Mediating rights and responsibilities in control transactions

• Published in: Osgoode Hall law journal (1960) 2010-12, Vol.48 (3/4), p.639-661
• Main Authors: Vanderpol, Sean, Waitzer, Edward J.
• Format: Article
• Language: English
• Subjects: Commercial law; Corporate governance; Corporation law; Federal court decisions; Responsibilities; Securities; Securities regulations
• ISSN: 0030-6185; 2817-5069; 2817-5069
• DOI: 10.60082/2817-5069.1092

There is a growing debate as to the relative merits and consequences of a shift to a more shareholder-centric corporate governance framework. How much "direct democracy" makes sense in corporate decision making? If power is to be transferred to shareholders, should responsibilities be imposed (and, if so, how)? These issues have long been addressed by courts and regulators in the context of unsolicited control transactions. In its recent Air Products and Chemicals v. Airgas decision, the Delaware Chancery Court canvassed the evolution of its law on this point and concluded that implicit in the power (and responsibility) of the board of directors to manage the business and affairs of the corporation is the power to determine the long-term strategy of the corporation, including when and if a sale of control of the corporation should be pursued. By contrast, Canadian securities regulation has consistently adopted a shareholder-centric approach to unsolicited change of control transactions. This is an approach that is increasingly difficult to reconcile with Canadian corporate law as it has evolved since these issues were first considered by securities regulators. The answer to this growing inconsistency, we suggest, is for Canadian securities regulators to repeal their "defensive tactics" policy in the recognition that our courts have become better equipped to adjudicate such matters.