Guide to Shareholder Activism and Proxy Contests in Canada

16. Limited Private Proxy Solicitation Canadian securities laws and most corporate statutes provide an exception to the proxy solicitation rules, allowing shareholders (but not the company) to avoid having to send a dissident proxy circular to shareholders if the total number of shareholders whose proxies are solicited is not more than 15 (joint holders being counted as one shareholder). 24 This method of solicitation is inexpensive and may be effective when the ownership of voting shares is concentrated in the hands of a few shareholders. Aside from the limit on the number of shareholders that a person may solicit, there are very few constraints on the manner in which a shareholder relying upon this exemption may solicit proxies. In some past instances, dissidents have quietly conducted limited solicitations of proxies from a small number of large shareholders and “ambushed” management at an annual meeting by nominating their own alternative slate of directors from the floor without any prior warning. Private proxy solicitation has been simplified by a decision of the British Columbia Supreme Court in 2019 in Russell v Synex International Inc. 25 Adopting the finding of an earlier Ontario case, the Court held that a dissident shareholder conducting a private solicitation could use the company’s form of proxy to appoint himself as the proxyholder (instead of management’s appointees) and then rely on the discretionary authority granted by a proxy to vote in favour of the candidates nominated from the floor of the meeting. The Court concluded that this result best gave effect to shareholders’ voting intentions, noting that the entire regulatory scheme for the voting of proxies is geared to facilitate the exercise of shareholders’ right to vote. 26 17. Solicitation by Public Broadcast Canadian securities laws and most corporate statutes provide a “public broadcast” exemption that can be used alone or in combination with the 15-shareholder exemption discussed above to enable a dissident (but not the company) to solicit proxies and support for its campaign without “sending” a proxy circular to shareholders. 27 The exemption allows the shareholder to solicit proxies through the media — by public broadcast or publication (for example, by press release, statement on radio or television, publicly available website or public speech) — and avoid the expense and time required to mail a proxy circular. For shareholders relying on this exemption in connection with the election of directors, a document containing prescribed information concerning the proposed nominees must be filed on SEDAR, together with the communication intended to be published. 28

24 CBCA, s. 150(1.1) and National Instrument 51-102, Continuous Disclosure Obligations (NI 51-102), s. 9.2(2). 25 2019 BCSC 34.

26 A dditional information is available in our article titled “Policy Prevails over Fine Print: Successful Ambush in British Columbia Clarifies the Use of Blank Proxies” (May 6, 2019) (available at https://www.dwpv.com/en/insights/publications/2019/policy-prevails-over-fine-print). 27 CBCA, s. 150(1.2) and NI 51-102, s. 9.2(4). 28 NI 51-102, s. 9.2(6).