Canada: Avoiding Surprise Activism At Your Annual Shareholders Meeting: Adopting Advance Notice By-Laws

Last Updated: March 15 2013
Article by Jean-François Séguin


  • Advance Notice By-Laws limit the ability of shareholders to surprise the issuer by nominating alternative directors at the annual general meeting without prior notice to the issuer;
  • Advance Notice By-Laws increasingly seen as the best tool to defend against activist shareholders planning a surprise nomination of alternative directors at an annual shareholders meeting;
  • Growing support for and use of Advance Notice By-Laws by Canadian issuers;
  • ISS and Glass Lewis support Advance Notice By-Laws under certain conditions;
  • Advance Notice By-Laws have already been tested in a Canadian court and were validated and enforced;
  • Advance Notice By-Laws are more common in the United States.

Why Should You Adopt an Advance Notice By-Law?

With the rise of shareholder activism in Canada, executives of public companies might have become nervous when it comes to the proxy season. A study recently conducted by Fasken Martineau, 2013 Canadian Proxy Contest Study, confirms that proxy contests are on the rise and that no one is immune to them. According to the study, a total of 101 contests were completed during the 2008-2012 period, representing an increase of 84% over the preceding five-year period. As noted in the study, the last five years have seen a 98% increase in the number of contests focused on change in the boardroom and in 54% of these board-related contests, dissident shareholders were successful. This trend is likely to continue and grow, especially as a number of institutional shareholders embark on shareholder activism and other activist titans like Bill Ackman of Pershing Square and Carl Icahn now actively eye Canadian companies.

Activist or disappointed shareholders have typically tried to influence an issuer by attempting to replace the current directors with their own candidates by issuing a shareholder proposal which needs to be added to the issuer's management proxy circular or by starting a proxy fight by sending to shareholders a dissident proxy circular. A disappointed shareholder may also wait until the annual shareholders meeting of the issuer to nominate alternative candidates from the floor and try to rally support from other shareholders. In this case, the issuer's management may be completely taken by surprise and depending on the composition of the issuer's shareholding, management may lose the vote and find itself with unexpected new board members.

Advance Notice By-Laws: A Simple but Efficient Tool

Advance Notice By-Laws are useful to prevent the latter situation. Such by-laws set a deadline by which shareholders must submit a notice of director nomination to the issuer's management prior to the annual meeting. The by-laws also set forth the information that a shareholder must include in the notice for it to be valid. It is intended to allow the issuer and its shareholders to receive adequate prior notice of director nominations, as well as sufficient information on all the nominees and, consequently, it is also intended to allow the shareholders to better evaluate the proposed nominees' qualifications and suitability as directors. Typical Advance Notice By-Laws will provide details on the nomination procedures to be followed by a "nominating shareholder". The nominating shareholder will need to send a timely notice to the issuer and in accordance with the current practice and what has been deemed reasonable by the main actors in corporate governance, such notice should be sent to the issuer not less than 30 nor more than 65 days prior to the date of the annual shareholders meeting. In the case of a special meeting of shareholders during which directors will be elected, the notice should be sent no later than 15 days following the day on which the first public announcement of the date of the special meeting of shareholders is made. Of course, it is important to always remember that the nominating procedure is also subject to the corporations act governing the issuer and to its articles.

Strong Support from Corporate Governance Actors

Institutional Shareholder Services Inc. (ISS), an influential corporate governance and proxy advisor, has changed its voting recommendation this year with regard to advance notice requirements. ISS will now make its voting recommendation on a case-by-case basis on proposals to adopt an advance notice board policy or to adopt or amend by-laws containing or adding an advance notice requirement. It will give support to those proposals that provide a reasonable framework for shareholders to nominate directors by allowing shareholders to submit director nominations as close to the meeting date as reasonably possible and within the broadest window possible, recognizing the need to allow sufficient notice for issuer, regulatory, and shareholder review. ISS finds that to be reasonable, the issuer's deadline for notice of shareholders' director nominations must not be more than 65 days and not less than 30 days prior to the meeting date. ISS's stated rationale for supporting reasonable Advance Notice By-Laws is:

"All shareholders should be provided with sufficient disclosure and time to make appropriate decisions on the election of their board representatives. Advance Notice Requirement Policies typically provide a transparent, structured, and fair director nomination process, whereby all shareholders, irrespective of whether they are voting by proxy or attending the meeting, are made aware of potential proxy contests in advance of the meeting. Shareholders are also provided with important information pertaining to proposed dissident director nominees within a specified time frame, allowing shareholders to fully participate in the director election process in an informed and effective manner."

Like ISS, Glass Lewis & Co., another major corporate governance player, supports the adoption of reasonable Advance Notice By-Laws:

"While we recognize the increased burden that could be placed on small shareholders that wish to nominate directors to a company's board under an advance notice policy, we believe that these costs are minimal compared with the potential negative impact resulting from an overhaul of a company's incumbent board. Accordingly, Glass Lewis will generally support these policies that require a nominating shareholder to provide notice not less than 30 or and not more than 65 days prior to the date of the annual meeting."

The Mundoro Case

The Supreme Court of British Columbia has also shown support for Advance Notice By-Laws in a recent decision, Northern Minerals Investment Corp. v. Mundoro Capital Inc., 2012 BCSC 1090. In this case, Mundoro's board of directors had adopted an Advance Notice Policy requiring shareholders to nominate a director by a fixed deadline and in compliance with the terms of the Advance Notice Policy, which was not an Advance Notice By-Law approved by shareholders however. NMI, an 8% shareholder, argued that there was no legal basis for adopting such a policy and petitioned the British Columbia Supreme Court for a declaration that Mundoro's Advance Notice Policy was unenforceable.

The Court noted that the petitioner did not produce any evidence that the directors of the issuer were acting other than in the best interests of the shareholders of the company. It noted that it was the intended actions of the petitioner that would not have been in the best interests of the shareholders as "the late announcement by the petitioner of its intentions would not permit sufficient time to insure that all shareholders were advised and given the opportunity to attend or submit their proxies".

NMI submitted that the result of the Advance Notice Policy was that the board of the issuer could entrench itself and that the directors were improperly seeking to protect and benefit themselves. The Court rejected this argument. NMI also submitted that the Advance Notice Policy affected shareholder democracy because it deprived shareholders of their right to elect directors in accordance with the British Columbia Business Corporations Act. The Court responded to this submission by saying that neither the act nor the articles of the company expressly precluded directors from creating such a policy and the Court insisted on the fact that nothing demonstrated that such policy was infringing on shareholder rights. The Court said that rather than infringing the rights of shareholders, the policy ensured an orderly nomination process and that the shareholders are informed in advance of a meeting what is in issue. The Court further commented that the policy prevented a group of shareholders from taking advantage of a poorly attended shareholders meeting to impose their slate of directors on what could be a majority of shareholders unaware of such a possibility arising. 

Finally, the Court declined to declare the Advance Notice Policy unenforceable and concluded as follows:

"The actions of the board in this instance in creating an advance notice policy have not been shown to having been done to "influence or preclude" a proxy contest but rather to insure that all shareholders are made aware that a proxy contest exists.  No evidence has been put forward that the directors are not behaving reasonably."

Adopting an Advance Notice By-Law

Advance Notice By-Laws are common in the United States and have been adopted by many large issuers. In Canada, although such by-laws seem to have been adopted more rapidly by smaller companies, we are currently noticing a rise in the adoption of such policies by Canadian issuers. Adopting Advance Notice By-Laws is simple and constitutes, at present, the most efficient way to prevent surprises at shareholders meetings.

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.

Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
Norton Rose Fulbright Canada LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
Norton Rose Fulbright Canada LLP
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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