Members of a board of directors play a crucial role in the decision making processes of a company, which shape the company’s practices, strategies, future goals and overall success. Directors who are not are primarily employed by the subject company

As noted by Kingsdale Advisors in a recently published report, corporate directors and their legal advisors continue to pay insufficient attention to shareholder activism in M&A. The authors of the 2017 special report caution that not only have shareholder

It is not in dispute that the role of the board of directors is to provide oversight of management and advise on the strategic direction of the corporation. However, the delineation of roles and responsibilities between management and directors in

This post was contributed by Walied Soliman, Partner, Norton Rose Canada, and Evelyn Li, Associate, Norton Rose Canada

A scan of recent business headlines suggests shareholder activism continues to rise, and even the who’s who of deep-rooted Canadian businesses are not immune.

While preparing for the upcoming proxy season, whether or not your company is at risk for a proxy contest, it might be a good idea to consider adopting certain pre-emptive defensive tactics, including a by-law to provide advance notice for nomination of directors as recently proposed by Arius3D Corp.

Proxy fights

Dissidents in a proxy contest typically look to gain board control by replacing directors with nominees whose strategy reflects that of the dissidents. Dissidents can propose their own nominees by:

  • requisitioning a meeting of shareholders to remove incumbent directors and elect the dissidents’ nominees;
  • preparing a shareholder proposal to the company within the prescribed timeline before a shareholders’ meeting, for inclusion in the management information circular;
  • soliciting proxies for the dissidents’ nominees before a meeting of shareholders; or
  • ambushing from the floor (i.e., during the motion to elect management’s nominees as directors) at a meeting of shareholders.

For your company, an ambush is the worst-case scenario as you would have no advance warning and no chance to prepare a defence.  Other shareholders and proxyholders (i.e., the non-dissidents) would also learn of the dissidents’ proposal and nominees at the time of the ambush, just before voting for the election of directors.