Key Features Of New Saskatchewan Business Corporations Act: Providing Clarity On The Fiduciary Duty Of Directors And Officers

• Law Firm: MLT Aikins LLP
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Shareholders
• Author: Mr Ethan Reis, Samer Awadh and Stathy Markatos
• Published date: 07 February 2023

What should directors and officers of Saskatchewan corporations know about incoming changes to Saskatchewan's corporate legislation concerning the fiduciary duty they owe to their corporations?

In this second part of this blog series that examines key features of The Business Corporations Act, 2021 (the "New SBCA"), we will cover the changes that apply to fiduciary obligations of directors and officers of a corporation.

In our first blog, we noted that the New SBCA comes into force on Sunday, March 12, 2023. The New SBCA will replace The Business Corporations Act (Saskatchewan) (the "Old SBCA"), which has been the law in Saskatchewan for over 40 years. The New SBCA will modernize corporate legislation in Saskatchewan by, among other things, reducing red tape for businesses operating in Saskatchewan and creating create efficiencies by expressly allowing for the use of modern technologies to better reflect current business practices.

Codifying a non-exhaustive list of factors for determining whether a director or officer acted in good faith

One of the most notable changes to be introduced by the New SBCA concerns the fiduciary duty that directors and officers owe to their corporation. More specifically, the New SBCA will codify a non-exhaustive list of factors for determining whether a director or officer has fulfilled their obligation to act in the best interests of the corporation.

Pursuant to section 117 of the Old SBCA, directors and officers are subject to a fiduciary duty to "to act honestly and in good faith with a view to the best interests of the corporation". However, the legislation is silent with respect to the content of the duty'in other words, against what standard should one attempt to determine the best interests of the corporation and what factors may directors and officers consider when fulfilling this obligation?

The courts have long recognized that it is often difficult to point to what the best interests of the corporation are, especially in light of the fact that directors and officers must often accommodate diverging stakeholder interests in fulfilling their duty to the corporation. The well-established "business judgement rule" gives wide discretion to directors and officers to make decisions concerning the business and affairs of the corporation, so long as the decision falls within a range of reasonable alternatives.

Accordingly, the Supreme Court of Canada characterized the fiduciary duty as a broad, contextual concept and held...