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- Anticipated Trends in International M&A: We can expect
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According to
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Pre-emptive Defensive Tactics Against Dissidents’ Ambush
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.
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.