email Laura to request a copy.