Governance Insights 2024 A Review of Shareholder Activism in Canada for 2024: Key Decisions and Trends to Watch for in 2025
or trading securities which would engage the public interest,” the BCSC declined to find that its public interest powers afforded the shareholder any remedy under securities law. Securities regulators in Canada have shown little interest in hearing advance notice disputes, making reliance on the courts all the more critical for enforcing the appropriate use of these provisions. But court proceedings can move slowly, and delays are likely to impede the real-time protection of shareholder rights often required in the context of pending proxy contests, leaving shareholders on the back foot. Securities regulators may be better positioned to respond swiftly, offering expedited processes that align with the urgency of director nominations ahead of shareholder meetings. GUIDANCE FOR BOARDS ON ADOPTING ADVANCE NOTICE BY-LAWS Advance notice by-laws are essential tools for public companies, helping to prevent surprise nominations at shareholder meetings and ensuring that all shareholders have sufficient information to make informed decisions. When adopting or amending these by-laws, Canadian boards should consider the following best practices: 1. Timing and Process of Adoption: The timing of adopting or amending by-laws can impact the deference afforded to the board. It is generally recommended that any adoption or amendment of an advance notice provision be undertaken proactively on a “clear day,” free of any existing or threatened proxy contest. Whenever a board is considering adopting or amending its by-law, it should: > seek advice from internal and external advisors; > e stablish processes to manage conflicts of interest; and > d eliberate thoroughly, documenting its decision- making process.
Securities regulators in Canada have shown little interest in hearing advance notice disputes, making reliance on the courts all the more critical for enforcing the appropriate use of these provisions.
Taking these steps can strengthen the board’s position under the business judgment rule, which affords deference to informed and reasonable decisions made in the company’s interests. 2. Reasonable Notice Periods: Advance notice by-laws should provide shareholders with a reasonable period of time in which nominations may be submitted. ISS and Glass Lewis suggest that a “reasonable” notice period is generally a minimum of 30 days prior to the date of the annual meeting, and recommend a broad time period (e.g., a 35-day window) during which shareholders may submit nominations. Proxy advisors will typically recommend that shareholders vote against advance notice provisions if the minimum notice period is either too close to (e.g., 10 days) or too far in advance of (e.g., 60 days) the annual meeting. 3. Reasonable Disclosure Requirements: Disclosure obligations for nominating shareholders should not be more onerous than those for management and board nominees or require disclosure that exceeds what is required in a dissident proxy circular. Imposing additional requirements, such as completing extensive questionnaires that could deter or thwart legitimate nominations may not stand up to judicial scrutiny.
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