Canada: It's Personal: Board Refusal Of A Requisition Of A Meeting Of Shareholders

Last Updated: February 15 2017
Article by Mark Wilson

The Ontario Superior Court of Justice (the "Court") in its recent decision in Koh v. Ellipsiz Communications Ltd. has contributed to the line of cases defining the ability of a shareholder to exercise the right to requisition a meeting of shareholders under the Business Corporations Act (Ontario) (the "OBCA"). 


In November 2015, Ellipsiz Communications Ltd. ("ECL") became a public company following the completion of a reverse takeover. The principal asset of ECL is a wholly-owned Taiwanese operating subsidiary, Ellipsiz Communications Taiwan Ltd. ("ECTW"). ECTW operates an engineering services business that provides technical engineering services to major telecommunications companies in Taiwan. 

On May 18, 2016, ECL's board of directors (the "Board") unanimously approved a management information circular for ECL's annual meeting of shareholders to be held on June 30, 2016 (the "Meeting"),which included a proposed slate of directors comprised of the largest shareholder of ECL (the "Requisitioner"), the president of ECL and ECTW, three resident Canadians (the "Canadian Directors") and another individual. 

On or about June 29, 2016, the Requisitioner (who owned approximately 42% of the outstanding shares of ECL) changed his mind and attempted to withhold his votes in respect of the Canadian Directors at the Meeting. At the Meeting, the scrutineer rejected the Requisitioner's proxy, and the slate of directors proposed by ECL was elected, including the Canadian Directors. 

In August 2016, the Requisitioner demanded that the Canadian Directors resign, failing which he would requisition another shareholders meeting to remove them. When the Canadian Directors failed to resign, the Requisitioner submitted a requisition (the "Requisition") pursuant to the OBCA seeking a shareholders meeting to be convened to consider two resolutions -  a resolution to remove the Canadian Directors and, if approved, a further resolution to elect three new directors identified in the Requisition. 

The Board rejected the Requisition. The basis for its decision was its assertion that the Requisition was for the primary purpose of redressing a personal grievance of the Requisitioner against ECL and its directors. In particular, among other items, the Board claimed that the Requisitioner: (i) wanted to be chairman of ECL and ECTW; (ii) wanted to be ECL's negotiator in respect of a potential ECL acquisition; (iii) wanted to arrange financing for ECL; and (iv) insisted on reimbursement of expenses related to ECL. As such, the Board asserted that it was entitled to decline the Requisition pursuant to the OBCA. 

The Requisitioner applied to the Court seeking, among other relief, a declaration that the Requisition was valid.               

The Requisition Right

Under the OBCA, the  holders  of  not  less  than  five per  cent  of  the  issued  shares  of  a corporation that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition. Upon receiving the requisition, the directors must call a meeting of shareholders to transact the business stated in the requisition unless: (i) a record date has been fixed and notice thereof has been given; (ii) the directors have called a meeting of shareholders and have given notice thereof; or (iii) the business of the meeting as stated in the requisition includes certain prescribed matters, including those in which it clearly appears that the primary purpose of the requisition is to enforce a personal claim or redress a personal grievance against the corporation or its directors, officers or security holders. The Board refused the Requisition on the basis of (iii). 

The Contending Positions of the Parties

In support of the rejection of the Requisition, ECL submitted to the Court that the fundamental cause of the dispute between the Requisitioner and ECL was that the Requisitioner objected to what he perceived to be a lack of respect for him, particularly in his capacity as the largest shareholder of ECL. ECL contended that the evidence demonstrated that the Requisition was primarily directed to redressing this personal grievance against the Canadian Directors, whom the Requisitioner believed had frustrated or impeded his personal agenda. 

The Requisitioner claimed that there was nothing on the face of the Requisition that supported the Board's view that the primary purpose of the Requisition was to redress a personal grievance. The Requisitioner characterized the purpose of the Requisition as being the reconstitution of the Board and submitted that this purpose related entirely to the business and affairs of ECL. The Requisitioner claimed that there was no evidence to support the Board's determination that the Requisition was for the primary purpose of allowing the Requisitioner to seek personal retribution or redress of a personal grievance against the Canadian Directors, and that the Canadian Directors were attempting to entrench themselves as directors in breach of their duties to ECL's shareholders. 

The Decision of the Court

In answering the question of what constitutes a personal grievance for the purposes of the requisition right in the OBCA, the Court stated that a personal grievance "involves a dispute that does not entail an issue of corporate policy or operations, but rather involves an issue primarily pertaining to the personal interest of the complainant." The Court further stated that relevant considerations could include "not only the nature of the dispute at issue, but also: (i) the extent to which such dispute is properly the subject of a shareholders meeting, or lies within the domain of the directors; and (ii) the extent to which the complainant acted alone or with the support of other like-minded individuals." 

The Court also set out the following principles in evaluating whether the rejection by a board of a requisition as a personal grievance is justified: 

  • The OBCA requires that a board must call a requisitioned meeting unless it is "clearly apparent" that the business proposed by the requisitioner is proposed for the primary purpose of redressing a personal grievance.
  • It is necessary for a board to look beyond the language of a requisition to determine the primary purpose for which the requisition is put forward. In making this determination, a board is not making a business decision. Rather, the board's determination must be made on the basis of objective evidence in the form of the requisitioner's actions, including an examination of any documentation prepared and delivered by the requisitioner. The objective evidence cannot be limited only to an examination of the resolutions in the requisition.
  • A determination of the requisitioner's primary purpose must be made against a standard of what a director would reasonably find based on the evidence before the directors.
  • The OBCA imposes a high threshold of proof (the onus of the proof being on the board) by virtue of the requirement that it must be clearly apparentthat the primary purpose of a requisition is to enforce a personal claim or redress a personal grievance. A board's authority to refuse to call a meeting depends on such a finding. This reflects, among other things, the fact that the right of dissident shareholders to requisition a meeting of shareholders is a fundamental right in respect of corporate governance afforded by the OBCA. 

With respect to the evidence before the Court, ECL submitted affidavits of each of the Canadian Directors and the president of ECL and ECTW, which included correspondence from the Requisitioner, minutes of meetings of the boards of ECL and one of its subsidiaries, and other documentary evidence. The Requisitioner did not submit any evidence regarding his purpose in making the Requisition. The Court noted that the Requisitioner's letter demanding the resignation of the Canadian Directors did not set out any specific issues of corporate policy in dispute between the Requisitioner and the Canadian Directors, and that "there is no evidence before the Court that the Board had functioned in a dysfunctional manner nor that any directors had engaged in clandestine activity. Nor is there any evidence of any complaints from any shareholders other than the applicant [the Requisitioner]." 

Based on this evaluation of the evidence, the Court found that the Board had properly exercised its right to reject the Requisition, and declined to issue a declaration that the Requisition was valid:

"The foregoing evidence collectively supports the conclusion that the applicant's alleged concerns were never credible. Accordingly, I conclude that the evidence regarding the applicant's opposition to the reconstitution of the board of directors does not reveal any serious difference of opinion among the directors regarding the corporate governance or operations of ECTW. Instead, I find that the applicant was, in fact, principally concerned to maintain his position as a director and chairman of ECTW." 

"In a larger sense, the acrimony between the applicant and the Canadian Directors reflects a conflict between the applicant's sense of his entitlement as the largest shareholder of ECL and the Canadian Directors' position that these matters are properly addressed by the Board and that, as a director, the applicant should act in the best interests of ECL. The important point is that the evidence described above regarding the five matters in dispute demonstrates that the applicant's position reflected his own personal interests rather than any larger sense of the best interests of ECL. In other words, the dispute does not reflect a significant difference between the parties regarding corporate policy or corporate operations."


Koh v. Ellipsiz Communications Ltd. is an important decision because in it the Court sets out principles in examining whether a requisition has been validly rejected by a corporation's board on the grounds that it is a personal grievance. The parties to the case agreed that until this decision of the Court, there was no case law directly on point. 

There have been a number of cases in recent years in which shareholders whose requisitions have been rejected, or hindered, by boards have complained to the courts. The results of these cases have been generally unfavourable to the requisitioning shareholders. For example, courts have taken a strict statutory interpretation approach in judging whether shareholders have properly followed prescribed procedures to exercise the requisition right. This literal approach has enabled boards to thwart substantively valid requisitions on technical grounds. Courts have also deferred to the business judgement of boards as to when a requisitioned meeting should be held; this deference has given boards strategic advantages as to the timing of putting contentious matters to votes of shareholders. 

For activist investors, Koh v. Ellipsiz Communications Ltd. gives some welcome relief from this board-friendly trend. The decision puts the onus on the board to clearly prove that it had reason to block the requisition. Critically, the appropriateness of a board's actions will be judged objectively, and not by giving deference to the business judgement of the board. Also, the decision gives practical guidance respecting behavior that will fall into the "personal grievance" category. Presumably, in most instances, this behavior should not be problematic to avoid. 

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
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
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