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ARTICLE · 23 DECEMBER 2005

Danier Overturned

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The Ontario Court of Appeal has affirmed the "business judgment rule" in the context of management’s financial forecasts in an IPO prospectus. In Kerr v. Danier Leather Inc., the Court found that a forecast made by senior management is an exercise in business judgment and that courts should not second-guess management’s opinions as long as they fall within a "range of reasonableness".

CanadaLitigation, Mediation & Arbitration
Andrew Gray
Andrew Gray
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The Ontario Court of Appeal has affirmed the "business judgment rule" in the context of management’s financial forecasts in an IPO prospectus. In Kerr v. Danier Leather Inc., the Court found that a forecast made by senior management is an exercise in business judgment and that courts should not second-guess management’s opinions as long as they fall within a "range of reasonableness".1

The Court also confirmed that in updating a prospectus, the distinction between "material facts" and "material changes" is key: there is no requirement under the Securities Act to update a prospectus by disclosing material facts that occur after a receipt for a final prospectus is issued.

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