Guide to Shareholder Activism and Proxy Contests in Canada

This decision has left the law unsettled on the use of cash-settled derivatives in the M&A context. It remains undetermined how the law in this area might be applied to proxy contests, but as the Re Bison decision concerned the voting, rather than the tendering, of shares, it is not difficult to anticipate the arguments that would be made in extending the application of the decision to proxy contests. In the meantime, other issuers (such as Elemental Royalties in response to a hostile bid by Gold Royalty) have already followed suit by including in their poison pills an extended definition of beneficial ownership that includes economic interests under cash-settled derivatives and other provisions that do not align with the Canadian takeover bid rules. 08. Voting Shares Acquired After the Record Date The question of who is entitled to vote at a shareholders’ meeting is determined by the particular corporate statute under which a company is incorporated. The CBCA stipulates that only a shareholder whose name appears on the shareholders list on the stated record date for the meeting is entitled to vote at the meeting. However, corporate legislation in several provinces and territories of Canada allows a purchaser of shares after the record date to vote at the meeting so long as the purchaser produces properly endorsed share certificates or otherwise establishes the purchaser’s ownership of the shares and asks the corporation (typically no later than 10 days before the meeting) to have his or her name included in the list of shareholders entitled to vote. 09. Advance Notice Bylaws Advance notice bylaws (or policies) set out requirements for shareholders to provide advance notice to a corporation of their proposal to nominate directors for election to the board at a shareholders’ meeting. Failure to comply with an advance notice bylaw can result in the shareholder being denied the right to nominate a director. Although the United States has a long history of adopting advance notice bylaws, Canadian advance notice bylaws were extremely rare prior to 2012. In 2012, Canadian courts condoned the use of these bylaws on the basis that they foster an orderly nomination process and informed decision-making by providing shareholders with reasonable notice of, and information concerning, a contested election of directors. As a result of the courts’ support, a majority of Canadian issuers have since adopted advance notice bylaws. Although bylaws and bylaw amendments can become effective immediately upon the board’s approval, they must be approved by the shareholders at the next meeting of shareholders following their passage to remain in place. The requirement for a shareholder vote has given ISS and Glass Lewis significant influence over the provisions of advance notice bylaws in Canada. In late 2014/early 2015, ISS and Glass Lewis reformulated