Executive Summary: Key Legal and Evidentiary Issues

• The plan of arrangement was challenged by CPPIB on grounds that it unlawfully undermined creditor protections under a note indenture.

• Petitioners argued that CPPIB’s legal rights remained untouched, and their objections were purely economic in nature.

• Nearly 100% shareholder approval across all classes demonstrated strong support for the arrangement.

• CPPIB claimed the transaction would reduce the value and enforceability of its $93 million investment in senior notes.

• The court applied the BCE Inc. v. 1976 Debentureholders test to determine whether the arrangement was fair and reasonable.

• Justice Masuhara approved the plan, finding valid business purposes and no impairment of CPPIB’s legal rights.

Facts and outcome of the case

Lions Gate Entertainment Corp. and its subsidiary, Lionsgate Studios Corp., sought court approval for a corporate restructuring under sections 288–297 of British Columbia’s Business Corporations Act. The proposed plan involved separating Lionsgate’s two major business lines: its motion picture and television studio operations (via Lionsgate Studios) and its Starz-branded subscription platform. It also included a reverse stock split and the elimination of a dual-class share structure. The plan was overwhelmingly approved by shareholders in April 2025.

The application was opposed by CPPIB Credit Investments II Inc. and CPPIB Credit Investments III Inc., entities under the Canada Pension Plan Investment Board. CPPIB, a minority holder of approximately $93 million in senior notes issued by a Lionsgate subsidiary, argued that the plan would undermine the guarantees and protections tied to those notes. Their objections centered around a supplemental indenture and exchange of notes undertaken by a majority of noteholders, which CPPIB claimed was prejudicial and unlawful. They had already filed a separate lawsuit in New York alleging breach of the indenture.

Justice Masuhara evaluated the case using the framework established in BCE Inc. v. 1976 Debentureholders, focusing on whether the arrangement was fair and reasonable. He found that the statutory procedural requirements were satisfied and that the application was brought in good faith. The judge also concluded that the plan served valid business purposes, such as simplifying the share structure, improving strategic focus, and enhancing market competitiveness. He emphasized that CPPIB’s legal rights were not altered by the plan and noted that other noteholders had not raised objections.

The court ultimately approved the arrangement, emphasizing the overwhelming shareholder support, expert fairness and solvency opinions, and absence of legal right infringement. While CPPIB’s economic concerns were acknowledged, they were not considered sufficient to block the transaction. The court also clarified that its ruling was without prejudice to CPPIB’s right to pursue its ongoing litigation in New York. No costs or damages were awarded in this decision.