Corporate Commercial Law
Corporate commercial law, or “business law,” is a broad area that can mean different things to different people. For many, it is an umbrella term that encompasses a number of specialties, such as corporate finance, securities, and bankruptcy and insolvency.
Counsel practising corporate commercial law may be involved in any number of matters for clients, including:
- drafting and negotiation of contracts of all types, including licensing and distribution agreements, supply agreements, joint ventures and strategic alliances;
- corporate governance;
- contractual disputes, typically pre-litigation;
- corporate reorganizations and restructurings; and
- mergers & acquisitions (assets or shares; public or private).
Corporate commercial lawyers need not only good technical skills, but a working knowledge of business, an ability to establish a rapport with the client, and a practical approach.
As shareholder activism verges on becoming the norm in Canada, proxy disputes are not only on the rise but becoming increasingly sophisticated.
Not surprisingly, courts are getting more involved with proxy battles as issuers and dissidents test the parameters of the tools at their disposal. In the most recent decision, the court overturned the results of a contested annual meeting, citing improper use of a telephone proxy solicitation system by the company's proxy agent.
The case arose when shareholders of Mosquito Consolidated Gold Mines Limited were asked to choose between competing slates of directors at the company's annual general and special meeting of shareholders. Both groups retained proxy solicitation agents, but only the company's agent used a TeleVote system. While Mosquito informed shareholders that it would use telephone solicitation, it did not specifically mention that the TeleVote system would be the system employed.
TeleVote employs call-centre operators to contact shareholders. The operators solicit votes and then take verbal voting instructions. However, the operators take no steps to confirm the identity of the respondents apart from obtaining their postal code.
At the meeting, the dissidents objected to including the televotes cast, but the Chair overruled them. Management's slate of directors were elected, albeit by a slim margin. The dissidents then asked the Court to set aside the results and order a new meeting.
In agreeing to do so, the Court cited a number of problems with TeleVote, including the unlawful reliance on an oral grant of authority; the fact that shareholders did not use unique identifiers such as the electronic signatures used in Internet voting; the company's failure to disclose the use of the TeleVote system in its proxy circular or subsequent news releases, which gave management an unfair advantage; the absence of appropriate checks and balances to ensure that shareholders understood their options and that they had the freedom to vote.
The Court also prohibited the use of TeleVote for the purposes of the new meeting — all of which is not to say, however, that TeleVote or telephone solicitation is dead in Canada. While it is apparent that using certain telephone solicitation methods will be problematic until proper procedures are developed, the Court did acknowledge that systems like TeleVote may become widely used when they have sufficient safeguards in place. Meanwhile, what's clear is that companies should be cautious in their use of telephone proxy solicitation.
ADVANCE NOTICE POLICIES
Unlike televoting, however, advance notice policies have passed the first Canadian judicial test of their viability as a proxy contest tool. Generally speaking, advance notice bylaws and policies require those intending to nominate a director or slate of directors to give issuers advance notice of their proposals.
Although such policies are relatively new in Canada, they have particular relevance because dissidents have the ability to ambush shareholder meetings by making nominations at the meeting itself without providing advance notice to the company.
The validity of advance notice policies has not been tested until recently, but the issue did make its way to court after Mundoro Capital Inc. gave notice of its AGM to be held in June 2012. Fifteen days before the meeting, the company announced that it had approved an advance notice policy setting a deadline by which shareholders had to submit their nominations for directors.
Northern Minerals Investment Corp., a Mundoro shareholder, responded by asking the BC Supreme Court to declare the advance notice policies unenforceable. In turn, the company postponed the AGM for one month and advised that shareholders would be asked to approve the new policies on the postponed date.
At the hearing, Mundoro challenged both the Board's authority to implement the policy and its authority to postpone the date of the AGM. The court dismissed the application, ruling that the Board had authority both to implement the policy and to postpone the meeting.
The ruling made it clear, however, that the decision was not a general endorsement of advance notice policies and that each case would depend on its own facts. In this case, the court concluded that there was evidence of good faith on the part of Mundoro's directors and of the policy's reasonableness. In particular, the directors were not attempting to influence a proxy contest and would be seeking shareholder approval of the policy.