their policies for evaluating advance notice bylaws in Canada. This was largely in response to the Ontario Superior Court’s 2014 decision in Orange Capital, LLC v Partners Real Estate Investment Trust , 16 in which the Court found that advance notice requirements are to be used only as a “shield” to protect shareholders and management from ambush and not as a “sword” to exclude nominations given by shareholders on ample notice or to buy time for management to develop a strategy for defeating an activist. In 2017, the TSX also weighed in on advance notice bylaws and provided guidance on which features of advance notice bylaws will and will not be viewed as acceptable for its listed issuers. 17
Key elements of the guidance provided by ISS, Glass Lewis and the TSX include the following:
– The notice period should not be less than 30 days before the shareholders’ meeting (if notice of the meeting is given 50 or more days prior to the meeting date), or 10 days following notice of the meeting if notice is given less than 50 days prior to the meeting date.
– The notice period should not be subject to any maximum notice period.
– If a shareholders’ meeting is adjourned or postponed, the bylaw should not restrict the notice period to that established for the originally scheduled meeting. – The bylaw should not require disclosure that exceeds what is required in a dissident proxy circular or goes beyond what is required under law or regulation. – The nominees identified in the notice should not be required to agree, in advance, to comply with the director policies and guidelines of the corporation. – The nominating shareholder should not be required to be present at the shareholders’ meeting, either in person or by proxy.
– The board should have the ability to waive all sections of the advance notice bylaw in its sole discretion.
Given the level and type of guidance provided in Canada, a typical Canadian advance notice bylaw will differ significantly from its U.S. counterpart. In particular, in Canada, advance notice bylaws rarely impose a requirement that a director nominee complete a questionnaire. Moreover, the company’s board typically has limited discretion to reject a director nomination. This contrast between Canadian-style and U.S.-style advance notice bylaws places Canadian companies that qualify as “U.S. domestic issuers” under SEC rules in a unique and largely uncharted position, which was highlighted in the 2023 Legion Partners’ proxy contest for Primo Water. Primo Water, a Canadian corporation cross-listed on the TSX and New York Stock Exchange qualified as a “U.S. domestic issuer.” Following initial engagement with activist Legion Partners, the company adopted a new advance notice bylaw that introduced the requirement that a director nominee complete a lengthy questionnaire and that gave broad discretion to the company to request additional information from
16 2014 ONSC 3793. 17
TSX Staff Notice 2017-0001 (March 9, 2017).
14
Davies | dwpv.com
Powered by FlippingBook