The role of a board of directors in responding to an unsolicited takeover bid
University of British Columbia
Master of Laws - LLM
The proliferation in the use of the "unsolicited takeover bid" as a means of acquiring corporate control has had profound implications, especially on large publicly traded companies. Although much has been written about the efficacy of takeover bids advancing shareholders' interests and economic prosperity in North America, surprisingly, opinions on this topic remain divisive. What is even more interesting is the diversity of opinions held with respect to directors' obligations when responding to an unsolicited takeover bid. What is the "appropriate role" of a board of directors when their company becomes the subject of an unsolicited takeover bid? In the execution of their duties and obligations to manage the business and affairs of a company, we are told that directors are in part, required to acthonestly and in good faith in promoting the best interests ofthe company. Much of the discussion in this paper will be confined to how this phrase, "the best interests of the company" might be interpreted in the context of an unsolicited takeover bid. What are the constituent elements that make up "the company"? Which interests should be construed as being in the company's best interests? To whom are the directors' duties and obligations owed in endeavouring to promote the best interests of the company? In the conclusion of this thesis, a theory has been advanced based on the notion of reasonable shareholders' expectations and legitimate shareholders' interests, as a possible approach to understanding the correct meaning of the phrase, "the best interests of the company" and from that, the role directors are to play when confronted with an unsolicited takeover bid for their company.
Law, Peter A. Allard School of