Supreme Court of Canada Ruling - Directors and ShaThe BOD of HRG has failed in their fiduciary duties and responsibilities due to conflicts of interest, neglect and clearly not protecting the value of the company. Recently the SCC ruled with regard to the BCE case. There were several parties (bond holders, stockholders) affected by decisions made by the BOD, the SCC clearly ruled that their actions must be to serve the best interests of the company and to treat individual stakeholders fairly.
In my opinion HRG's BOD have either done nothing to enhance the value of HRG, or worse have served the interests of Severstal instead. Have a read...pretty clear to me, BOD cannot serve the interests of only one group of shareholders to the detriment of all others. By doing so, they have opened themselves to redress.
Supreme Court Decision
Oppression Remedy The SCC held that the oppression remedy focuses on harm to the legal and equitable interests of a wide range of stakeholders affected by oppressive acts of a corporation or its directors and that the remedy gives a court a broad jurisdiction to enforce not just what is legal but what is fair. The SCC further indicated that oppression is also fact specific, and that what is just and equitable is to be judged by the reasonable expectations of the stakeholders in the context and in regard to the relationships at play.
In assessing a claim of oppression, the SCC determined that a court must answer two questions: (1) does the evidence support the reasonable expectation asserted by the claimant? and (2) does the evidence establish that the reasonable expectation was violated by conduct falling within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest? For the first question, the SCC provided certain factors to be considered in determining whether a reasonable expectation exists, including: general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicts between corporate stakeholders. For the second question, the SCC indicated that a claimant must show that the failure to meet the reasonable expectation involved unfair conduct and prejudicial consequences.
Where conflicting interests arise, the SCC determined that 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 and that this duty comprehends a duty to treat individual stakeholders affected by corporate actions equitably and fairly. The SCC determined that there are no absolute rules and no principle that one set of interests should prevail over another and that 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.
CJ