Algoma Steel Inc. is not required to advance the date of its special shareholder meeting, set for March 22, 2006, held the Ontario Superior Court of Justice, which rejected an application by U.S.-based hedge fund Paulson & Co. Inc. to have the meeting one month earlier. The Court held that an obligation to "call" a meeting of shareholders under the Business Corporations Act (Ontario) (OBCA) is satisfied when the board of directors resolves to hold the meeting on a particular date and announces the meeting date by a news release that outlines the proposed business for the meeting. We represented Algoma before the Court.
On November 1, 2005, Paulson requisitioned Algoma’s directors to call the meeting to replace the majority of Algoma’s directors and have the new board consider substantial distributions of Algoma’s capital. On November 21, 2005, Algoma issued a news release announcing that its board had called a special meeting of shareholders for March 22, 2006 in response to Paulson’s requisition. The news release stated that Algoma’s board had chosen the meeting date to give Algoma time to seek a ruling from the Canadian Revenue Agency clarifying the tax consequences to Algoma and its shareholders of Paulson’s proposal.
The Court concluded that Algoma’s board had properly called the special meeting as required by the OBCA. The Court held that "calling" a meeting must be distinguished from sending notice of the meeting, the proxy circular and other meeting materials to the shareholders, and from holding the meeting. Those steps are required in due course, within the timing prescribed by the OBCA, working backward from the scheduled meeting date. Thus, the Algoma board complied with the OBCA requirement that the meeting be called within 21 days of the requisition date.
The Court also held that the OBCA does not prescribe a time limit for holding (as opposed to "calling") a requisitioned meeting. It described the right of shareholders to requisition a meeting as a fundamental right that is "only meaningful if it can be exercised in a timely and expeditious manner." But the Court found that the scheduling of a requisitioned meeting is left to the business judgment of the directors to be determined by them acting honestly, in good faith and with a view to the best interests of the corporation. The Court "must defer to business judgments made by directors within that framework," if the directors’ decision "falls within a range of reasonableness." Such scheduling can, according to the Court, "properly take into account the need for full disclosure and clarification of important legal or factual matters relevant to the business of the meeting."
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