Good business law is predictable business law. Boards of directors should be able to plan their actions around it. Unfortunately, recent decisions on the use of fairness opinions in plans of arrangement have made the law less predictable, and more arbitrary.
A plan of arrangement is a common type of merger made available to companies under the Canadian Business Corporations Act. To complete a plan of arrangement, two-thirds of each class of voting securities must approve of the transaction and a court must then review the plan according to several criteria: for statutory compliance; to evaluate whether the arrangement was put forth in good faith; and to see if the arrangement is fair and reasonable. While court approval is generally a low risk process, it’s only a low risk process because solicitors and directors know how to satisfy the court’s requirements.