Canada: British Columbia Court Of Appeal Allows Mason's Requisitioned Meeting – Legislatures, Not Courts, Should Address "Empty Voting" Concerns

Last Updated: October 19 2012
Article by Paul D. Davis and Lisa Fang

On October 12, 2012, the British Columbia Court of Appeal (the "BCCA")1 set aside an earlier decision of the British Columbia Supreme Court (the "Supreme Court")2 thereby allowing CDS & Co. ("CDS"), in its capacity as the registered holder of common shares of Telus Corporation ("Telus") beneficially held by investment funds managed by Mason Capital Management LLC ("Mason"), to call and hold a meeting of Telus' shareholders in accordance with the shareholders' meeting requisition provisions under the Business Corporations Act (British Columbia) (the "Act").

The decision of the BCCA is noteworthy not just because the BCCA refused to be swayed by the policy concerns regarding "empty voting" – believing that this issue was better left to the legislature – but also in light of its commentary regarding amendments to the articles of a corporation incorporated under the Act.


Telus, a company incorporated under the Act, has a capital structure with two classes of shares – common shares and non-voting shares. Other than the fact that the non-voting shares do not carry any voting rights, the two classes of shares have identical attributes and rights. Both classes of shares are listed on the Toronto Stock Exchange, and the non-voting shares have historically traded at a slight discount to the common shares of 4.5%3.

For various reasons, including the promotion of good corporate practice and the enhancement of the liquidity and marketability of Telus' shares, the directors of Telus announced in February 2012 a proposed arrangement whereby the non-voting shares would be converted on a one-for-one basis to common shares. Immediately following the announcement, the trading price differential narrowed between the two classes of shares. Mason began acquiring Telus common shares for its funds, while hedging its position by short selling both common shares and non-voting shares. Mason had an arbitrage plan to vote against the arrangement, and profit from the price differential between the two classes of shares, which was expected to return following the defeat or withdrawal of the proposed arrangement. By April 2012, Mason's funds held approximately 18.7% of the issued common shares. Telus contended that, after taking into consideration Mason's hedged short position on both classes of shares, Mason's net investment in Telus represented only 0.021% of Telus' outstanding share capital.

On May 8, 2012, Telus announced that the proposed arrangement was being withdrawn, after it had become clear that Telus would not be able to secure the special majority vote of two-thirds of each class of shares required to implement the proposal.

CDS is the registered holder of approximately 95% of the outstanding common shares of Telus, holding such shares on behalf of many intermediaries, who in turn hold the shares on behalf of numerous other intermediaries and beneficiaries, some of which are Mason's investment funds. On August 1, 2012, CDS issued a requisition (the "CDS Requisition") for a general meeting of Telus shareholders (the "CDS Meeting") pursuant to the provisions of section 167 of the Act whereby only common shareholders would be entitled to vote. The CDS Requisition stated that CDS was operating under the direction of an anonymous beneficial owner of 10,000,000 common shares. Despite the anonymity in the CDS Requisition, Mason announced on August 2, 2012 that it had requisitioned the CDS Meeting.

The CDS Requisition sets out four resolutions that Mason wished to place before the common shareholders at the CDS Meeting. The first two resolutions (or mandatory resolutions) proposed the addition of a new provision to Telus' articles to prohibit Telus from converting or exchanging non-voting shares for common shares at an exchange ratio of less than one common share for 1.0475 or 1.08 non-voting shares, except in accordance with existing obligations under the articles or as authorized by an exceptional resolution approved by 80% of the common shareholders. The second set of resolutions, only to be considered if the first set of resolutions failed, were non-binding recommendations to the Telus directors (or advisory resolutions) that they not proceed with any exchange or conversion of non-voting shares for common shares unless the ratio was at a minimum exchange ratio of one common share for 1.0475 or 1.08 non-voting shares.

On August 21, 2012, Telus wrote to CDS indicating that Telus had declined to call the CDS Meeting because Telus believed that the CDS Requisition was defective in a number of respects. On the same day, Telus obtained an order from the Supreme Court granting it leave to hold its own general meeting as well as a separate class meeting of non-voting shareholders (together, the "Telus Meeting") to consider and vote on a second proposed arrangement. The new proposed arrangement would allow the non-voting shares to be exchanged for voting shares on a one-for-one basis without having to amend Telus' articles. Thus, while a 2/3 majority vote from non-voting shareholders was required to approve the proposed arrangement, only a bare majority of the common shareholders was required.

On August 31, 2012, CDS sent a notice to Telus shareholders calling the CDS Meeting to be held on October 17, 2012, the same date as the Telus Meeting. Telus immediately commenced proceedings in the Supreme Court and subsequently obtained an order from the Supreme Court that CDS and Mason were not entitled to call the CDS Meeting on the basis that, among other things, the CDS Requisition was defective. On appeal by Mason and CDS, the Supreme Court's order was set aside by the BCCA.

The issues and BCCA reasons for judgment

Both the Supreme Court and BCCA decisions discussed the following noteworthy issues:  

  1. the ability of a registered holder, such as CDS, to requisition aphareholders' meeting on behalf of an anonymous beneficial shareholder under the Act;  
  2. whether the proposed resolutions for the CDS Meeting would effectively alter Telus' articles by affecting the rights and restrictions of the non-voting shares, and therefore be ultra vires; and
  3. the practice of "empty voting", the challenges it creates for shareholder democracy, and the court's role and inherent jurisdiction to intervene in such practices.

Can a registered holder requisition a shareholders' meeting under the Act without naming the beneficial holder?

Subsection 167(2) of the Act provides that shareholders holding in aggregate at least 5% of the issued voting shares of a company are entitled to requisition a general meeting of shareholders. The term "shareholder" is defined in the Act to mean "a person whose name is entered in a securities register of a company as a registered owner of a share of the company" (i.e., a registered shareholder). In addition, subsection 167(3) stipulates that a requisition must be signed by, and include the names and mailing addresses of, all of the requisitioning shareholders.

The Supreme Court held that Telus' directors had the right to decline the requisitioned meeting because the CDS Requisition did not comply with the requirements set out in subsections 167(2) and (3). In its decision, the Supreme Court took the view that a requisition only naming CDS (the registered holder in this case) as the requisitioning shareholder was insufficient since it did not allow Telus to determine whether the meeting was being requisitioned for an improper purpose which if that was the case would allow Telus to properly reject the requisition:4

. . . [I]n order to know whether the purpose of the requisition is to enforce a personal claim or address a personal grievance, the identity of the requisitioning shareholders must be known. I do not think that naming the nominee of the statutory depository on a requisition requiring a general meeting fulfills that purpose. Nor do I think that such an interpretation impairs the efficient operation of capital markets.

... in my opinion, the [CDS] Requisition must identify the beneficial shareholders behind the requisition so the directors can meet their duties under ss. 167(2), (3) and (7).

In contrast, the BCCA focused on a plain reading of the Act. Since the term "shareholder" is defined as the registered shareholder, the court determined that CDS, as the registered shareholder of the Telus shares in question, had the power to requisition the CDS Meeting. Further, the court determined that the language of the Act was clear – a requisition must be signed by a registered shareholder and only required the furnishing of the registered shareholder's address; there is no requirement that the requisitioning shareholder also be a beneficial holder or for the beneficial holder to be named in the requisition.

In response to the Supreme Court's discussion regarding the directors' duties to ascertain whether the purpose of a requisition is to enforce a personal claim or address a personal grievance, the court noted that the statute "does not place any duty on directors to detect inappropriate requests for meetings – it merely gives them discretion to refuse to call a meeting in certain circumstances."5 Although there may be situations where the knowledge of the identity of the beneficial shareholder may be critical in determining whether a requisition is appropriate, the BCCA stressed that the courts are not given the power to expand the requirements for a requisition beyond those clearly set out in the Act.

Are the resolutions proposed ultra vires?

In considering the ultra vires issue, the Supreme Court held that Mason's proposed mandatory resolutions were contrary to Telus' articles and the Act. In particular, the court took the view that the mandatory resolutions, in setting a minimum exchange ratio between the two classes of shares, would modify the rights and attributes attached to both the common shares and the non-voting shares as set out under Article 27 of Telus' articles. Therefore, the court determined that, pursuant to the provisions of the Telus articles and the Act, the proposed resolutions would require approval by the common shareholders and non-voting shareholders, voting as separate classes, and that the general meeting of shareholders requisitioned by CDS to consider the proposed resolutions would not fulfill this requirement.6

The BCCA did not agree. In reviewing Telus' articles, and in particular Article 27 which contained the rights, privileges, restrictions and conditions attached to the non-voting and common shares, the court noted that the mandatory resolutions in the CDS Requisition could have been set out in other provisions of the articles and therefore there need not have been an amendment to Article 27. An amendment to Article 27 would have required 2/3 majority approval from each class of shares pursuant to Article 27.10, and under the Act a shareholder requisitioned meeting (being a general meeting) could not be constituted as a class meeting for a vote by the holders of non-voting shares. In considering Article 27.9, which required that the common shares and the non-voting shares have the same "rights" and attributes," the court concluded that "the proposed resolutions do not affect any 'right' or 'attribute' of the non-voting shares, because there is no right or ability to convert or exchange shares"7 in the articles. The BCCA went on to state that, other than in narrowly defined circumstances, the articles of Telus do not suggest any ability to exchange or convert non-voting shares for common shares.

With respect to the two advisory resolutions, the BCCA acknowledged that the requisitioning of a meeting merely to consider advisory resolutions might not "justify the calling of a special shareholder meeting,"8 but concluded that it was "not convinced that section 167 precludes shareholders from requisitioning a meeting for that purpose."9

Ultimately, the BCCA did not find the proposed resolutions in the CDS Requisition to be ultra vires.

Empty voting and the court's role in preventing such practices

Telus argued that Mason should not be allowed to requisition a meeting (through CDS) because, despite Mason's significant holding of Telus common shares, its hedged position meant that Mason had a very limited net financial interest in Telus. Both the Supreme Court and the BCCA expressed concern with respect to "empty voting" – being the accumulation of votes by a party that has very limited or no financial stake in the company (or the "decoupling [of] a share's economic interest from its voting interest")10 – and the challenge that "empty voting" causes to the protection of corporate shareholder democracy.

While the Supreme Court did not rest its decision on this issue, the court's commentary in this regard indicated that the court would have been willing to interpret section 167 of the Act to require any shareholder requisitioning a meeting under that statute to have a significant economic interest in the shares that it purports to vote.

In response to the Supreme Court's comments on this issue and its interpretation of the requirements under section 167 of the Act, the BCCA cautioned that the courts are only entitled to intervene when they have specific authority to do so under statutory provisions. On a plain reading of subsection 167(2), the BCCA concluded that such provision "does not refer to any particular level of net investment in a company, but only to the holding of a particular proportion of the issuer voting shares" and that "[t]he reference to the 'aggregate' shareholding simply allows the voting shares of multiple shareholders to be added together; it does not allow the court to look behind shareholders to determine whether the shareholding represents a 'material interest in the company.'"11

Despite its stated concerns with "empty voting", the BCCA was not able to find anything in the Act that gave the court authority to prohibit a shareholders' meeting on the basis that the requisitioning shareholder is engaging in "empty voting." Although there may be "a strong concern that [Mason's] interests are not aligned with the economic well-being of the company ... there is no indication that [Mason] is violating any laws, nor is there any statutory provision that would allow the court to intervene on broad equitable grounds."12 To conclude, the BCCA noted that the remedy must lie in legislative and regulatory change to address the problem of "empty voting" and its potential negative impact on the goals of shareholder democracy.


Historically, dissidents requisitioning a meeting have registered their shares not only to ensure that they satisfy the requirement that they be a registered shareholder in order to requisition a meeting, but also to ensure that they have greater flexibility in dealing with issues that may arise surrounding the requisitioned shareholders' meeting. Prior to the decision of the Supreme Court, there was some (albeit limited) concern as to whether a nominee that was merely a registered shareholder – and not also a beneficial shareholder - could requisition a meeting; this concern should now abate.

The issues surrounding "empty voting" will no doubt continue to generate commentary; however, we would suggest that the concerns related thereto will not be easily resolved. The fact of the matter is that "empty voting" has been with us for some time – whether through a shareholder voting shares that were sold following the "record date" or the numerous financial or derivative products in the market-place which can separate voting control from other indicia of share ownership.

With respect to the decision of the BCCA regarding the mandatory resolutions in the CDS Requisition not being ultra vires, we suspect that this reasoning will generate significant discussion in years to come.


1 TELUS Corporation v Mason Capital Management LLC, 2012 BCCA 403 [Telus BCCA].

TELUS Corporation v CDS Clearing and Depository Services Inc, 2012 BCSC 1350 [Telus BCSC].

3 This discount was relative to the trading price of the common shares over the three years prior to February 2012.

Telus BCSC, supra note 2 at paras 63 and 64.

Telus BCCA, supra note 1 at para 49.

6 The Supreme Court determined that the proposed mandatory resolutions would require an amendment to Article 27 of the Telus articles. Article 27 specifically required that any amendment thereof be made via "special separate resolutions" approved separately by each class of Telus shares on a 2/3 majority basis. The Act distinguishes between various types of shareholder meetings, including "general meetings" and "class meetings" and in accordance with the Act, special separate resolutions are those to be considered and passed at a "class meeting." The Supreme Court concluded that, since section 167 of the Act only provides for the requisitioning of general meetings, and not class meetings, the proposed mandatory resolutions are not properly the subject matter of the CDS Meeting, being a general meeting requisitioned under section 167 of the Act, and are therefore ultra vires the Company.

Telus BCCA, supra note 1, at para 58.

Ibid at para 70.


10  Ibid at para 73 and Telus BCSC, supra note 2 at para 103.

11  Telus BCCA, ibid at para 77.

12  Ibid at para 81.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2012 McMillan LLP

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.

Paul D. Davis
Lisa Fang
In association with
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