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Business Law Today

September 2023

September 2023 in Brief: International Business Law

Mike Tallim

September 2023 in Brief: International Business Law

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Ownership of Privileged Communications in M&A Transactions in Canada: Practical Takeaways and Delaware Case Law Comparison

By Jonathan Bilyk, Michel Gélinas, and Kevin Greenspoon, Davies Ward Phillips & Vineberg LLP

The Ontario Superior Court of Justice’s recent decision in Dente v Delta Plus Group validated the use in M&A agreements of contractual provisions that preserve a seller’s ownership over a target’s pre-closing privileged communications. With Dente, Canadian jurisprudence has further aligned itself with Delaware’s more developed body of case law regarding the transfer and control of privileged deal communications in M&A transactions.

Dente arose as a privilege motion in a post-closing civil dispute between the plaintiff sellers in a M&A transaction and the defendant buyer and target companies. During document review for production, defendants’ counsel identified materials on the buyer’s servers that contained potential solicitor-client communications between the sellers and their counsel. These documents included pre-closing deal communications as well as emails related to the transaction that were generated on buyer email accounts after closing during the sellers’ tenure as post-closing consultants to the buyer.

The Court held that parties to a share purchase transaction are free to contract, by way of the inclusion of a provision in the purchase agreement, for the seller to retain the rights to privileged communications. Absent such a provision, the buyer will assume control over the target’s privileged documents. The parties, however, had not included this type of a clause in their agreement, leaving the court to determine who, as between the sellers and the target, owned the privilege at closing and whether the sellers, if they in fact owned the privilege, had waived it by leaving the communications on the buyer’s servers or using buyer email accounts to communicate after closing.

Click here for a full analysis of Dente, together with some practical takeaways and a review of select recent related case law in Canada and Delaware.

Canada’s De Facto Public Corporate Beneficial Ownership Register (under the Quebec Legal Publicity Act) Is Here!

By Daniel Frajaman, Spiegel Sohmer Attorneys (Montreal, Canada)

We are at the forefront of dealing with what I call Quebec’s de facto Canadian national public beneficial ownership register for private company shares, including with regard to trusts that are shareholders.

This relates to Quebec’s public register on this, which has been in operation since March 31, 2023, and which requires all private corporations (and also all partnerships) with activity in Quebec—no matter where the entity was formed, whether in any Canadian province, federally in Canada, or elsewhere in the world including the United States—to register publicly and online Quebec’s version of their corporate beneficial owners and/or individuals with significant control, which the Quebec legislation refers to as the “ultimate beneficiary.” We have therefore already encountered and applied, when putting ultimate beneficiaries onto Quebec’s public register (which is freely and easily available online), rules and interpretations concerning direct and indirect ownership or control—whether as nominee (or mandatary in Quebec terms) or beneficial owner (or true owner in Quebec terms)—joint ownership, status of corporate trustees, status of discretionary and fixed interest trust beneficiaries, de facto controllers in virtue of the Canadian federal Income Tax Act and the Quebec Taxation Act, and how to deal with individuals and entities from foreign jurisdictions such as protectors and corporate/trust hybrids. This likely will be all the more important should the Canadian federal government’s proposals in this area in Bill C-42 of spring 2023 become law (which would turn the Canadian federal registers for individuals with significant control into a public register).

Please see at the following link my two-part longer article touching on these issues and, given that comparisons between jurisdictions help promote understanding of laws, briefly comparing these rules and the policy behind them in Quebec, the other Canadian jurisdictions, the United States (where the analogous but non-public federal Corporate Transparency Act register becomes operational on January 1, 2024), the United Kingdom, and the European Union. (The linked article first appeared nationally in Canada in Law360 Canada, part of LexisNexis Canada Inc., at

Cayman Islands — Trina Solar: A Warning Regarding Reliance on Merger Price and Deficient Disclosure in s238 Proceedings

By Erik Bodden, Partner; Alex Davies, Partner; and Mauricio Da Rocha, Associate, Conyers

The successful appeal by dissenting shareholders in Trina Solar provides key insights into the importance of establishing a robust merger process, the company’s burden to make all relevant information available in appraisal proceedings, and discounted cash flows.

An Overview

Trina Solar Limited (the “Company”), a listed manufacturer in the renewable energy sector, was the subject of a take-private transaction on March 13, 2017, which resulted in a number of dissenting shareholders exercising their rights under section 238 of the Companies Act to seek fair value appraisal of their shares. The initial valuation, as determined by the Cayman Islands Grand Court on September 23, 2020, rested on a combination of the market price, transaction price, and discounted cash flow (“DCF”) analysis. This analysis yielded a fair value calculation only slightly higher than the merger price and was subsequently appealed by the dissenting shareholders to the Cayman Islands Court of Appeal.

The Court of Appeal handed down its decision on May 3, 2023, highlighting the challenges of relying on merger price when determining fair value, especially where the disclosure by the Company during the appraisal proceedings is unsatisfactory and the merger process did not have sufficient protections for shareholders to address potential conflicts of interest.

Key Findings

The Court of Appeal acknowledged the pitfalls of the merger price as an exclusive measure of a company’s value in certain circumstances. In fact, the Court held that no weight should be given to the merger price in this case and granted greater prominence to the DCF analysis. A noteworthy aspect of the judgment was the Court’s decision to raise the weight assigned to DCF analysis to 70% (compared to the Grand Court’s initial weighting of 45%), resulting in dissenting shareholders receiving an uplift of ~26% to the merger price. A short summary of the Court of Appeal’s key findings is set out below:

  • Unreliable Merger Price: The Court of Appeal found that the merger price could not be relied upon as a result of the deficiencies of the special committee of the Company (which were acknowledged by the Grand Court) regarding a robust market check for potential bidders and dealing with conflicts of interest related to the management buy-out.
  • Market Price Discrepancy: The Court of Appeal recognized that market prices may not accurately reflect a company’s true value, particularly in instances of illiquidity or market volatility. However, this was not enough for the Court of Appeal to overturn the Grand Court’s decision to adjust the weighting given to market price.
  • DCF Methodology Weightage: The Court of Appeal significantly increased the weight assigned to DCF analysis, elevating it to 70%. The Court of Appeal rejected the dissenting shareholders’ challenges to the discount rates applied by the Grand Court.
  • Management Projections Departure: The Court of Appeal held that the threshold adopted by the Grand Court for departing from management projections (i.e., that they had to be “obviously wrong, careless or tainted by an improper purpose”) was too high. Instead, the Court of Appeal noted that the judge must review and weigh all evidence before them, and, following such assessment, they must be able to depart from management projections if they don’t appear to be the most realistic forecasts for the circumstances.
  • Deficient Disclosure: The Court of Appeal did not shy away from commenting on the deficiencies in the disclosure provided by the Company during the proceedings, which required requests for specific discovery by the dissenting shareholders. This extends to all information relevant to the merger process (such as discussions with potential bidders and financial advisors regarding value) and evidence supporting the relevant assessment undertaken by the special committee.


The Court of Appeal’s ruling in Trina Solar underscores the importance of establishing an independent special committee that adequately addresses any potential or perceived conflicts of interest if a company is seeking to rely primarily on the merger price as an indicator of fair value for the purposes of section 238 proceedings.