The economic downturn is making proxy fights one of the stories
of the year for 2009. Most battles have been in the resource sector
so far, particularly with junior mining companies. But the scope of
possible activity could widen as share prices in all sectors
continue to struggle and shareholders become more aggressive.
Ogilvy Renault has been involved in five proxy fights since the
beginning of January 2009. Our firm has represented dissident
shareholder groups, corporations and independent directors in the
dynamic context of a proxy battle. Because of the absolute
devastation of market caps in 2008, we have seen a lot of activity,
and we believe that we are going to continue to see a lot more.
An example of a proxy battle in which we were involved was for
the control of Polar Star Mining Corporation. We acted for Douglas
Willock who was working to remove the existing board and replace
them with his own board of nominee directors. The now-former board
had removed Mr. Willock as President and CEO on January 30, 2009,
over a disagreement regarding the right strategy for the
corporation. He continued to serve as a director of the company and
launched his proxy fight in early February. Mr. Willock and his
supporters ultimately won, receiving almost 60 per cent of
shareholder proxy votes at the shareholder meeting.
The Polar Star example is a common type of proxy fight, where
shareholders believe the board of a company should do things
differently to maximize shareholder value. Another kind of fight
can involve investors such as hedge funds that tailor themselves as
shareholder activists. In these situations, investors focus on
companies where there is a significant difference between the
market cap and cash on hand. The investor may launch a challenge to
the current board of a company when motivated by a desire to have a
company do a share buyback or pay out the cash on hand by paying a
We are also encountering circumstances where proxy battles are
the result of poor relationships between the parties and can be
motivated by differences of opinion on who should be managing a
company and its board. These types of scenarios can be based more
on clashes between different personalities rather than diverging
visions, but can still seriously divide a company's board and
Whatever the reason for launching a proxy battle, Canadian law
provides a unique tactic by which one can be commenced that is not
necessarily available in other parts of the world: the power to
requisition a shareholder meeting. It gives shareholders the
ability to replace a board of directors in between the annual
meetings of a company. Sophisticated shareholders are recognizing
that a mechanism exists to force a different vision for the
company—and they are using it. Boards are playing a
dangerous game if they ignore the demands of shareholders,
especially in today's market.
About Ogilvy Renault
Ogilvy Renault LLP is a full-service law firm with close to 450
lawyers and patent and trade-mark agents practicing in the areas of
business, litigation, intellectual property, and employment and
labour. Ogilvy Renault has offices in Montréal, Ottawa,
Québec, Toronto, and London (England), and serves some of
the largest and most successful corporations in Canada and in more
than 120 countries worldwide. Find out more at
Voted best law firm in Canada two years in a row.
2008 and 2009 International Legal Alliance Summit & Awards.
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