You can grab notes on other topic from here.
Policy for defensive: you can do w/e you want to fight bid, but if you deprive SH of choice, you’re dead (prob b/c conflict of interest between directors interests and SH’s interests). It’s good to have them, because you maximize value of the enterprise.
- Traditionally, directors’ actions evaluated under the “business judgment rule” (Smith v. Van Gorkom) and have fiduciary duties of care/loyalty under CBCA
However, in the context of defensive measures, a more stringent view emerges. Directors must show:
- (a) They have reasonable grounds, based upon good faith and reasonable investigation, to believe that the takeover threat is harmful to the enterprise; and
- (b) Actions taken in response to the threat are reasonable or “proportionate” in relation to the threat posed.
o This is Intended to address the potential conflict of interest between management and SHs (that directors will just act in their own best interests in a TOB situation to entrench themselves)
- NP 62-202: Tactics that will come under scrutiny Tactics that will come under scrutiny include:
- Issuance of grant on, option, or purchase of outstanding securities of target
- Sale or acquisition of asset of a material amount
- Entering into a contract other than in the normal course of business.
- Duty to Maximize SH Value
Competing goals of the directors: immediate maximization of SH value and pursuing the long-term best interests of the corporation.
You can grab notes on other topic from here.
