Corporate Commercial Law

OVERVIEW

Corporate commercial law, or “business law,” is a broad area that can encompass a number of specialties, such as corporate finance, securities, and insolvency law. Counsel practising corporate commercial law may be involved in any number of matters for clients, including:

  • drafting and negotiation of contracts of all types, including licensing and distribution agreements, supply agreements, joint ventures and strategic alliances;
  • corporate governance;
  • contractual disputes, typically pre-litigation;
  • corporate reorganizations and restructurings; and
  • mergers & acquisitions (assets or shares; public or private).

Corporate commercial lawyers need not only good technical skills, but a working knowledge of business, an ability to establish a rapport with the client, and a practical approach.

COMMON INTEREST PRIVILEGE

A recent ruling from the New York Court of Appeals highlights the differences in the way Canadian and American courts approach common interest privilege.

Generally speaking, disclosure of communications protected by solicitor-client privilege to a third party results in a waiver of the privilege. The common interest privilege doctrine, an exception to the waiver rule, seeks to avoid that result where parties have the same interests, share common goals, or are seeking similar remedies. Indeed, common interest privilege agreements are intended to enable parties to communicate frankly between themselves without waiving a privilege that any one of the parties may enjoy.

Historically, common interest privilege applies to the sharing of information that takes place for the purpose of or in contemplation of litigation, arbitration or dispute resolution proceedings. But Canadian courts have taken it further, with some judges entrenching that protection in the commercial context in order to allow parties to pursue similar common interests in commercial transactions.

The British Columbia Court of Appeal’s decision in Maximum Ventures v. De Graaf in 2000 is generally regarded as having set the tone for Canadian courts. The court ruled that where sufficient commonality exists, the privilege applies even in the absence of actual or contemplated litigation. Other Canadian cases have echoed that view.

But the law can be different in the US. While some federal courts of appeal have taken a position similar to the Canadian one, most US courts have applied the privilege only where the shared communications relate to pending or anticipated litigation.

Most recently, the New York Court of Appeals upheld the narrow scope of the common interest privilege in that state. The decision, Ambrac Assurance v. Countrywide Home Loans, arose in the context of a merger between Countrywide and America in 2008. The transaction featured a common interest agreement intended to protect communications between the companies regarding matters affecting the merger, including documents relating to employee benefit plans and legal advice on tax issues.

Bank of America claimed that certain communications between itself and Countryside were protected by attorney-client privilege because they related to a number of legal issues the companies needed to resolve jointly in pursuance of the merger. Ambac countered that the voluntary sharing of the confidential material waived the attorney-client privilege.

Two lower courts upheld the privilege, but the Court of Appeals reversed, noting that New York precedent had for over two decades required “pending or reasonably anticipated litigation” as a pre-condition to invoking common interest privilege.

“As an exception to the general rule that communications made in the presence of or to a third party are not protected by the attorney-client privilege our current formulation of the common interest doctrine is limited to situations where the benefit and the necessity of shared communications are at their highest, and the potential for misuse is minimal,” the court stated.

As the court saw it, the commercial context, which differed markedly from the litigation context, did not meet these criteria. “When two or more parties are engaged in or reasonably anticipate litigation in which they share a common legal interest, the threat of mandatory disclosure may chill the parties’ exchange of privileged information and therefore thwart any desire to coordinate legal strategy,” the court stated. “In that situation, the common interest doctrine promotes candor that may otherwise have been inhibited. The same cannot be said of clients who share a common legal interest in a commercial transaction or other common problem but do not reasonably anticipate litigation.”

US courts are also much less likely to imply that a common interest privilege exists. “Courts in many states are not inclined to apply the privilege unless it has been evidenced by a formal agreement that includes reference to the privileged communications and to the fact that there is no intent to waive the privilege by virtue of the documents’ disclosure to the parties involved.

MAJORITY VOTING

The 2015 proxy season was the first in which companies listed on the TSX were required to have a majority voting process for the election of the director.

Majority voting means that each director must be elected by more than 50 per cent of the votes cast at a shareholder meeting. It differs from the corporate law requirement, where votes for director election are either “for” or “withheld”. But under corporate law, a vote withheld is not a vote against. The upshot is that there was no real mechanism for displaying dissatisfaction with a nominee when a company put forward the same number of nominees as there were director positions.

Contested meetings, where the nominations exceed the seats available, are exempt from the new rules. The exemption reflects the fact that contested elections are true elections where the nominees who receive the most votes ought to be elected, whether or not they garner a majority of the votes cast.

Also exempted are majority-controlled companies where majority voting occurs by definition.

Non-exempt companies must describe the majority voting policy in the information circulars related to meetings at which directors will be elected.

The mandatory majority voting policy follows on other rule changes adopted for the 2013 proxy meeting seasons. These earlier rules eliminated staggered boards and slate voting, required disclosure of whether a majority voting policy was in place and an explanation of why it was not in place if that was the case. Consequently, many TSX companies adopted majority voting before it became mandatory. 

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