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ARTICLE · 16 FEBRUARY 2011

Insider Trading at Private Companies

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If you thought insider trading laws only applied to publicly traded companies in Canada, you would be in good company.

CanadaCorporate/Commercial Law
Gary Solway
Gary Solway
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Originally Published In The Lexpert Magazine, February 2011

Shareholders of private companies may not be subject to securities regulation, but as guest columnists Gary Solway and Benjamin Gliksman of Bennett Jones LLP write, that doesn't mean they can flout insider-trading rules

If you thought insider trading laws only applied to publicly traded companies in Canada, you would be in good company. But you would be wrong. Canadian courts have frequently held that shareholders do not have fiduciary duties to each other, so it might be fair to assume that this is the end of the issue. It is not.

Since directors of private companies are often shareholders who trade the company's shares, this insider trading issue raises a corporate governance concern for directors. Subsection 131(4) of the Canadian Business Corporations Act (CBCA) – and similar provisions in some provincial legislation including the Business Corporations Act (Ontario) – provides that:

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