Author: Ryan Carroll, LAW 365 Summer Student
The fiduciary duty held by directors of corporations has been further clarified by the Supreme Court of Canada in the BCE Inc v 1976 Debentureholders decision. The SCC clarified that the fiduciary duty held by directors is to the well-being of the corporation alone. At minimum, the corporation must meet its statutory obligations. Other requirements may also need to be met, but the SCC has made it clear that directors are expected to maintain the “best interests of the corporation”. Outside of statutory obligations, what is needed to maintain the best interests of the corporation is contextual and is based on the specific situation.
The SCC did offer suggestions to help guide the decision of directors to determine what is in the best interests of the corporation. The best interests of the corporation could be contemplated by considering the interests of other stakeholders. The SCC listed several, including shareholders and employees. The SCC did note however, that considering the interests of other stakeholders is not mandatory. There may be situations in which different stakeholders possess conflicting interests. It was made clear that there is no hierarchy of stakeholders and directors are solely expected to ensure that the best interests of the corporation are maintained.
This decision also affords deference to the decisions made by directions when attempting to maintain the best interests of the corporation. Business decisions will be given deference if the decision “lies within a range of reasonable alternatives”. The SCC has recognized that directors are “better suited” then the courts to determine what is in the best interests of the corporation.
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