BCE proposed a leveraged buyout that would substantially increase debt and could reduce the market value of Bell Canada debentures. Debentureholders opposed the arrangement even though their contractual payment rights would remain unchanged. They argued that the board had not adequately protected their economic interests.
The Supreme Court allowed BCE's appeals and dismissed the debentureholders' cross appeals. It separated the statutory oppression remedy under section 241 of the Canada Business Corporations Act from the requirement that a plan of arrangement be fair and reasonable under section 192. The debentureholders had to show a reasonable expectation and conduct that oppressed, unfairly prejudiced or unfairly disregarded their interests. They had not established the expectation that the board would preserve the debentures' investment grade trading value.
The board had considered the debentureholders' interests and complied with their contracts. The Court found that the proposed arrangement satisfied the applicable fair and reasonable approval standard. It did not hold that directors may ignore debt holders or that every reduction in security value is acceptable.
The reasons were delivered on December 19, 2008, after judgment on June 20. For board practice, the distinction matters because considering an affected stakeholder's position is not the same as guaranteeing the outcome that stakeholder wants.