Someone on SH has already posted on this subject but I thought it is of interest to talk about that subject again.
to discuss a precise subject.
To do so, we must have a minimum percentage of the shares. If I refer to the article below, we need to have at least 5 % of the shares. It is probably one of the reason why they diluted on a 20 to 1 basis.
Remember that Clulow is a lawyer and must know quite well all those rules.
For all the talk of proxy access in the U.S., and now Canada (see DLA Piper’s 2016 and 2017 publications on this point), one of the more powerful tools available to shareholders of Canadian companies is the power to requisition a meeting. Under the Ontario Business Corporations Act ("OBCA”) and similar federal and other provincial legislation, shareholders holding 5% of the company’s shares have the power to requisition a meeting to consider shareholder proposals, including potentially replacing the Board. This is a powerful tool in the hands of an aggrieved shareholder, who is not required to wait for the next annual meeting to seek to replace the Board.
There are, however, statutory exceptions to this right. Legislation allows the Board to refuse a shareholder’s request for a meeting where the same issue has been put to shareholders either by management or dissidents in the prior two years. The Board may also refuse where a meeting has already been called. And, interestingly, the Board may refuse where the shareholder is not really advancing matters related to the business and affairs of the company, but rather, advancing a personal grievance.
Lower courts have given some guidance over the years as to what constitutes a “personal grievance”. Now an Ontario appellate court has weighed in. Describing the right to call a meeting a “fundamental right” of shareholders, the Court found the Board must meet a high threshold to establish an exemption to that right – indeed, the statute says that it must be “clearly apparent” the shareholder is advancing a personal grievance or personal claim. The Court also provided guidance on how to distinguish between a personal grievance and a matter properly put before shareholders, particularly in circumstances where the shareholder advancing the proposal is a significant shareholder.
The Court adopted comments made in another decision that “[t]he right to call a special meeting is a substantive one and is not lightly to be interfered with.” It refused to apply the business judgment rule to the decision of the Board in assessing the shareholder proposal. And, as a result, the Court overturned the lower court, ordering the company to hold the meeting.
The statutory right to call a meeting
Section 105(1) of the OBCA confers the right to call a meeting of shareholders. It reads:
The holders of not less than 5 per cent of the issued shares of a corporation that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition.
Upon receiving the requisition, the directors are required to call the meeting of shareholders to transact the business set out in the requisition, except in three situations. One of those situations relates to the content of the shareholder resolution. The directors are not required to utilize corporate funds to call and hold a shareholder meeting where “the business of the meeting as stated in the requisition includes matters described in clauses 99(5)(b) to (d)”. Those clauses read:
(b) it clearly appears that the primary purpose of the proposal is to enforce a personal claim or redress a personal grievance against the corporation or its directors, officers or security holders;
(b.1) it clearly appears that the proposal does not relate in a significant way to the business or affairs of the corporation;
(c) not more than two years before the receipt of the proposal, a person failed to present, in person or by proxy, at a meeting of shareholders, a proposal that, at the person’s request, had been included in a management information circular relating to the meeting; or
(d) substantially the same proposal was submitted to shareholders in a management information circular or a dissident’s information circular relating to a meeting of shareholders held within two years preceding the receipt of the shareholder’s request and the proposal was defeated
In a decision released on May 18, 2017, Koh v. Ellipsiz Communications Ltd., 2017 ONSC 3083, the Ontario Divisional Court gave greater clarity on what constitutes a “personal grievance” as described in subparagraph 99(5)(b) of the OBCA. As we explain below, the court significantly narrowed the scope of this exemption.