Canada: Improper Use Of Televoting Overturns AGM Results

Last Updated: December 5 2012
Article by Heenan Blaikie

The recent victory on October 16, 2012, by a dissident slate of candidates for the board of directors of Mosquito Consolidated Gold Mines Limited (the Company) illustrates the potentially significant consequences that the improper use of televoting to solicit proxies and voting instructions can have in the context of a shareholders' meeting. The recent vote was a "do-over" of the Company's last annual and special meeting, after a court overturned that meeting's results due in part to improper use of televoting.

While televoting has the potential to facilitate shareholders' meetings, televoting systems may also lack sufficient safeguards to ensure that proxies and voting instructions are properly given and shareholders are able to vote freely. Televoting is a new process in the context of the Canadian securities industry and there is little guidance on protocols for its use, particularly in contested shareholders' meetings.

Importantly, the British Columbia Supreme Court decision did not prohibit the use of televoting per se, and can serve to provide guidance to companies wishing to utilize televoting in the future. This article examines the safeguards necessary to ensure that televoting is conducted in compliance with securities laws and policies.

Background Facts to the Decision

The Company, a TSXV-listed mining company, held an annual general and special meeting that was contested by a dissident group which proposed its own slate of directors. As its proxy solicitor, the Company retained Georgeson Shareholder Communications Canada Inc., which deployed a televote system to obtain proxies and voting instruction forms (VIFs) from shareholders. The Management's slate of directors won by a small margin. This caused the dissidents to challenge the use of the televote system in court.

The proxy solicitor's televote system used call-centre operators to telephone registered shareholders and non-objecting beneficial owners to take their votes. The proxy solicitor asked for verbal authorization to execute a proxy or VIF on behalf of the shareholders. The operators followed a script and the conversations were recorded. The operators encouraged votes in favour of management's recommendations, but shareholders had the option of voting for or against the motions set out in the management proxy.

Deficiencies of the Televote System

The Court found that the thrust of the applicable securities legislation, policies and guidelines was to establish safeguards to ensure that proxies and voting instructions were provided by those having the authority to give them. In a decision that turned on examining the reasonable expectations of shareholders, the Court's view was that televote, as used by the proxy solicitor in this case, was deficient in a number of ways.

The following were problems with the manner in which the proxy solicitor used the televote system:

  • The Oral Grant of Authority was Insufficient – The televote system's reliance on an oral grant of authority, without a link to a verifiable and written confirmation, was inconsistent with legislative requirements.
  • No Unique Identifier for Votes – The absence of a unique identifier made it difficult to scrutinize the process. The televote system neither had a reliable means of identifying the person giving the instructions, nor ensuring the integrity of the information contained in the proxy or VIF.
  • No Complete Record – The record of the oral grant of authority, consisting of a printout of the votes entered by the proxy solicitor into its proprietary software, was not regarded by the Court as creating a full record.
  • Problematic Agency Relationships – The proxy solicitor's dual agency role in soliciting and recording votes raised the potential for a conflict of interest, a lack of proper disclosure and confusion amongst shareholders.
  • Lack of Prior Disclosure – Televote was not mentioned in the management circular, management proxy or any of the Company's news releases. While shareholders might otherwise reasonably expect to be contacted by phone, 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 the Company's written materials.
  • Lack of Sufficient Safeguards – Appropriate checks and balances were absent and the extent of the proxy solicitor's quality control analysis was unclear. When partisan solicitation is combined with vote-taking, the potential for abuse exists and, in a contested vote, care must be taken to ensure that votes are taken 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.

The Outcome

The Court concluded that the dissidents proved that the Company, in authorizing the proxy solicitor to use televote, failed to act fairly, and that this constituted oppressive and unfairly prejudicial conduct.

The Court set aside the results of the meeting and declared the meeting invalid and all resolutions passed as null and void. The Court ordered that the Company reconvene an annual and special general meeting. The order included, inter alia, a condition that the Company not solicit proxies or voting instructions using televote.

The "do-over" annual and special meeting was recently held and the dissidents' slate of directors was elected.

Repercussions of the Decision for Televoting in Canada

The Court noted that televote is relatively new in Canada and encouraged the securities industry to establish appropriate protocols for its use.

The Court made clear that televoting must have sufficient safeguards built into it to ensure that instructions are properly given and shareholders have the freedom to vote as they choose. The Court suggested that this may involve a system that allows the operator to transfer callers to an automated system where they can place their votes privately using their unique identifiers, or at least some kind of immediate and independent confirmation, perhaps by email, of the shareholder's identity and the votes taken. While the Court did not specify exactly what standard must be met by televoting systems, the case can serve as guidance in the deployment of televoting in the future.

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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.