Canada: Risks Of Telephone Proxy Solicitation In Contested Shareholder Meetings

Last Updated: August 28 2012
Article by Zohar Barzilai, Warren B. Learmonth and David Surat

Most Read Contributor in Canada, November 2017

Improper use of telephone proxy solicitation renders results of AGM invalid due to a lack of procedural safeguards and a verifiable record.

In the recent decision of International Energy and Mineral Resources Investment(Hong Kong) Company Limited v. Mosquito Consolidated Gold Mines Limited, 2012 BCSC 1191, the Supreme Court of British Columbia overturned the results of a contested annual meeting due, primarily, to the improper use of a telephone proxy solicitation system ("TeleVote") by the company's proxy solicitation agent.

Background Facts

Mosquito Consolidated Gold Mines Limited ("Mosquito"), a public mineral exploration and development company, held its annual general and special meeting of shareholders (the "AGM") on December 16, 2011. The AGM was contested as shareholders were asked to choose between two competing slates of directors – one nominated by management and the other nominated by a group of dissident shareholders. While both groups retained proxy solicitation agents in their respective bids to secure shareholder votes, it was Mosquito's proxy solicitation agent that employed the relatively new TeleVote system.

Through TeleVote, call centre operators employed by a proxy solicitation agent contact shareholders by phone, encouraging votes in favour of the position of the party employing the proxy solicitation agent. The operator takes verbal voting instructions from the shareholder in order to execute a proxy or voting instruction form on the shareholder's behalf. Aside from obtaining the postal code of the shareholder, operators take no further steps to confirm the identity of the shareholder, or the authority that the shareholder has to exercise voting rights. Contrast this system with traditional telephonic or internet voting systems, where shareholders can only access such systems using a unique control number found on the proxy or voting instruction form mailed to them with the meeting materials. Although Mosquito informed shareholders that proxies could be solicited by telephone, its management proxy circular, form of proxy and its four subsequent news releases did not specifically mention that Mosquito would be using the TeleVote system.

Ultimately, at the AGM, management's slate of directors prevailed by a slim margin – however, if the votes obtained by TeleVote were not counted, the dissidents' slate of directors would have been elected. While the dissident shareholders objected to the votes cast by TeleVote, the Chair chose to recognize those votes at the AGM. As a result, the dissident group petitioned the Court to set aside the results of the AGM and order a new meeting of shareholders.

The Court's Decision

The main issue before the Court was whether the use of the TeleVote system was oppressive or unfairly prejudicial to the dissident shareholders.

In applying the first part of the two-pronged test for oppressive conduct previously established by the Supreme Court of Canada in BCE Inc. V 1976 Debentureholders, 2008 SCC 69, the Court concluded that the dissidents had a reasonable expectation that the voting procedures used in advance of and at the AGM would be conducted properly, in accordance with accepted methods and protocols, and consistent with the methods discussed in management's proxy circular.

The Court reached the conclusion that the reasonable expectations of the dissident group of shareholders were not met due to the following problems associated with the manner in which TeleVote was used:

  • Mosquito's reliance on an oral grant of authority is inconsistent with legislative requirements. Both the BC Business Corporations Act and the Securities Act (BC) define proxy in terms of a written or printed form. The TeleVote system, as implemented in this case, did not provide a direct and immediate link to a verifiable, written confirmation of voting instructions.
  • Shareholders placed their votes without using a unique identifier, which is a required "electronic signature" for regular telephone or internet voting. The only unprompted identifier used by the proxy solicitation agent was the shareholder's postal code.
  • The proxy solicitation agent did not have a well defined and complete record of the oral grants of authority, particularly in relation to the nonobjecting beneficial owners. The only record was a printout of the votes entered by the proxy solicitation agent into its proprietary software along with a blank proxy and voter information form executed by the proxy solicitor, neither of which incorporated by reference the printout of votes. Absent from this record, as pointed out by the Court, was anything directly from the shareholder that could be readily checked or verified if challenged.
  • The proxy solicitation agent was contemporaneously soliciting proxies on behalf of management and recording shareholders' voting instructions. This dual agency role raised issues of conflict of interest and proper disclosure of the proxy solicitor's relationship to management.
  • Mosquito's use of the TeleVote system was not specifically disclosed in management's proxy circular, proxy or any of Mosquito's subsequent news releases. Given how relatively new the TeleVote system is in Canada, the Court found that shareholders did not reasonably expect to be solicited for the purpose of having their votes taken in a relatively new process that was not disclosed in any of Mosquito's written material.
  • The TeleVote system did not have appropriate and necessary checks and balances to ensure that instructions were properly given and shareholders had the freedom to vote as they choose. The Court explained that in a contested vote, care must be taken to ensure that votes are solicited in a manner that allows the shareholder to make his or her choices privately, on a fully-informed basis and without undue pressure from a proxy solicitor.
  • As the dissident group was limited to the use of traditional paper, telephone and internet processes in soliciting proxies, management's use of the TeleVote system gave them an unfair advantage.

The Court found that Mosquito's conduct was unfairly prejudicial and oppressive to the dissidents. Consequently, the Court ordered a new shareholders meeting to be reconvened within 60 days of the Court's judgement. The Court also set aside the original AGM, declaring the AGM, and all resolutions passed at the AGM, null and void. Finally, the Court imposed a number of conditions upon the new meeting, including that TeleVote could not be used to solicit proxies or voting instructions.


While the Court ultimately rejected the use of TeleVote in this case, the Court did acknowledge that "[t]hese telephone solicitation systems are a legitimate attempt to streamline shareholder proxy solicitations." However, the Court also noted the need for market participants to "take steps to establish appropriate protocols for its use, particularly in contested meetings." The Court acknowledged that with sufficient safeguards in place to ensure that proxies and voting instructions are properly given and shareholders having the freedom to vote as they choose, systems like TeleVote may become widely used to facilitate shareholder meetings.

Nevertheless, companies who employ proxy solicitation agents should take appropriate steps to ensure that the methods employed to solicit shareholder votes are not unfair or oppressive. As it may be some time before the necessary protocols for the use of TeleVote are generally established and accepted, companies should be especially cautious in their use of telephone proxy solicitation.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions