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  1. a x i u m CORPORATE | FINANCE | LAW Michael VarabioffFounding PartnerAxium Law Group Conflicts of Interest and Corporate Opportunities: Solving the Problems Created by Being a Director of More Than One Junior Mining Company

  2. Multiple directorships are a fact of life in the mining sector This creates real or potential conflicts of interest with resulting legal risks We can’t “solve” the problems, but we can “manage” them Introduction

  3. Identify the principal legal risks resulting from acting as a director of more than one company Try and develop a “Code of Conduct” to manage and minimize these risks Purpose of Discussion

  4. Directors owe a “fiduciary” duty to the company … Section 118(1) of the Company Act (British Columbia) states that: “Every director of a company, in exercising the director’s power and performing the director’s functions, must … act honestly and in good faith and in the best interests of the company” This does not prevent multiple directorships, but such a practice makes it more difficult to satisfy the fiduciary obligations Directors’ Fiduciary Duties

  5. What happens if a director learns some information from Company A which is significant to Company B? PWA Corp. v. Gemini Automated case – directors breached their duty by withholding important information In extreme cases, the director cannot fulfill his duties to both companies, and should resign Duties of Confidentiality and Disclosure

  6. Basic Rule – Business opportunities acquired by a director by virtue of his position as a director, are the property of the company Director will be liable to the company for any profit made from the opportunity, even if the Company rejects the opportunity Canaero case Corporate Opportunities

  7. When is it not a corporate opportunity? When can a director take advantage of a corporate opportunity? Peso Silver Mines Case Corporate Opportunities continued

  8. Deals with situations where a director has an interest in a transaction with the company Examples: he/she is the other party to the transaction he/she is on the board of the other party to the transaction he/she is a shareholder of the other party to the transaction Conflict of Interest Transactions

  9. Basic Rule (ss. 120 and 121 of the Company Act (British Columbia)) Every director who is in any way interested in a proposed contract or transaction must disclose the nature and extent of his interest at a meeting of directors Conflict of Interest Transactions continued

  10. The director must account for any profit made from the transaction unless: The director disclosed his interest, and either The transaction was approved by the board and the director abstained from voting, or The transaction was fair and reasonable to the company and was approved by a special resolution of shareholders Conflict of Interest Transactions continued

  11. Serving as a Director: Generally - don’t serve as a director.Is it really worth it? Code of Conduct

  12. Serving as a Director: Do as much due diligence as possible. Also insist on an indemnity agreement and director and officer liability insurance. Code of Conduct

  13. Serving as a Director: Don’t serve as a director of more than one company. This will simplify your life. Code of Conduct

  14. Serving as a Director: If you must sit on more than one board, pick companies that don’t compete and won’t likely be competing. Code of Conduct

  15. Confidentiality: Keep all company information confidential. Disclosure: Disclose all significant information to the company. Code of Conduct continued

  16. Corporate Opportunities: Promptly and fully disclose to the board in writing your interest in any corporate opportunity. Code of Conduct continued

  17. Corporate Opportunities: Refrain from participating in any proceedings in which the company considers whether to pursue the opportunity and ensure that same is recorded in the minutes of any meetings. Code of Conduct continued

  18. Corporate Opportunities: Confirm in writing that the company wishes for demonstrable business reasons to reject the opportunity, having made the decision equipped with the director’s or officer’s previous disclosure. Code of Conduct continued

  19. Corporate Opportunities: Obtain the written approval of the directors to privately pursue the opportunity, or alternatively, obtain such approval from the shareholders by special resolution in a general meeting. Code of Conduct continued

  20. Corporate Opportunities: Refrain from participating in any meeting where the subject of permitting the director or officer to privately pursue the opportunity is discussed and ensure that the same is recorded in any minutes. Code of Conduct continued

  21. Corporate Opportunities: Refrain from voting on any resolutions concerning the company’s decision to permit the director or officer to pursue the opportunity privately. Code of Conduct continued

  22. Transactions Within the Company: Avoid these as much as possible. Code of Conduct continued

  23. Transactions Within the Company: If you have an interest in a transaction with the company, disclose this interest in writing and abstain from voting on the transaction. Code of Conduct continued

  24. a x i u m CORPORATE | FINANCE | LAW Michael VarabioffFounding PartnerAxium Law Group Thank You Suite 3350, Four Bentall Centre 1055 Dunsmuir Street, PO Box 49222 Vancouver, BC V7X 1L2 Tel: (604) 692-4918 Fax: (604) 692-4900 email: