Extract

The issue of to whom directors’ duties are owed is, without question, the most important issue in corporate law, for it defines the end or purpose of corporate existence and thus delineates the function that we wish corporations to play in our society. Shareholders are the only class of residual taker in the corporation; all other constituents are fixed claimants. Particularly as the traditional formulation of fiduciary duties in English and Canadian law is that the duty is owed only to the shareholders, the choice of duties, at the highest level of abstraction, is whether directors’ duties should be owed only to shareholders, only to fixed claimants, or to some combination of the two. In this chapter, I explore the rather abrupt paradigm shift from a shareholder-centric universe of directors’ duties to a new duty of uncertain proportions, a shift wrought by two decisions in the Supreme Court of Canada–Peoples Department Stores Inc. v. Wise (‘Peoples’) and BCE Inc. v. 1976 Debentureholders (‘BCE’) These decisions reject shareholder wealth maximization in favour of a duty to ‘the corporation’, where ‘[t]he interests of the corporation are not to be confused with the interests of the creditors or those of any other stakeholders’