When a take-over bid lands on the boardroom table, a related-party transaction emerges, or the CEO appears at a meeting with a term sheet from a strategic partner, the board's first decision is usually whether to constitute a special committee. The decision itself is rarely contested.
The harder — and far more consequential — questions arrive in the next 48 hours, and they are typically resolved by default before anyone realizes they were choices.
The eight questions below are the ones I find most useful for independent directors to put on the table before the committee is formed, not after. They are not exhaustive. They are the ones that, in my experience, determine whether the committee operates from a position of real leverage or merely papers over a process that has already been decided.
Is the committee genuinely independent — and can you prove it on paper?
"Independent" under MI 61-101 is not the same as "independent" under National Instrument 52-110, which is not the same as common-law director independence. A director can be independent for audit committee purposes and disqualified from a special committee considering a related-party transaction.
Map each proposed member against the specific transaction at issue: prior relationships with the interested party, consulting arrangements, joint board service, family ties. Document the analysis before the first meeting, not after the deal closes.
Has the committee been formed early enough to actually do its job?
The most common process failure I see is forming the committee after the principal terms have been negotiated. The committee inherits a fait accompli, the fairness opinion becomes an exercise in reverse-engineering, and the negotiating leverage has already been spent.
The right moment is when the matter is first contemplated, not when the term sheet is presented. If management has been in discussions for weeks, that fact will sit in the disclosure record and the timeline gap will be examined.
What is the precise scope of the mandate — and who controls it?
A committee charter that authorizes the committee to "review and recommend" is materially different from one that authorizes it to "negotiate, on behalf of the corporation, the terms of the transaction and any alternative transactions, and to recommend or reject any resulting proposal to the board." Push for the broader formulation.
Specifically: confirm the committee's authority to canvass alternatives, to instruct the financial advisor on market-check parameters, and to terminate negotiations without further board action.
Will the committee — not management — select its own advisors?
The committee's legal counsel and financial advisor must be retained by the committee. In practice, this means the committee chair (with input from members) interviews candidates and signs the engagement letter. If management or the conflicted directors are presenting a shortlist of "their" advisors, that is the first signal the process needs to be reset.
Sector specialization matters more than it first appears. The committee's counsel and financial advisor should have demonstrated experience in the company's industry — generalists routinely miss the disclosure mechanics, technical-report timing, and operational considerations that drive value.
How will the fairness opinion be commissioned, and how is the valuator being paid?
Fairness opinions paid on a success-fee basis are increasingly contested in court and almost always uncomfortable in the disclosure record. The committee should commission a fixed-fee opinion from a financial advisor whose compensation is not contingent on the transaction closing.
If MI 61-101 requires a formal valuation — related-party transactions above the threshold, business combinations with interested parties — the valuator must be independent of the interested party and selected and supervised by the committee. A fairness opinion and a formal valuation are not interchangeable documents; understand which the transaction requires.
What is the documentation discipline — and who is reviewing the minutes?
In litigation, the process record is the case. Detailed minutes, contemporaneous memoranda, and a complete record of materials reviewed are what carry the day in front of a court reviewing the board's conduct.
The committee's legal counsel should attend every meeting, draft the minutes in real time, and circulate them for approval before the next meeting. If the corporate secretary is drafting minutes for management's review, the committee has already lost control of its record.
What is the information protocol between the committee and conflicted insiders?
If the CEO is conflicted — common in management buyouts, going-private transactions with insider participation, and many related-party deals — the committee needs an information protocol from day one.
What management information will flow to the committee, through whom, and on what terms? Will the conflicted parties have access to the data room? Who handles communications with the interested party's counsel? These are unglamorous mechanics, but the absence of a clear protocol is what produces the awkward disclosures three months later.
Have you mapped the MI 61-101 disclosure obligations against your timeline?
The disclosure requirements for an insider bid, issuer bid, business combination, or related-party transaction are dense and unforgiving.
At the first meeting, the committee should ask counsel for a written analysis mapping each disclosure trigger — material change reports, management information circular, news releases, early warning filings — against the projected transaction milestones. Surprises in this area are not just regulatory risk; they extend timelines and re-open settled negotiating points.
These eight questions will not get you to a clean deal on their own. They will tell you, very quickly, whether the committee is positioned to do its job or whether the architecture of the process has constrained the answer before the work begins. In every committee mandate I have worked on over the last decade, the difference between the committees that delivered real value to shareholders and the committees that merely documented a result was made in the first two weeks — and almost always by the questions that were asked, or weren't, at the outset.