BCE and the Long Shadow of American Corporate Law
Canadian Business Law Journal, Vol. 48, 2009
19 Pages Posted: 11 Aug 2010
Abstract
The recent decision of the Canadian Supreme Court in BCE Inc. v. 1976 Debenture holders, 2008 SCC 69, created further uncertainty in the Canadian corporate law of directors’ fiduciary duties, especially with respect to one of the most basic issues of corporate law: how to reconcile the competing interests of shareholders and non-shareholder corporate stakeholders such as bondholders. One substantial cause of this confusion is Canadian courts’ tendency to be too deferential to American principles of corporate law, at least some of which are in deep tension with the structure of Canadian corporate law. As a result of the outcome in BCE, Canadian law, despite the fact that the Canadian Business Corporation Act (CBCA) offers more explicit protections to creditors than U.S. corporate law, has ironically become more formalist in its approach to creditors’ rights than U.S. law. The first part of this article discusses the Court’s contractual analysis of the bondholders’ rights. The second part discusses the Supreme Court’s analysis of the bondholders’ oppression claims, with criticism limited to two aspects: 1) its failure to apply its own conception of the board’s fiduciary duty to the board’s actual conduct, and, 2) its decision to treat BCE and Bell Canada as though they were one corporation. The third part argues that, given the differences between background principles of commercial law in Canada and the United States, Canadian courts should adopt American corporate law precedents only after carefully ascertaining their consistency with background principles of Canadian commercial law and the particular principles that animate Canadian corporate law which, relative to U.S. corporate law, especially as formulated in Delaware, is substantially more paternalistic.
Keywords: BCE, shareholder, bondholder, indenture, commercial law, Canadian Business Corporation Act, CBCA, fraudulent conveyance, bankruptcy
Suggested Citation: Suggested Citation