What is a fairness opinion and when is one required for an Ontario corporate reorganization?

A fairness opinion is an assessment, usually prepared by an independent financial advisor or valuator, stating whether the financial terms of a proposed transaction are fair to the shareholders, or a particular group of shareholders, being asked to accept it. It typically weighs the price or consideration being offered against comparable transactions, valuation methods, and the company's financial position, and concludes whether the terms fall within a range a reasonable, informed shareholder could accept.

The Business Corporations Act doesn't require a fairness opinion for every reorganization as a strict legal mandate. It becomes practically important where a court is being asked to approve a plan of arrangement, especially one involving a conflict of interest, such as a going-private transaction or a related-party deal, since courts scrutinizing these transactions for fairness routinely expect independent evidence supporting that conclusion, and a fairness opinion is the standard way to provide it.

For routine reorganizations without a conflict of interest, a fairness opinion is less commonly needed. Where minority shareholders are being cashed out or a controlling shareholder benefits differently than others, getting one early avoids delay at the court approval stage and gives affected shareholders real information to evaluate the deal.