BCE Inc v 1976 Debentureholders

In considering BCE's leveraged buyout, the SCC restated Canadian corporate-law fundamentals: the fiduciary duty in s.122(1)(a) of the CBCA is owed to the corporation, not directly to shareholders or other stakeholders. The oppression remedy in s.241 protects reasonable expectations of stakeholders affected by corporate conduct.

BCE shareholders approved a leveraged buyout that would substantially increase BCE's debt. Debentureholders objected that the increase in debt would downgrade their existing debentures.

(1) To whom is the directors' fiduciary duty owed? (2) What is the test for oppression?

Duty owed to the corporation; debentureholders' reasonable expectations not breached; transaction approved.

Section 122(1)(a) duty is owed to the corporation. In assessing whether action is in the corporation's best interests, directors may consider the interests of shareholders, creditors, employees, and other stakeholders, but they are not required to give priority to any one group. Oppression under s.241 turns on (a) the claimant's reasonable expectations and (b) whether those expectations were breached by conduct that was oppressive, unfairly prejudicial, or unfairly disregarded the claimant's interests.

The Court rejected arguments that directors owe direct duties to particular stakeholders. The oppression remedy is the appropriate avenue for stakeholders complaining of unfair treatment. Reasonable expectations are assessed objectively by reference to the surrounding circumstances.

Cornerstone of modern Canadian corporate law. Reaffirms Peoples Department Stores v Wise (2004). Sets the analytical framework for every oppression claim. Practical effect: boards have wide discretion provided they consider stakeholder interests in good faith.

BCE Inc v 1976 Debentureholders, 2008 SCC 69, [2008] 3 SCR 560.

McLachlin CJ, Bastarache J, Binnie J, LeBel J, Deschamps J, Fish J, Abella J, Charron J, Rothstein J