Late this afternoon the Supreme Court of Canada delivered its most important business decision since the court was established in 1875.

The decision related to BCE and its friendly takeover by a consortium of companies headed by the Ontario Teachers Pension Fund for $52 billion dollars – the largest takeover in world history.

More specifically the question the Court dealt with was whether the directors of BCE adequately took into consideration the interests of the bondholders viz.a viz. the shareholders.

Shareholders use their money to buy stock in the company. So if the company’s shares go up the shareholder makes money. If the stock goes down the shareholder loses money. There are no guarantees. Buying stock means taking a risk.

The bondholders do not buy stock; they lend the company their own money. There is a contractual obligation to pay the bondholder interest on his or her money and to pay back the whole amount when the bond becomes due. There is little risk.

In the case before the Supreme Court the company argued that it owed the bondholders only their contractual obligations. The bondholders argued that the company failed to properly consider their interests in a debt-heavy takover that is gutting the value of their investment.

Today the Supreme Court came down unanimously on the side of the shareholders. Presumably now the deal, which must be wrapped up by June 30, will go ahead.

Do you agree with the Supreme Court’s decision?

Do you think it will now be more difficult for companies to raise financing because potential bond buyers will feel their interests are being subordinated to the interests of shareholders?



  1. 1
    jim Says:

    I find it strange that the court did not issue a majority opinion. They say later but not when. As it stands now, I wouldn’t touch bonds with an 11 foot barge pole. One class of bonds which could end up in the sewer is the consol bond which has no due date.

  2. 2


    The Court issued a majority opinion in the sense that all seven judges who heard the case came down with a unanimous verdict. Later they will issue the reasoning behind their ruling.

  3. 3
    Cornelius T. Zen Says:

    Good morrow, all!
    Shareholders, bondholders – these are INVESTORS, who assume risks in the pursuit of profit. Where does all this money come from? That’s right – CUSTOMERS, you know, people who actually BUY STUFF, who were NOT EVEN MENTIONED! in this oh so important Supreme Court decision. How does this takeover benefit customers? Better products? Better service? All this talk about corporate takeovers reminds me of mating elephants – it’s done at a high level, with a lot of noise, and it takes two years to see any results.
    Perhaps the Supremes could pause in passing that good bud around (must be from BC, considering some of the decisions that have come down recently) and give but a passing moment’s consideration of the source of all that fat, filthy lucre – Joe and Mary Sixpack. Unless a corporate merger provides benefits to the people who actually buy the products and/or services, who actually pay the bills and sweat the pennies to do so, all it means is that Junior gets his next Mercedes a little sooner.
    You know the agricultural definition of servicing? What the bull does to the cow? Now you know what those big companies mean when they refer to servicing the customer. It’s a familiar feeling. Does that make sense? CTZen

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