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Issuers, Directors and Officers Take Comfort in Court of Appeal's Decision in Danier


Area Corporate Finance and Securities, Litigation


In an eagerly awaited decision released last week, the Ontario Court of Appeal reversed the May 2004 ruling of Justice Sidney Lederman in Kerr v. Danier Leather Inc., which had held that Danier and certain of its senior officers were liable to investors for a prospectus misrepresentation relating to an earnings forecast included in a prospectus.

The Court of Appeal's decision in Danier is important for many reasons.  The two most important are that the Court of Appeal:

1.  Clarified that under the Ontario Securities Act, a prospectus is only required to provide full, true and plain disclosure of all material facts as of the date of the prospectus (not the date of closing) and issuers are required to amend for material changes, but not for material facts; and

2.  Strongly endorsed what is referred to as the "business judgment rule." 

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