Corporate E-Review: Introduction - Oct 2012

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Introduction

This edition of the Osler Corporate Review reviews recent judicial decisions in Ontario and Delaware which have transformed restrictions on use of shared information often found in confidentiality agreements into de facto standstill provisions.  We also analyze a recent Ontario commercial court decision in which the court held that a corporation did not have to advance legal fees to the former directors and officers it had sued, even though the corporation’s by-law mandated the payments.  In addition, we review the recently proposed (by the NYSE and NASDAQ) changes to compensation committee listing standards, and the implications of these changes for Canadian issuers.  Finally, we discuss recent OSFI and federal government initiatives concerning corporate governance guidelines, credit and debit card code of conduct and residential mortgage underwriting practices and procedures.

Strategic Lessons Arising From Canadian and U.S. Judicial Consideration of Confidentiality Agreements

Judicial decisions in Ontario and, more recently, Delaware have transformed restrictions on use of shared information commonly found in confidentiality agreements into de facto standstill provisions.  These decisions raise strategic considerations that buyers and targets should address before negotiating confidentiality arrangements, especially where it is important to preserve or preclude an effective hostile option for the potential acquiror.

Ontario Court Denies Advance on Former Directors’ Legal Costs – Makes Rare Interim Finding of Bad Faith

The Ontario commercial court recently decided that a corporation did not have to advance legal fees to the former directors and officers that it had sued, even though the corporation’s by-law mandated the payments.  This decision is one of the few decisions refusing to advance legal costs, and may well in practice expand the role of the Court in considering future requests.

NASDAQ and NYSE Propose Listing Standards for Compensation Committees and Selection of Compensation Committee Advisors

The New York Stock Exchange and NASDAQ recently filed with the U.S. Securities and Exchange Commission proposed changes to their listing standards relating to compensation committees as required by SEC Rule 10C-1. In general, neither exchange proposes to (i) significantly alter the minimum listing requirements set forth in Rule 10C-1 or (ii) add any additional factors to be considered in determining director independence for compensation committee purposes or the independence of compensation advisers beyond those in Rule 10C-1.  The implications of these changes for Canadian issuers are discussed in this article.

OSFI and Federal Government Changes to Corporate Governance Guidelines, Credit and Debit Card Code of Conduct, and Residential Mortgage Underwriting Practices and Procedures

OSFI has recently released proposed changes to its Guideline on Corporate Governance which generally build on the principles articulated in the current Guideline and are a codification of industry best practices and OSFI’s existing expectations.  In addition, the federal government has announced the proposed expansion of the Code of Conduct for the Credit and Debit Card Industry in Canada to apply to mobile device point-of-sale payment services.  OSFI has also published the final version of revised Guideline B-20 Residential Mortgage Underwriting Practices and Procedures, forming part of the Canadian government’s attempts to strengthen the Canadian housing finance system.

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