Canadian publicly traded companies need more recourse when mergers fall through

What rights of recourse should a Canadian public company have if a buyer illegitimately backs out of a deal to buy the company?

Should the company be able to claim for the lost shareholder premium, also known as the “benefit of the bargain”, that the company’s shareholders will lose because of the buyer’s breach?

Or should the company be limited to some other measure of damages such as “lost synergies”, the approach recently endorsed by the Ontario Superior Court?

Writing in their Business Opinion in The Globe and Mail, Fasken partners Gesta Abols, Neil Kravitz and Brad Moore explain how this dilemma was solved for U.S. dealmakers and courts in 2024 by targeted revisions to Delaware’s corporate law.

They argue that to protect investors in Canadian public companies, from pension funds to retail investors, Canadian federal and provincial lawmakers should follow Delaware’s lead by expressly permitting public companies to sue a delinquent buyer for the lost “benefit of the bargain” after a busted public M&A deal.

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The views in the Business Opinion are those of the authors.