Vol 11 (2014) - Issue 6

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The Role of Fairness Opinions in the Approval of Plans of Arrangement: Indicia of Transaction Fairness or Inadmissible Evidence?

Introduction
The Ontario Superior Court of Justice (Commercial List) recently had the opportunity to consider the existing practice and continued utility of a fairness opinion rendered by a financial advisor to a company's directors and its shareholders, and its consideration by the court at a hearing to approve the plan of arrangement. In particular, the recent pronouncements by the court in two cases stand for the proposition that a fairness opinion is not intended to be an expert report in the litigation context, which is contrary to an earlier decision of the same court.
Canadian corporate statutes, including the Canada Business Corporations Act (the 'CBCA') and the Ontario Business Corporations Act (the 'OBCA'), provide for corporate arrangements upon fulfilling the statutory requirements, which include obtaining an order of the court approving the arrangement.
This article provides a summary of the recent trilogy of cases, Champion Iron Mines Limited (Re), Bear Lake Gold Ltd. (Re), and Re Patents Royal Host Inc., which considered the practice and utility of fairness opinions in the approval of plans of arrangement by the court.