01. Applicable Rules In Canada, the rules governing shareholder activism are derived from four principal sources: the target’s corporate statute and constating documents, securities legislation, common law and stock exchange rules. The target may be federally or provincially incorporated or may be a creation of contract (for example, a trust governed by provincial law). Canada does not have a single federal securities regulator; rather, each province and territory has its own securities legislation and regulatory body. For purposes of this guide, our analysis is generally based on the Canada Business Corporations Act (CBCA), the most common incorporation statute among companies listed on the Toronto Stock Exchange (TSX); and the Securities Act (Ontario), the provincial securities statute that applies to all companies listed on the TSX. The corporate statutes and securities laws of the other major Canadian jurisdictions are substantially similar with respect to proxy solicitation and shareholder rights, with some exceptions. In addition to applicable legal requirements, shareholder activism is also governed by the rules of the TSX or the TSX Venture Exchange (TSXV) and informed by the guidance published by Institutional Shareholder Services (ISS) and Glass Lewis & Co. (Glass Lewis). In Canada, ISS has published the leading source of guidance on proxy voting for companies listed on the TSX and TSXV. 02. Right to Requisition a Shareholders’ Meeting One of the most powerful rights that shareholders of Canadian corporations enjoy is the right of holders of not less than 5% of the issued voting shares to requisition the directors to call a shareholders’ meeting. On receiving a valid requisition proposing proper shareholder business — most commonly to remove and elect directors — the directors must, within 21 days, call a meeting of shareholders to transact the business stated in the requisition. 1 CONTENT OF REQUISITION While significant, the requisition right is not quite as powerful as it may appear due to a series of judicial decisions that have added content and procedural requirements not found in the statute, making the practical use of the requisition right difficult. Canadian courts have held shareholders to a high standard of technical compliance in submitting requisitions and have demonstrated a propensity to invalidate requisitions on technical grounds. For example, in Wells v Bioniche Life Sciences Inc. 2 ( Bioniche ), a 2013 decision of the Ontario Superior Court of Justice, the Court upheld a board’s decision to reject a requisition on the basis that it had not been signed by a registered holder of 5%, even though the shareholder who had submitted the request was known by the board to beneficially own a sufficient number of shares to requisition a meeting.
1
CBCA, s. 143.
2
2013 ONSC 4871.
2
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