The Allocation of Profits between Related Entities and the Oppression Remedy: An Analysis of Ford Motor Co. V. Omers

Ottawa Law Review, Vol. 36, No. 1, pp. 127-167, 2004-2005

28 Pages Posted: 29 Mar 2006

See all articles by Anita Anand

Anita Anand

University of Toronto - Faculty of Law

Kim Brooks

Dalhousie University - Schulich School of Law

Abstract

In Ford Motor Co. v. Ontario Municipal Employees Retirement Board, the Ontario Superior Court of Justice reviewed the transfer pricing arrangements between parent and subsidiaries Ford US and Ford Canada in the context of a going-private transaction. Its review was the key to resolving the two main issues in the case: first, did the transfer-pricing arrangements understate Ford Canada's profits so as to undermine the fair value of Ford Canada's shares? And second, did the transfer-pricing arrangement oppress or unduly disregard the interests of Ford Canada's minority shareholders so as to give rise to the oppression remedy?

In this comment, the authors analyse the Court's reasoning and its implications for tax and corporate law. They review profit allocation methods that were available to the Court (and to Ford US) and the Court's rationale in adopting the profit split method. Although the authors agree with the Court's reasoning regarding the profit allocation methods, they argue that the reasoning with regard to oppression gives rise to some important questions regarding the proper analysis for oppression when board conduct is impugned. They disagree with the Court's use of reasonable foreseeablity as a basis for assessing whether the oppression remedy should be granted and argue that where board conduct is at issue in an oppression action, courts must consider whether directors have breached their fiduciary duties.

Keywords: Transfer pricing, intangibles, oppression remedy, arm's length, fiduciary duties

JEL Classification: H2, K2

Suggested Citation

Anand, Anita and Brooks, Kimberley, The Allocation of Profits between Related Entities and the Oppression Remedy: An Analysis of Ford Motor Co. V. Omers. Ottawa Law Review, Vol. 36, No. 1, pp. 127-167, 2004-2005. Available at SSRN: https://ssrn.com/abstract=892650

Anita Anand

University of Toronto - Faculty of Law ( email )

78 Queen's Park
Toronto, Ontario M5S 2C5
Canada
4169464002 (Phone)

Kimberley Brooks (Contact Author)

Dalhousie University - Schulich School of Law ( email )

6061 University Ave
Weldon Law Building
Halifax, Nova Scotia B3H4H9
Canada

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