This means that if a company has multiple voting shares, a controlling shareholder with multiple voting shares can block a takeover bid. The protection of the company rests on the shoulders of a single shareholder, who is generally the company founder.
We long ago adopted the conclusions of the report entitled “The Maintenance and Development of Head Offices in Québec” that was published in 2014 by the Task Force on the Protection of Québec Businesses. This report contains numerous recommendations that could also be useful for the country as a whole.
The report relied mainly on a brief submitted by Mr. Martel, an attorney who had researched safeguards already in place in certain U.S. states that we should import here to protect our businesses. For example, the buyer's voting rights can be temporarily withdrawn for a given period, and transactions, or business combinations, with the buyer can be restricted. I should also mention poison pills, which everyone has heard of. They involve diluting the buyer's shares by allowing other shareholders to buy shares at a certain price. In addition, fiduciary duties could be enshrined in corporate law in favour of stakeholders. Staggering directors' terms means the process for replacing all the members of a board of directors is spread out over a period of several years. This complicates the takeover process, because it takes more than a year to replace the entire board. That can sometimes deter potential buyers from attempting a takeover.
We focused particularly on the fiduciary duties of company directors, especially with regard to the treatment of stakeholders. As you may already know, British law sets out all of the fiduciary duties towards stakeholders, along with a list of all stakeholders. Allow me to quote directly from the United Kingdom Companies Act 2006:
A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—
(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with suppliers, customers and others,
(d) the impact of the company's operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company.
According to the law, corporate directors in the United Kingdom have a duty to consider the interests and rights of all stakeholders, including the state and the environment. Therefore, all the issues raised previously by all the other speakers concerning the acquisition of a corporation, whether by a foreign state that is a dictatorship or a state where there is little respect for human rights, would be part of the legal, judicial and fiduciary responsibilities of corporate directors if we had such provisions in Canada. These issues would not have to percolate until addressed by provisions such as those of the Investment Canada Act. Due to the current situation in the country, considerations concerning the fiduciary duties of corporate directors is left to case law.
I would refer you to the 2008 ruling in BCE Inc. v. 1976 Debentureholders.
...it may also be appropriate, although not mandatory, [for the board of directors] to consider...shareholders, employees, suppliers, creditors, consumers, governments and the environment.
Here, in Canada, it is not mandatory and it is left to case law. We would be well served by going beyond the reflections of this committee on these issues, beyond the Investment Canada Act, and see what is happening upstream to cause files to be subject to this law.
There is also the 2016 study by Mr. Allaire on the head offices of major corporations in Quebec. This study lists corporations at risk of being taken over. In Quebec, they do not have the protections already in place, that is they do not have multiple voting shares or a group of shareholders holding more than 40% of shares. The study lists 16 firms at risk of takeover, including Metro, Gildan, SNC-Lavalin, Dollarama, Valeant and TransForce. You can have a look at the list.
One of the problems with the act in its current form is that the department determines whether the transaction is of net benefit to Canada, but it does not have to disclose the reasons why that is the case. In our opinion, there should be more transparency in that regard.