A select group of senior executives and in-house counsel interested in cross-border M&A disputes recently had a special opportunity to hear Vice Chancellor Travis Laster of the Delaware Court of Chancery speak in Toronto about his thoughts on some thorny M&A issues and their treatment under a continuum of legal regimes ranging from Pennsylvania, to Delaware of course, to Canada and to the United Kingdom. VC Laster was invited by McCarthy Tétrault to provide the keynote speech at a seminar put on for its clients and friends entitled M&A Disputes: Perspectives from Both Sides of the Border. Participants were treated to a highly animated and entertaining commentary on the availability and effectiveness of defensive tactics and potential investment banker conflict scenarios among other sources of M&A disputes. VC Laster is the newest Vice Chancellor appointed to Delaware’s renowned Court of Chancery and at the time of his appointment only 39 years old. VC Laster’s reputation is that he has become one of the court’s boldest judges and his remarks did not disappoint.
With respect to defensive tactics, VC Laster’s thesis was that law governing defensive tactics should find itself in the “enlightened middle”. He conceded that the enlightened middle can easily become “muddled” at times. An efficient middle path on the issue of defensive tactics should, in VC Laster’s view, maximize value promoting deals and minimize value destroying deals. He left for another day making any comments on transactions that cause value to leave one jurisdiction for another.
VC Laster explored the roots of what he viewed as very disjointed regulation of sell-side activity in the United States unlike the investment bank cartel origins of equivalent regulation in the UK. It is with this perspective that he views Delaware’s Court of Chancery as stepping into a regulatory void in applying common law principles to the review of directors’ conduct in satisfying their fiduciary duties to the corporation.
With several caveats, but still in keeping with his trademark boldness, VC Laster offered his observations on the Canadian patient that is defensive tactic regulation. After a quick read of the Supreme Court of Canada’s decision in BCE and National Policy 62-202 Take-over Bids – Defensive Tactics, VC Laster’s diagnosis was schizophrenia with touch of bipolar disorder. While VC Laster found it difficult to reconcile the constituency based approach that he took from the BCE decision with the stockholder focused/market integrity based approach of NP 62-202, he saw an opportunity for Canadian treatment of defensive tactics to achieve an enlightened middle ground.
VC Laster’s remarks were actively discussed by a panel made up of McCarthy Tétrault panellists Gary Girvan, Paul Steep and the Honourable James Farley. The panel discussion was VC Laster’s venue for his final advice to directors wrestling with the continued use of defensive tactics. His advice was to focus on the duty of loyalty that is a part of their fiduciary duties and assume that all of the stock of the company was held by a loved one and that the directors must make a decision on behalf of that loved one to either to “take the money and run” or manage the corporation for greater long term value.