Does a corporate board have to accept the highest offer for the company?

The duty is to the corporation, not to the price

CBCA s.122(1)(a) states the core duty: every director and officer shall “act honestly and in good faith with a view to the best interests of the corporation.” CBCA s.122(1)(a), (1.1) s.122(1.1) then confirms that “best interests of the corporation” is broader than the sale price: in forming that view, directors and officers “may consider, but are not limited to” a list of factors including the interests of shareholders, employees, retirees and other stakeholders. Nothing in either provision instructs a board to prefer the numerically higher of two competing offers — the statute frames the question as which course serves the corporation, and price is one input to that judgment rather than the test itself.

Why a lower bid can still be the defensible choice

A materially lower offer can be preferable where it carries meaningfully higher certainty of closing, cleaner financing, fewer regulatory conditions, or better outcomes for employees and other constituencies s.122(1.1) permits directors to weigh — provided the board can show it actually considered the relevant factors in good faith, rather than simply asserting them after the fact. The Supreme Court of Canada's discussion in BCE Inc. v. 1976 Debentureholders is the leading authority on how directors balance competing stakeholder interests in exactly this kind of decision; it is cited here for the holding, not quoted, because the judgment text is not reachable from a plain fetch.

What a rejected higher bidder can and cannot do about it

A shareholder who believes the board's process was not conducted honestly, in good faith and with genuine regard to the corporation's interests can raise the CBCA s.241 oppression remedy — but that is a claim about the fairness of the PROCESS and the directors' conduct, not a freestanding right to insist the higher number be accepted. Absent bad faith or a genuine breach of the duty of care, the board's judgment on which offer serves the corporation is respected even where it is not the highest one on the table.

Where This Plays Out in the Case Files

• • A board that took the lower offer — a CBCA board that accepted a $54 million bid over a $58 million one, and why s.122(1)(a) and s.122(1.1) meant that was defensible.

Sources

• • Canada Business Corporations Act, R.S.C. 1985, c. C-44, s.122 — s.122(1)(a)-(b) (duty of care of directors and officers, quoted above), s.122(1.1) (best interests of the corporation, incl. the factors directors may weigh).
• • CBCA s.241 — the oppression remedy, as the process-fairness route open to a dissatisfied shareholder.
• • BCE Inc. v. 1976 Debentureholders, Supreme Court of Canada — cited, not quoted; the judgment text is not reachable from a plain fetch of the SCC's case page.
• • Treadstone Law — can shareholders instruct directors? — directly on the objection a disappointed higher-price bidder or shareholder is typically making.