Change In Control Agreements

In Montreal Trust Co. of Canada v. Call-Net Enterprises Inc. (2002) [2], the Ontario Superior Court described the change agreement to the control agreement as a “safeguard mechanism” for the company, which promotes the retention of senior executives and guarantees their loyalty by offering them a financial advantage if the company undergoes a significant change. In essence, the worker has a financial reward if he continues his employment until the end of the sale. Finally, the “modified trigger”, also favorable to the company, requires dismissal for no reason or good reason. However, the resignation of the executive only occurs during the “open window” period (usually 30 days) after the expiration of six to twelve months since the change of control. During this transition period, the company benefits from continuous performance. Severance pay for long-term senior managers can be geared to protect the manager`s income, thereby maximising ties and protecting the company through anti-competitive and “good reason” provisions that ensure that a severance pay agreement does not become an incentive to cease operations. Change-in-control agreements, sometimes referred to as “golden parachutes,” compensate executives for job losses due to mergers or sales. Directors are agents responsible for acting in the best interests of the company and shareholders.

However, CEOs face inherent difficulties when it comes to a merger or sale of the company, the end result of which results in the loss of their executive position. .

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