CHAPTER 02 Bulletproofing Your Board Against Oppression Claims
CONFIDENTIALITY The board and management should adopt best practices to protect the confidentiality of the company’s documents, data and information. Disclosure of confidential information of any kind – in addition to raising a host of other commercial, regulatory and legal issues – can inspire or catalyze an oppression claim. The company should have a code of conduct – consistent with best practices as adapted to the particular circumstances of the company – specifying the confidentiality obligations binding on each director, officer and employee. Board members in particular should be aware that all board materials – as well as all discussions and deliberations among board members, both at formal meetings and during informal interactions – are confidential. Minutes and other documents provided to directors should generally be shared only via secured platforms. Public companies should maintain a system to preserve the integrity of their computer systems from infiltration and attack. In addition, board members (especially independent board members who do not use the company’s IT systems) should ensure that their personal computers, hard drives and email systems are secure. Depending on the particular needs of a board’s members, the company might consider providing its directors with access to ongoing training in data security. 7 Confirm that insurance provides adequate coverage. Oppression claims often name both the corporation and the individual directors as defendants. Consequently, a public company should ensure that its liability and/or D&O insurance provides adequate coverage for directors who are named personally in oppression or breach of duty claims. Proper coverage should, among other protections, provide officers and directors with the right to retain separate counsel when separate legal representation is necessary or appropriate.
Communications or documents can lose their privileged status if they are disclosed, on a non- confidential basis, to third parties within or outside the organization. Moreover, in litigation, a party cannot cherry-pick which privileged communications to disclose to the opposing party. As a result, disclosing some privileged communications may result in loss of the privilege that would otherwise have protected all related communications. Consequently, a public company should take appropriate steps to preserve the confidentiality of all privileged materials. No potentially privileged materials should be disclosed without careful review by counsel to consider all of the potential implications. The following are some of the steps that public companies can take both to ensure that privilege attaches to a document or communication and to safeguard against that privilege being inadvertently waived: – Clearly label as “privileged” emails and other communications that are intended to be privileged. – At the same time, do not indiscriminately label emails and other communications “privileged.” Overuse of the privileged label can create risks, including the possibility that documents properly labelled as privileged may not be accepted as such, or that documents needed to establish the company’s position cannot be produced without the risk of waiving privilege over other documents. – Do not distribute privileged materials, either within or outside the organization, more broadly than is reasonably necessary. As a general rule, distribution of privileged materials should be made with legal advice and limited to a small subset of persons who need to participate in the communication. – Copy legal counsel on the communication of privileged information. – Adopt and follow best practices with respect to confidential information in general.
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Davies | dwpv.com
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