In this case, the British Columbia Supreme Court
(BCSC) overturned the results of a public company's annual
general meeting due to a finding that the telephone voting system
used by management's proxy solicitation firm had been
oppressive to the company's shareholders.
International Energy and Mineral Resources Investment (Hong
Kong) Company Limited (International Energy) was the largest
shareholder in Mosquito Consolidated Gold Mines Limited (Mosquito),
a public company with its shares traded on the TSX Venture
Exchange. Mosquitos' annual general meeting, held in December
2011, was contested as two different slates of directors were
proposed for election. Both management and dissident circulars and
proxies were sent to shareholders in advance of the meeting. The
management slate was elected. International Energy subsequently
petitioned the BCSC for, among other things, a declaration that the
meeting was conducted in an oppressive or unfairly prejudicial
manner as a result of Mosquito's proxy solicitors' use of
the TeleVote system to solicit proxies, among other things. The
TeleVote system used call centre operators to telephone registered
shareholders and non-objecting beneficial owners to take their vote
by verbally authorizing a proxy advisory firm to execute a proxy on
their behalf (as opposed to the more traditional method of
encouraging the holder to complete and submit their proxy).
Although the BCSC stated that the use of TeleVote would be
acceptable if sufficient safeguards were in place, the BCSC
concluded that the use of TeleVote in this case was deficient in a
number of ways, and fell short of providing a contemporaneous,
reliable and verifiable record of proxies and voting instructions.
Particulars included the finding that oral grant of authority was
not consistent with the British Columbia Business Corporations
Act and the British Columbia Securities Act, the
proxy solicitation firm did not maintain a sufficient record of the
oral grants of authority that it received and the fact that the
proxy solicitation firm 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.
A new annual general meeting was ordered to be convened within
60 days of the BCSC's judgment.
Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
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