Peoples Department Stores Inc. v. Wise - Supreme Court of Canada Weighs in on Duties
|Area||Corporate Restructuring, Corporate and Commercial, Corporate Finance and Securities|
On October 29, 2004, the Supreme Court of Canada released its much anticipated decision in Peoples Department Stores Inc. (Trustee of) v. Wise. The Court unanimously ruled that directors and officers owe their fiduciary duties to the corporation at all times, even when the corporation is in the nebulous “vicinity of insolvency,” declining to adopt the approach favoured in some other jurisdictions where fiduciary duties are owed to creditors when a corporation is in financial difficulty.
The decision is welcome news for corporate directors, both because it clarifies an area of Canadian corporate law that was becoming less certain in recent years and because it rescues directors from the near-impossible position of trying to manage a shifting fiduciary duty as the fortunes of a corporation rise and fall.
The decision of the Supreme Court of Canada should provide directors with comfort that where a board of directors has made a business decision honestly and in good faith, and has acted prudently and on a reasonably informed basis, a court should not (and will not) second-guess the judgment of the directors.