15. Proxy Solicitation Under Canadian corporate and securities laws, unless an exemption is available, the solicitation of proxies by a shareholder requires the preparation and mailing of a prescribed form of dissident proxy circular and form of proxy to every shareholder whose proxy is solicited. “Solicitation” is very broadly defined under the CBCA to include a “communication to a shareholder under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.” For example, in Smoothwater Capital Partners LP1 v Equity Financial Holdings Inc. 23 ( Smoothwater ) in 2014, the Ontario Superior Court of Justice had to consider whether a press release issued by a company following the commencement of proxy solicitation by an activist amounted to illegal proxy solicitation by the company. In that case, the activist, Smoothwater Capital Partners LP, requisitioned a meeting of shareholders and commenced its proxy solicitation in reliance on the public broadcast exemption. Smoothwater Capital issued a press release criticizing the board’s decision to delay the requisitioned meeting. In response, the company issued a press release defending the actions of its directors and outlining its concerns with Smoothwater Capital’s nominees and confirming that a proxy circular was forthcoming. Smoothwater Capital challenged the press release as an illegal solicitation of proxies under the CBCA, claiming that the release constituted a “communication to a shareholder under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy” prior to the filing of the management proxy circular. The Court held that whether a communication is a solicitation is a question of fact that depends on the nature of the communication and the circumstances of the transmission. Looking at the principal purpose of the document, the Court held that the press release was simply a defence of the company’s leadership and of the date that it chose to hold the meeting, and that the release did not encourage shareholders to provide proxies to the company. The determination whether a communication is a solicitation requires considering the motives and intention of the sender, as well as the likely effect that the communication will have on recipient shareholders. Further, timing could also be important in assessing whether a given communication can be described as a “solicitation.” For instance, where there is a substantial period of time between the initial communication and the ultimate formal solicitation, the initial contact is likely not going to be deemed to constitute a solicitation.
23 2 014 ONSC 324.
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