The Canadian Supreme Court published its reasons in BCE Inc. v. 1976 Debentureholders 2008 SCC 69 a few days before Christmas; its decision was given in June last year. The Supreme Court's decision is one of the most important recent Canadian cases concerning directors' duties and the oppression remedy (Section 241 of the Canadian Business Corporations Act, R.S.C. 1985, c. C-44).The case concerned an allegation by debentureholders that the directors had acted oppressively, contrary to Section 241, when they approved the sale of the company. This claim required the court to consider the duties of directors in circumstances where their decision would benefit some but not all of the company's stakeholders. A unanimous court rejected the debentureholders' claims that they had a reasonable expectation that the directors would protect their economic interests through maintaining the trading value of the debentures. The court also found that the directors' had considered the interests of the debentureholders and stated that if the debentureholders required greater protection this could have been achieved contractually. With regard to directors' fiduciary duties, the court unanimously observed (paras. [38], [40] and [66]):
The fiduciary duty of the directors to the corporation is a broad, contextual concept. It is not confined to short-term profit or share value. Where the corporation is an ongoing concern, it looks to the long-term interests of the corporation. The content of this duty varies with the situation at hand. At a minimum, it requires the directors to ensure that the corporation meets its statutory obligations. But, depending on the context, there may also be other requirements. In any event, the fiduciary duty owed by directors is mandatory; directors must look to what is in the best interests of the corporation.
In considering what is in the best interests of the corporation, directors may look to the interests of, inter alia, shareholders, employees, creditors, consumers, governments and the environment to inform their decisions. Courts should give appropriate deference to the business judgment of directors who take into account these ancillary interests, as reflected by the business judgment rule.
Directors, acting in the best interests of the corporation, may be obliged to consider the impact of their decisions on corporate stakeholders, such as the debentureholders in these appeals. This is what we mean when we speak of a director being required to act in the best interests of the corporation viewed as a good corporate citizen".
As discussed, conflicts may arise between the interests of corporate stakeholders inter se and between stakeholders and the corporation. Where the conflict involves the interests of the corporation, it falls to the directors of the corporation to resolve them in accordance with their fiduciary duty to act in the best interests of the corporation, viewed as a good corporate citizen.
The cases on oppression, taken as a whole, confirm that the duty of the directors to act in the best interests of the corporation comprehends a duty to treat individual stakeholders affected by corporate actions equitably and fairly. There are no absolute rules. In each case, the question is whether, in all the circumstances, the directors acted in the best interests of the corporation, having regard to all relevant considerations, including, but not confined to, the need to treat affected stakeholders in a fair manner, commensurate with the corporation’s duties as a responsible corporate citizen.
Directors may find themselves in a situation where it is impossible to please all stakeholders ... There is no principle that one set of interests — for example the interests of shareholders — should prevail over another set of interests. Everything depends on the particular situation faced by the directors and whether, having regard to that situation, they exercised business judgment in a responsible way.
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