Canada: Being Prepared for a Stealth Proxy Contest

Last Updated: April 29 2010
Article by Fred R. Pletcher

Most Read Contributor in Canada, September 2016

With shareholder activism rising in Canada over recent years, the number of publicly waged proxy contests has dramatically increased - from two in 2004 to nineteen in 2009. This trend is expected to continue in 2010, as evidenced by recent contests involving Lions Gate Entertainment Corp. and Crew Gold Corporation.

But managers of Canadian small- and mid-cap issuers should be cautioned that these high-profile public proxy fights, where dissidents seek broad shareholder support through a public solicitation of proxies and management has the luxury of responding to the dissidents' campaign, are in the minority. A greater number of "stealth" proxy contests occur each year in Canada where incumbent management is often taken by surprise.

In stealth proxy contests, dissidents privately solicit votes from a handful of significant shareholders without canvassing broader shareholder support through a public solicitation. Generally, stealth campaigns will solicit proxies from no more than 15 shareholders, exempting dissidents from the usual requirement under Canadian laws to publicly file and deliver a dissident information circular when soliciting proxies. Often, target management will become aware of a stealth campaign only when dissident proxies are filed, commonly 48 hours before the meeting, but sometimes at the meeting itself. With scarce time to counter the dissidents' solicitation, these stealth contests are often effectively won by the dissidents before management even becomes aware of their existence.

Who launches stealth campaigns? Often they're spearheaded by hedge funds and other short-term activist institutional investors (frequently abetted by disgruntled former executives who retain significant personal shareholdings) seeking to push companies to enhance value through strategic transactions or to unlock value by selling non-strategic assets or freeing up cash reserves for dividends. In other cases, the dissidents' goal is more mundane: simply a cashless take-over.

Canadian issuers may be increasingly susceptible to stealth proxy contests in 2010, ironically as a result of two well-intentioned trends towards greater direct shareholder engagement and better corporate governance practices.

The first trend involves the recent removal of the ability for NYSE member brokers to vote shares beneficially owned by clients at the broker's discretion – without specific instructions from those clients – in uncontested director elections for US and Canadian companies. Canadian issuers that have historically had a significant percentage of their shares held and voted by NYSE member brokers, therefore, may receive reduced support for their board nominees.

The second trend is the growing influence of voting recommendations from proxy advisers, such as RiskMetrics and Glass Lewis (whose institutional investor clients are believed to hold between 20 to 30 per cent of the shares of most large- and mid-cap North American issuers). These recommendations are based on issuers' compliance with annually published corporate governance and executive compensation criteria, and "no-vote" or "withhold-vote" recommendations are not uncommon. Although RiskMetrics and Glass Lewis employ a different analysis when making recommendations in proxy contests (which considers the positions of management and dissidents), in stealth contests these firms often won't have time to change their recommendations or have their institutional clients act upon such changes. Accordingly, "no-vote" or "withhold-vote" recommendations may encourage stealth campaigns and even ensure their success, despite the dissidents' aims possibly being very different from RiskMetrics' and Glass Lewis' clients.

How can issuers protect themselves from stealth proxy contests? Effective ongoing shareholder engagement is a good first step. This can alert issuers to shareholder discontent and allow management and directors to preempt some shareholders' concerns. Where danger signs persist, consider undertaking a more proactive management proxy solicitation campaign by engaging a professional proxy solicitation firm to improve participation. It also pays to be onside of the governance and compensation policies of the leading proxy adviser firms to avoid "no-vote" or "withhold-vote" recommendations. Issuers should set a deadline for submitting proxies several days prior to the meeting and monitor proxies daily as they come in. The issuer's corporate secretary, registrar and transfer agent, investor relations personnel, counsel and an experienced meeting chair (possibly advised by independent counsel) should be ready to respond to the first signs of a stealth proxy contest. Finally, where a stealth proxy contest is suspected, consider adjourning the meeting to allow a reasonable time for public solicitation of proxies by both sides and/or to permit confidential negotiations with dissident shareholders on potential compromise slates or compromise resolutions.

Care should be taken by issuers, however, not to overreact to the prospects of a stealth proxy contest by adopting heavy-handed tactics that interfere with shareholders' voting rights. In its 2009 decision in Hudbay Minerals, the OSC focused on Hudbay's governance practices in connection with shareholders' meetings, including a requisitioned meeting to change its board; and the OSC sent a strong message that using tactical scheduling to frustrate the ability of shareholders to vote on a major matter would not be tolerated.

With a little preparation and good shareholder communications, however, issuers may avoid being blindsided by stealth proxy contests.

About BLG

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.

In association with
Related Video
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.