RE CANOPY RIVERS INC A few months after the Sherritt decision, the Court provided guidance regarding its expectations for applications for an interim order in Re Canopy Rivers Inc . Although the purpose of an interim motion is not to assess substantive fairness, courts require certain information that will enable them to assess procedural matters such as the terms of the securityholders’ meeting. In particular, issuers should identify their securityholder base (i.e., institutional versus retail), discuss the genesis of the transaction and explain why the proposed plan is fair. The Court reiterated that the mere presence of a fairness opinion is of little help given that the quality of these opinions varies widely. As in Sherritt , the Court had no reservations granting the order since the issuer ultimately addressed its concerns, but concluded that it would be helpful to raise the issue pre-emptively for future plans of arrangement.
KEY TAKEAWAYS
– Courts are not rubber stamps. Issuers and their counsel need to be prepared for courts to ask difficult questions at both the interim and the final hearings. Recycling generic precedent applications and facta that are not tailored to an issuer’s unique circumstances and those of the proposed transaction may be met with more judicial scrutiny . – Not all fairness opinions are created equal. Whether to obtain a fairness opinion for a transaction, and in what form, is a matter for an issuer’s board of directors to decide. In certain cases, a short-form fairness opinion can be
sufficient. However, in many circumstances, particularly those in which an issuer is relying heavily on the fairness opinion to demonstrate that the transaction is fair and reasonable, the issuer should strongly consider obtaining a long-form or a “hybrid” fairness opinion from a qualified, independent, subject-matter expert. This is particularly true for arrangements involving material conflicts of interest, which securities regulators continue to monitor and review on a real-time basis.
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Governance Insights 2022
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