On July 20, 2012, the Supreme Court of British Columbia rendered
a judgment that sheds new light on the shareholder nomination
process for electing the directors of a business
corporation.1 In fact, the Court confirmed that a
corporation's policy, which aimed to impose an advance
nomination process at a shareholders' meeting, was reasonable
and did not infringe shareholder rights with respect to electing
the directors of a corporation.
The advance notice policy approved by the board of directors of
Mundoro Capital Inc.,1 a corporation governed by the
corporate legislation of British Columbia included a deadline by
which time shareholders were required to submit, in writing,
nominations for directors to be elected during the
corporation's annual general meeting of shareholders. In
particular, any nomination had to be received at least 30 days
before and no more than 65 days prior to the meeting. Only such
nominated persons would be eligible for election as directors.
One of Mundoro's shareholders brought an action against
Mundoro in order to contest the validity of this policy. This
concerned shareholder alleged namely that there was no legal basis
for such a policy and further argued that its implementation
constituted an attempt to limit the fundamental right of
shareholders to elect directors. By ruling that the advance notice
policy did not breach shareholder rights, the Court recognized that
such a policy favored the implementation of an orderly nomination
process, which would enable shareholders to make an informed
Although such policies and their integration into a
corporation's by-laws are currently not standard practice for
reporting issuers in Canada, the Mundoro case could prompt
issuers to amend their by-laws. In all likelihood, this policy
would strengthen the directors nomination process by requiring a
shareholder to send the issuer an advance notice, affording him
sufficient time to analyze and respond in an informed manner to the
proposed nominations. This tool could prevent nominations which are
sometimes enforced by ambush or by proxy contest during annual
The Court's decision suggests that advance notice policies
or the addition of a provision to that effect in a
corporation's by-laws should be carefully drafted and
established to strike a reasonable balance between the rights of
shareholders to elect directors, and the responsibilities of the
board to make sure that the nomination process for electing
directors is respected.
An advance notice policy regarding the nomination process for
electing directors can represent an important tool for a reporting
issuer to ensure that all shareholders are treated fairly and that
they are provided in a timely manner with relevant information
pertaining to the nomination of directors.
1. Mundoro Capital Inc., 2012 BCSC 1090 [Mundoro
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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