The Court noted that there is a “fundamental right” for unitholders to have the requisitioned meeting held expeditiously. While this does not imply a right to have the meeting held immediately, or even at the soonest available date, it does imply an obligation to hold the meeting “without unreasonable or unjustifiable delay.” In this, boards still generally enjoy deference under the business judgment rule in determining the appropriate timing for the meeting. The Court then considered whether the board was entitled to the protection of the business judgment rule. It first looked at the board’s process to examine whether the board applied an appropriate level of prudence and diligence in its decision-making. The Court took issue with the fact that the board had held only one two- hour meeting at which the requisition of the activists was only one item on the agenda and that the trustees targeted by the activists participated in the deliberation. On the whole, the Court found that the process failed to demonstrate the required independence and objective process that would warrant deference, and the reasons cited by the board did not justify a five-month delay in holding the meeting. The Court also examined the reasons cited by the board for the delay. The board argued that (i) holding two separate meetings would be too expensive; (ii) the unitholders should be given greater time to consider the issues to be raised at the meeting; and (iii) the meeting should be delayed to allow for the issuer’s business plans to unfold. On the first argument, the Court in Sandpiper found that, given the large size of the issuer, a “cost saving” argument was not persuasive (in contrast to the small size of the issuer in Intrinsyc Software ). On the second and third arguments, the Court found that allowing for additional time before holding the requisitioned meeting would have the potential to defeat the very purpose of the meeting and was therefore not an appropriate argument. The Sandpiper decision is a cautionary tale for boards seeking to delay the timing for a requisitioned meeting. A board’s decision-making in this context will be heavily scrutinized and will focus on the management of conflicts and adequacy of the board’s process. Boards should consider establishing a special committee, or meet in camera , without the presence of conflicted board members who are subject to the shareholder’s requisition. Boards should also be careful to tailor their response to the specific circumstances, and their reasons for delaying a meeting should make sense in the context of the issuer’s size and potential near-term material developments. MEETING CALLED BY SHAREHOLDERS If the directors do not call a meeting within 21 days of receiving the requisition, any shareholder who signed the requisition may call the meeting. The corporation is required to reimburse the shareholders for expenses they reasonably incurred in requisitioning, calling and holding the meeting unless shareholders resolve otherwise at the requisitioned meeting. However, what happens when the shareholder calls the meeting is not entirely clear: the statute provides little guidance, and there is scant precedent to look to because in virtually all cases the corporation calls the requisitioned meeting.
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Davies | dwpv.com
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