CANADA LAW AND PRACTICE Contributed by: Kevin West, Andrea Hill, Priya Ratti and Meryam Kellow, SkyLaw
(GAAP) applicable to publicly accountable enterprises and disclose, in the case of annual financial statements, an unreserved statement of compliance with IFRS. GAAP, in the context of Canadian securities regulation, must be deter - mined in accordance with the Handbook of the Canadian Institute of Chartered Accountants. 7.4 Transaction Documents In a takeover bid, the following transaction docu- ments are required to be disclosed in full: • the takeover bid circular and any documents incorporated by reference; • the directors’ circular; • any lock-up agreements; and • any support agreement. In a plan of arrangement or other business com- bination, the following documents are required to be disclosed in full: • the management information circular deliv- ered with the meeting materials and any documents incorporated by reference; • any support agreements; and • the arrangement or business combination agreement. Reporting issuers are required to meet certain continuous disclosure obligations and file mate - rial contracts on SEDAR+. 8. Duties of Directors 8.1 Principal Directors’ Duties Directors’ duties in Canada include the follow - ing: • to act honestly and in good faith, with a view to the best interests of the corporation; and
• to exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances. In discharging their fiduciary duties, directors must exercise their powers for the benefit of the corporation and not for an improper purpose. These duties are owed to the corporation even in the context of a business combination or a hostile bid. However, the Supreme Court of Canada has confirmed that directors are per - mitted to consider the interests of a variety of stakeholders in fulfilling their responsibilities. This stakeholder-friendly corporate governance model has been codified in the Canadian federal corporate statute. The common law provides guidance as to which stakeholders’ interests may be considered, but does not provide guidance on whose interests, if any, should be prioritised. Although directors do not owe a fiduciary duty to shareholders and the “Revlon duty” (ie, when a break-up or change of control transaction is inevitable, the board’s fidu - ciary duty is to maximise shareholder value) has not been upheld by Canadian courts, directors are not prohibited from taking steps to maximise shareholder value or prioritise shareholders over other stakeholders. As of 2024, directors of Canadian corporations involved in producing, selling, distributing or importing goods in or outside Canada have a new responsibility: to approve an annual report detailing the steps the company has taken to prevent and reduce the risk that forced labour or child labour is used in any step of its operations. 8.2 Special or Ad Hoc Committees Special committees comprised of target direc- tors who are independent of a proposed transac-
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