Governing Principles In Hostile Take-Over Bid Litigation

This article was originally published in Blakes Bulletin on Litigation, September 2004.

The directors of a company have an obligation to act honestly and in good faith in the best interest of the corporation (see Section 134(1)(a) of the Ontario Business Corporations Act) (OBCA).

This provision requires that in discharging their obligations, directors must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. If the actions of the directors unfairly disregard the interest of a shareholder, unfairly prejudice those interests or are oppressive to them, Section 234 of the OBCA comes into play and allows the court to grant any remedy it thinks fit. This is known as the "oppression remedy".