Legal news and trends for Canadian in-house counsel and c-suite executives
Issue link: https://digital.canadianlawyermag.com/i/50875
"We have this curious situation in corporate law where shareholders have rights, but no responsibilities," notes Waitzer. "Shareholders can say whatever they want to say, and do whatever they want to do with their shares. If they're an institutional investor, they may have obligations to their beneficial owners, but they don't have any obligations to the company. Directors and management, on the other side, have rights and responsi- bilities. Ultimately, they're subject to an obligation to act in the best interests of the corporation." That means the role of in-house counsel is to ensure all players understand their rights and responsibili- ties. That can become difficult when the dynamics of the situation create hostility, Waitzer suggests, or when tightened time frames present themselves. "The legal issues become, as is often the case in cor- porate law, judgment calls," he adds. David Surat, counsel with Borden Ladner Gervais LLP's securities and capi- tal markets group, says in-house coun- sel should expect shareholders to take advantage of activist techniques with any significant transaction, such as a merger and acquisition. This became apparent in examples such as the bid in opposition to the merger of the Toronto Stock Exchange and London Stock Exchange, which was spearheaded by a group of major banks and pension funds. "If you are planning a significant transaction, the lesson is that you've got to try to anticipate the tactics someone might take if they come out of the woodwork, or someone you already know about," says Surat. At the same time, Surat does not believe shareholder activism in Canada will overnight become as prevalent as it is in the United States. "If you look back over the last couple of years, there've been a lot of people saying shareholder activism is coming, things are changing," he says. "I think to a certain extent that's true, but it may have been somewhat overstated. I don't think there's been a revolutionary change in the way things happen, but I do think the level of scrutiny that boards are being put under, and the amount of focus of shareholders on their ability to influ- ence corporate decisions, has certainly risen. I think boards are much more focused on potential responses of share- holders to any action that's taken." Nonetheless, there appears to be clear consensus from those in the corporate legal community that shareholder activ- ism in Canada is no fad. That means it would be imprudent of in-house counsel to fail to do their homework on the trend. "I don't think it's a flash in the pan," says Enbridge's Love. "It is an increasingly important issue for companies, and lots of companies are putting the resources that are required into their communica- tion with shareholders in this area." IH Employment and Labour Lawyers Experience Counts. Referrals respected and appreciated. Shields O'Donnell MacKillop LLP 416.304.6400 65 Queen Street W, Suite 1800, Toronto, Ontario Canada M5H 2M5 28 • AUGUST 2011Shields_IH_Apr_11.indd 1 INHOUSE 3/1/11 10:04:56 AM