Directors and Officers Liability under Newly Revised Securities Legislation
On February 14, 2011, leave to appeal a ruling of the Ontario Superior Court was denied in Silver v. IMAX Corporation (Court File No. CV-06-3257-00). The result of this decision is to allow a class action to go forward against IMAX and its directors for false statements made regarding its 2005 financial results. This is the first case under the recent revisions to the Ontario Securities Act that are designed to permit investors, with leave of the Court, to bring actions for civil liability against directors and officers of public companies for misrepresentations in public disclosure documents.
Formerly, for such an action to succeed at common law, it was necessary to show detrimental reliance upon a misrepresentation. This requirement has been eliminated by the 2005 Ontario Securities Act.
This case is a reminder of the ever increasing potential for personal liability that is assumed when someone accepts a position as a director or officer of a company. However, this risk can be tempered with an appropriate directors and officers insurance policy which provides coverage for securities-related litigation.