In September 2012, we reported that the Supreme Court of British
Columbia had rendered a judgment1 confirming that a
corporate policy imposing an advance nomination process for a
shareholders' meeting was reasonable and did not infringe the
shareholders' rights relating to the election of the
corporation's directors ("Advance Notice
Policy"). We concluded at the time that Advance
Notice Policies are a tool that can prevent nominations in cases
where they might be enforced by ambush or by proxy contest. Nine
months later, we notice that Advance Notice Policies have been
adopted by numerous Canadian public corporations and that proxy
advisory firms such as Institutional Shareholder Services Inc.
("ISS") and Glass Lewis & Co., LLC
("Glass Lewis") have widely supported
Furthermore, since many Canadian public corporations are still
seeking to put in place other responsible defences against proxy
contests, we wish to advise in this bulletin that Canadian Oil
Sands Limited and other Canadian public corporations recently
adopted "Enhanced Quorum By-Laws", in
addition, to Advance Notice Policies, at their respective annual
and special shareholders' meetings. Enhanced Quorum By-Laws
require a minimum of two shareholders holding at least a majority
of the issued and outstanding common shares (an
"Enhanced Quorum") to be present or
represented by proxy at any meeting at which a shareholder will be
seeking to replace half or more of the board of directors, before
the meeting can be held and business validly transacted.
This is different from the more standard practice among issuers
with respect to quorum at shareholders' meetings, which is
generally 10% of the shareholders, represented in person or by
proxy. The Enhanced Quorum requirement is intended to ensure the
enfranchisement of all the shareholders and that a material number
of shares are represented at shareholders' meetings, where such
a fundamental change to the business and strategic direction of a
corporation may occur. Enhanced Quorum By- Laws have recently been
adopted by at least four Canadian public corporations.
An Enhanced Quorum would provide a better framework to
shareholders for exercising their fundamental right to make
significant changes to the board of directors of a public
corporation. In the absence of an Enhanced Quorum for the
transaction of business at any meeting where the Enhanced Quorum is
required, those present and entitled to vote will constitute a
quorum for the purpose of (i) conducting all business other than
for the election of directors, and (ii) the adjourning of such
meeting. The meeting may be adjourned no more than twice for an
aggregate of no more than 65 days. If an Enhanced Quorum is not
present at the opening of the second adjourned meeting, if any,
those shareholders present and entitled to vote at that adjourned
meeting will constitute quorum for the transaction of business,
including the election of directors, at the adjourned meeting.
The concept of Enhanced Quorum was integrated by a few other
Canadian corporations such as Open Text Corporation, Rutter Inc.
and Enghouse Systems Limited into those companies' respective
majority voting policies. Majority voting policies generally
provide that if the votes in favour of the election of a director
nominee at a shareholders' meeting represent less than a
majority (50 %) of the shares voted and withheld, the nominee will
submit his or her resignation promptly after the meeting, for the
corporation's consideration. The majority voting policies of
the corporations referred to above would only apply in an
uncontested election at which more than 65% of the outstanding
common share have been voted by holders in person or by proxy.
It is reasonable to believe that both ISS and Glass Lewis will
generally support the adoption of Enhanced Quorum By-Laws. Like
Advance Notice Policies, Enhanced Quorum By-Laws appear to be yet
another answer to shareholder activism, which has been growing and
trending in Canada. Similarly to Advance Notice Policies, Enhanced
Quorum By-Laws will particularly benfit junior issuers.
1 Northern Minerals Investment Corp. v.
Mundoro Capital Inc., 2012 BCSC 1090 [Mundoro
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
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.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
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).