BCE Inc. v. 1976 Debentureholders Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction

The written document or the case addresses the issues that arose during the proposed privatization of the Bell Canada and the responsibility of the corporation towards its debenture holders[1]. This change in control transaction puts forward a question of vast importance that talks about the responsibilities of the directors of the corporation, but the decision of the Supreme Court of Canada focused on directing the directors in settling the opposing interests of stakeholders. This decision is presented under the Canada Business Corporation Act for oppression remedy and the plan of arrangement[2].

It has been identified that the court, while analyzing the situation, did not address the interest of the shareholders in various aspects and in detail. The oppression remedy of the statutory rights of the debenture holders has been given priority and the statutory rights of the shareholders or their expectations have been neglected by the Court. On the other hand, when an organization or a corporation is “in play”, the responsibilities of directors include maximizing the value of shareholders which has not been addressed by the court.

The Board of Directors of BCE formed a committee with the responsibility to view or supervise the probable auction process of the corporation after viewing or examining interests from some interested parties for takeover or acquisition. The offer from the Ontario Teachers Plan Board, a group from Ontario was accepted by the BCE board.

Analysis

The original decision regarding the BCE’s change of control transaction by the Quebec Court of Appeal was challenged in the Supreme Court which indicated that the court will leverage this opportunity to highlight the importance of directors or will clarify their role in terms of such decisions. The court must take this opportunity to justify its decision regarding Peoples Department Stores v. Wise[3].

The Supreme Court can easily demonstrate the importance of fiduciary duty and its applicability in the case of a change of control transaction[4]. The duties of directors in such context have never been discussed before which is why the importance of this decision raised.Instead of addressing the above stated issue the Supreme Court divested its focus towards a narrower question that talks about the necessary and important steps that are essential to create oppression of debenture holders in such situations or how can directors create oppression for debenture holders when a change of control transaction is in process in a corporation[5].

On the other hand, the necessary steps in maximizing the value of shareholders that must be taken by the board are ignored or neglected.BCE is facing a certain takeover[6], and the Court acknowledges this fact which caused the submission of the case by the Court. Furthermore, the momentum of the market clearly indicated that the corporation has been put in play and a buy outis expected[7].

However, the reaction of a board of directors to being put in play and the reaction of the market are functions, at least in part, of what the board and the market perceive to be the legal obligations of the board in that context. To conclude that a buyout was inevitable overlooks the question of whether the BCE board could legitimately have taken steps to frustrate any change of control transaction through defensive tactics.

BCE Inc. v. 1976 Debentureholders Case Solution

The Supreme Court had ample of cases in the Canadian aspect that clearly exhibit the duty of the directors of a firm or a corporation facing a takeover or is in play. The cases indicate that the directors must implement or propose some steps that presents that rational towards maximizing the value of the shareholders. The Delaware principle offers some line of cases that have an influence on the court and have been dealt before this decision or the case.

[1]BCE Inc. v. 1976 Debentureholders 2008 SCC 69 ("BCE").

¹[2]R.S.C. 1985, c. C-44 ("CBCA"),

[3][2004] 3 S.C.R. 461 ("Peoples").

[4]R. Rocha, "Lawyers eager for Supreme Court to hear BCE Case", The Gazette, May 23, 2008; "BCE v. Bondholders", The Globe and Mail, June 17, 2008 at B1; and A. Hudec, "BCE and the Lessons Learned", The Globe and Mail, December 2, 2008, online: The Globe and Mail

5[5]BCE, supra at para 30.

[6]BCE, supra at para 106.

[7]BCE, supra at para. 112. ................................

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