Amendments to provincial
securities legislation across Canada that make it easier for shareholders to sue for misrepresentations by public companies have
recently attracted much attention.
These amendments have made
it easier to certify class actions
brought on behalf of shareholders
for damages suffered as a result of
misrepresentations in financial
statements and other public documents, as they create a presumption of shareholder reliance and
damages once a misrepresentation
is proven. The anticipated proliferation of shareholder class actions
as a result of these amendments
has been a hot topic among lawyers and senior management for
years, especially in the wake of the
KEN
DEKKER
2009 certification of a shareholder
class action against IMAX Cor-
poration.
Significantly less attention has
been paid to whether shareholder
class actions might be brought
under another and potentially
much broader statutory remedy:
the oppression remedy under one
of the provincial or federal business corporations statutes. However, this may be changing.
Last November, B.C. became
the second Canadian province,
after Ontario, to have an oppres-
sion action on behalf of aggrieved
shareholders of a public corpora-
tion certified as a class action. In a
decision released on Nov. 8, 2010,
the B.C. Court of Appeal over-
turned a lower court decision and
certified as a class proceeding an
oppression action brought on
behalf of minority shareholders of
American Bullion Minerals Ltd.
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Insolvency reform: what a difference a year makes
The introduction of the federal government’s long-awaited
insolvency reform package,
which finally came into force on
Sept. 18, 2009, was expected to
motivate financially challenged
debtors to favour proposals and
restructurings. But has it worked
as intended?
Over a year later, it’s interesting to assess how Canada’s business sector is faring under the
amendments. The chart on the
right (from Insolvency Statistics
in Canada—Third Quarter of
2010, by the Office of the Superintendent of Bankruptcy Canada) provides the most recent
personal and business insolvency statistics.
On the consumer side, it’s
clear that proposals have been
strongly favoured; new financial
incentives encourage higher
income individuals to make proposals rather than assignments in
bankruptcy. The impact on the
business side is not quite so clear.
While insolvencies overall are
down, this was expected because
businesses in 2009 were still coping with the “sturm and drang” of
the credit crisis.
Digging beneath the numbers, however, there are some
emerging trends, such as more
restructuring activity. The credit
crunch has eased and more
alternative lenders are back in
the market, enabling more companies to access funds to support
them through a period of financial difficulty. Since a restructuring can take several months to
orchestrate, these latest proposal
statistics likely don’t yet reflect
the number of organizations
using this option.
The amendments to the
Bankruptcy and Insolvency Act (BIA)
and the Companies Creditors
Arrangement Act (CCAA) harmonized procedures and provided smaller businesses with
Personal and business insolvencies (% increase/decrease)
BANKRUPTCIES
CONSUMERS
BUSINESSES
-25
PROPOSALS
+29.9
- 3. 3
OVERALL INSOLVENCIES
- 7. 7
- 21
For the 12-month period ending Sept. 30, 2010
CHRISTOPHER
PORTER
“Digging beneath
the numbers,...there
are some emerging
trends, such as more
restructuring activity.
more access to cost-effective
opportunities to restructure or
seek going-concern transactions.
For example, the court may now
authorize debtor-in-possession
(DIP) financing under a BIA Division 1 proposal. Previously this
was only possible through the
more complex and expensive
CCAA process available to companies with a minimum debt of
$5,000,000. For smaller businesses, the proposal process is
simpler and cheaper.
In certain ways, the amend-
ments have impacted corporate
borrowers more than finan-
cially troubled debtors. For
instance, the Wage Earner Pro-
tection Program (WEPP),
which was an earlier part of the
insolvency reform package,
came into force in July 2008.
