CANADA LAW AND PRACTICE Contributed by: Kevin West, Andrea Hill, Priya Ratti and Meryam Kellow, SkyLaw
Advance Notice By-Law A target’s by-laws or other constating docu- ments may be amended to require advance notice of shareholder nominations for members to the board of directors, thereby giving the tar- get the time to strategically respond to a proxy fight in the context of a hostile bid. 9.4 Directors’ Duties Canadian directors owe the same duties when they are enacting defensive measures as in any other context. Boards in Canada owe a fiduciary duty to the corporation, not to the shareholders, and are not required to conduct an auction once a company is “in play” . This principle is especially important for nominee directors, who should be careful to manage con- flicts of interest and only share information with their nominating shareholder with the consent of the company. Canadian courts have held that the conduct of directors will be analysed on an objective stand - ard of what a reasonably prudent person would do in comparable circumstances. See 8.3 Busi- ness Judgement Rule . 9.5 Directors’ Ability to “Just Say No” Target boards in Canada cannot “just say no” in the same way that this strategy is understood in the USA. Canadian directors of public compa - nies, while they may implement defensive meas- ures, are not able to indefinitely prevent a bid from being presented to the shareholders.
securities litigation is relatively new in Canada. Parties involved in private acquisitions will often choose arbitration over litigation to provide them with greater efficiency and confidentiality. Notably, there has been a rise in the use of repre- sentation and warranty insurance, which serves as the primary recourse for a breach of represen- tations by the company or its security holders in instances where a policy has been put in place as part of closing. 10.2 Stage of Deal Litigation can occur at any stage of a trans- action. A plan of arrangement requires court approval, which provides a forum for aggrieved stakeholders. Other remedial avenues for stakeholders include a cease-trade order or other relief preventing the consummation of a takeover bid from a securi- ties regulator. 10.3 “Broken-Deal” Disputes Courts will typically uphold agreements in the M&A context and only in exceptional circum - stances will they find an agreement unenforce - able or allow parties to walk away from an agree- ment. See 3.1 Significant Court Decisions or Legal Developments .
11. Activism 11.1 Shareholder Activism
10. Litigation 10.1 Frequency of Litigation
Although Canada is seen by some as an activist- friendly jurisdiction, levels of shareholder activ - ism tend to lag behind levels of activity in the USA and Europe, particularly among large-cap Canadian issuers.
M&A litigation in Canada is not as prevalent as in other jurisdictions such as the USA. Class action
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