Written by Jennifer L. Asquin, Brent W. Kraus and William S. Osler

Canadian corporate statutes require approval by a special majority of shareholders (two-thirds) of the "sale, lease or exchange of all or substantially all of the property of a corporation other than in the ordinary course of business." In the current economic climate, where many corporations are selling assets in order to access capital, it is increasingly important that parties to an asset sale transaction carefully consider whether the transaction will trigger the shareholder approval threshold.

The determination of whether an asset sale constitutes "all or substantially all" of a corporation's property is considered by the courts from both a quantitative and a qualitative perspective. Notably, courts are placing increasing emphasis on the qualitative analysis, and will consider whether the transaction "transforms the fundamental nature of the corporation," even if the overall quantity of assets being sold is less than 50% of the corporation's property. For more information, please see our Client Update, "Considering an Asset Sale Transaction? Be Aware of Shareholder Approval Requirements," which explores the quantitative and qualitative analyses in detail and outlines the potential consequences of failing to obtain requisite shareholder approval.

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