Canada: Distanciation sociale pendant la saison des procurations : mise à jour sur les assemblées générales d'actionnaires virtuelles

À mesure que les gouvernements du monde entier recommandent à leur population d’éviter les grands rassemblements, les émetteurs canadiens devraient envisager des solutions de rechange à la tenue de leurs assemblées annuelles d’actionnaires au cours de la saison des assemblées générales 2020. 

Une traduction de ce billet sera disponible prochainement.

As authorities around the world encourage people to refrain from gathering in large groups, Canadian reporting issuers should consider alternative means of holding their annual shareholder meetings during the 2020 proxy season.  

• Virtual shareholder meetings take place over a technology platform in lieu of or in addition to a physical meeting.
• An issuer’s ability to hold a virtual-only shareholder meeting will depend both on its governing statute and its constating documents, which should not be interpreted in an unduly restrictive manner.
• In jurisdictions where it is not possible to hold a virtual-only meeting, issuers may consider holding hybrid meetings or in circumstances where there is no reasonable basis to conclude otherwise, seeking a court order to hold a virtual meeting.

Should You Consider a Virtual Meeting?

Until recently, only a limited number of Canadian issuers have held or planned to hold their shareholder meetings virtually. Given the public health impact of COVID-19 (coronavirus), it is understandable why there has been a sudden shift given the need to mitigate risks to the health and safety of communities, shareholders, employees, and other stakeholders. The Canadian Securities Administrators (CSA) has also expressed support for issuers who choose to hold virtual-only shareholder meetings this proxy season.

Issuers should take a number of considerations into account when deciding whether they can or should hold their next annual meeting virtually:

• Corporate statute. Not all Canadian corporate statutes permit the use of virtual-only meetings. As an example, the Canada Business Corporations Act (CBCA) allows for virtual or electronic shareholder meetings, subject to the issuer’s by-laws, provided that persons may participate in a meeting by telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting. The Business Corporations Act (Ontario) (OBCA) provides complete flexibility to hold a virtual-only meeting, subject to the issuer’s articles and by-laws. Other Canadian jurisdictions may not expressly permit or may restrict the use of virtual meetings or permit hybrid meetings but not virtual only meetings because they require that the meeting be held in a location.
• Corporate by-laws. Issuers should review their by-laws and, if required, consider amending the by-laws to allow for virtual meetings. Consideration should also be given to procedural matters found in the by-laws, including the chairperson’s powers and quorum requirements.
• Corporate Governance. Consideration should be given to whether a virtual meeting will raise any corporate governance issues. Historically, critics of virtual-only meetings have suggested that technology does not provide shareholders with an adequate opportunity to address or challenge management and directors. This may, however, be less of criticism in the current environment given the push by health authorities and regulators to consider social distancing.
• Business of the Meeting. Virtual meetings may not be well suited to special business or for meetings where there is a possibility of contested resolutions, debate or shareholder proposals. Consideration should therefore be given to the nature of the meeting being held.

Hybrid Meetings May be an Option

Hybrid meetings allow shareholders to participate in the meeting electronically while a physical meeting is still being held, satisfying any applicable corporate law requirements.

Issuers Who Cannot Hold Virtual Meetings

While virtual shareholder meetings will be appropriate in many instances, for some issuers virtual meetings may not be possible or desirable as a result of limitations in corporate statutes and/or constating documents and taking into account prohibitive costs. Where an issuer is not able to hold a virtual-only meeting as a result of its by-laws, an issuer’s board of directors should generally be able to amend such by-laws to permit a virtual-only meeting and ask shareholders to ratify the amendment at the shareholders’ meeting.

Certain issuers together with their advisors appear to be pursuing recourse to the courts for judicially ordered virtual-only meetings out of an abundance of caution. In our view, this approach should be reserved for where absolutely necessary only given that in current circumstances it would be highly unlikely for a challenge of the power to hold a virtual-only meeting to succeed and furthermore, this risks creating an inevitable precedent, potentially forcing all companies contemplating such meetings into court.

If a virtual-only meeting is still not desired or possible, an issuer may wish to consider the following alternative as a means of addressing the COVID-19 situation:

• If the meeting location has been announced and needs to be changed, file an amended notice of meeting and press release advising shareholders of the change in location.
• Ensure press release and notice of meeting reminds shareholders how to vote by telephone, internet, mail, etc. and encourage shareholders to do so if there are any concerns or challenges in attending in person.
• Allow for the ability to dial-in or join the meeting online. This would not be a virtual meeting so there will be no ability to “participate” (vote, ask questions or count towards quorum) through dial-in or internet. In person attendance is still open.
• If the meeting location has been changed, delay the commencement of the meeting by 30 minutes or so in order that those who attend at the original meeting location can be directed to the new location.

Issuers should also consider including language in their proxy circulars to reserve the right to amend the location of the meeting allowing for flexibility as the COVID-19 pandemic continues.

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.