East West Petroleum Corp V.EW

Shareholder group update

[lageorges]

With the most recent pledges the nEw total participation is 4.7 million of the Total 90 million EW share float. This represents approximately 5.2 percent of the total outstanding share float. While 5 % is the minimum requirement for formal standing we should continue to seek more participants and develop a cushion to allow for individuals selling their holdings etc.  As a target i believe we should work to exceed 10% of the float this unlocks even more options for the group to influence the Board and the management of the company. See the text below. That said however we now are in a position to prepare for the next steps I will post details soon Thank you all for your support.

 

• https://gettingthedealthrough.com/area/84/jurisdiction/7/shareholder-activism-engagement-canada/
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• Under Canadian corporate statutes, shareholders are able to make proposals for inclusion in the company’s proxy materials. Under the CBCA, a registered or beneficial shareholder is entitled to submit a shareholder proposal for consideration at a company’s annual meeting if the shareholder holds, or is supported by shareholders who hold, the lesser of 1 per cent of the outstanding voting shares of the company and voting shares of the company whose fair market value is at least C$2,000. The shareholder or shareholders are required to have held such shares for a period of six months prior to the day on which the proposal is submitted. A proposal may include nominations for the election of directors if the proposal is signed by one or more holders of shares representing in aggregate not less than 5 per cent of the outstanding shares (although this right is not often used by shareholders). A shareholder proposal under the CBCA must be submitted to the company at least 90 days before the anniversary date of the notice of meeting that was sent to shareholders in connection with the previous annual meeting. The shareholder is entitled to provide a supporting statement for the proposal, not exceeding 500 words.
  Upon receiving a shareholder proposal, a company is able to request proof that the proponent meets the shareholding requirements. There are exemptions to a company being required to accept a proposal, including, among other things:
  • it appears the primary purpose of the proposal is to enforce a personal grievance;
  • the proposal does not relate in a significant way to the business or affairs of the company;
  • the proposal mechanism is being abused to secure publicity; or 
  • substantially the same proposal was submitted to shareholders in preceding years and it did not receive the prescribed amount of support. 
• A valid proposal, including any supporting statement, is required to be included or attached to the company’s proxy circular for the annual meeting. 
  Canadian public companies have received a wide range of shareholder proposals on topics including operational matters, disclosure matters, governance and compensation matters and environmental and social matters. It is anticipated that the number of environmental and social proposals, including gender diversity proposals, will continue to trend upwards in upcoming proxy seasons. 
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• 7. 
  What common strategies do activist shareholders use to pursue their objectives? 
  
   
  Generally speaking, activist shareholders are now more sophisticated and committed and US activist funds are applying their tactics in the Canadian market. 
  The most common activist strategy continues to be accumulating a meaningful position prior to triggering ‘early warning’ reporting obligations (10 per cent if the company is not subject to US requirements) and approaching the company through a formal ‘bear hug’-type letter or requesting meetings with management or the board. At this juncture, some activists prefer to exhaust private avenues before going public, while others seek the publicity that accompanies a public activist campaign. Often, the activist’s position will be supported by a detailed presentation or a position paper. If the board or management of the target company does not engage, the activist may requisition a shareholder meeting, as discussed in more detail below, or may employ other common tactics to further their agenda including making the dispute public. The activist will also lobby for support from institutional (and other large) shareholders and, if the campaign is public, proxy advisory firms and the media. 
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• 8. 
  May shareholders call a special shareholders’ meeting? What are the requirements? May shareholders act by written consent in lieu of a meeting? 
  
   
  Under Canadian corporate statutes, shareholders are entitled to requisition meetings of shareholders in order to, among other things, replace directors. Under the CBCA, registered shareholders holding not less than 5 per cent of the outstanding shares of a corporation that carry the right to vote at a meeting may requisition a shareholder meeting. A requisition is required to state the business to be transacted at the meeting and must be sent to each director and to the registered office of the corporation. 
  A recent Ontario court decision has held that, where a requisition includes the removal and replacement of directors, the requisition must include sufficient detail to allow shareholders to make an informed decision about the business to be transacted at the meeting, which would include the names and qualifications of the proposed new directors. 
  Upon receiving a valid requisition, the directors of a CBCA company must call a meeting of shareholders within 21 days, failing which any shareholder who signed the requisition may call the meeting. The time frame for actually holding the meeting, as opposed to calling it, is generally within the discretion of the board of directors, subject to judicial challenge. The timing of the meeting is a matter that is litigated from time to time in Canada as a board of directors will frequently set the meeting date some months down the road. There are certain exceptions to the requirement for the board of directors to call a meeting of shareholders in response to a requisition, including where a record date for a meeting has already been set and notice of it has been given, or where the directors have already called a meeting of shareholders and notice of it has been given. 
  Shareholders under most corporate statutes can act by written consent in lieu of a meeting, however, it must be unanimous.
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• 9. 
  May directors accept direct compensation from shareholders who nominate them? 
  
   
  There is no prohibition on directors accepting direct compensation from shareholders who nominate them. However, activist shareholders have been criticised for employing this tactic in recent Canadian proxy contests as a result of independence concerns.
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• 10. 
  May shareholders nominate directors for election to the board and use the company’s proxy or shareholder circular infrastructure, at the company’s expense, to do so? 
  
   
  As noted above, a shareholder proposal may include nominations for the election of directors if the proposal is signed by one or more holders of shares representing not less than 5 per cent of the outstanding shares. A valid proposal, including any supporting statement, is required to be included or attached to the company’s proxy circular for the annual meeting. As a result, ‘proxy access’, or at least a form of proxy access, is already available to shareholders in Canada.
  However, while a form of proxy access is available to shareholders in Canada, it does have certain limitations including: 
  • the proponent is restricted to a 500-word supporting statement for inclusion in the company’s proxy circular while the company is not subject to similar limitations; and 
  • the proponent must either prepare a dissident proxy circular to solicit proxies in favour of its nominees (which can be costly) or rely on exemptions to the proxy solicitation rules (discussed in more detail below) to solicit proxies in favour of its nominees. 
• As such, proposals of this nature are not common. 
  Similar to the current experience in the United States, there is a movement towards enhanced proxy access in Canada led by certain shareholder groups. However, the acceptance of this movement in Canada, at least by companies and practitioners, appears somewhat tempered to date, given the rights already available to shareholders.
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• 11. 
  May shareholders bring derivative actions on behalf of the corporation or class actions on behalf of all shareholders? What defences against, or policies regarding, strike suits are applicable? 
  
   
  Under Canadian corporate statutes, derivative actions are permitted and under Canadian securities laws, companies can be sued (including by way of class actions) for misrepresentations in their public disclosure. 
  In addition, Canadian shareholders and other stakeholders have a remedy that is somewhat unique. This is known as the ‘oppression remedy’ and it provides courts with a wide range of remedies (including damages, setting aside transactions and ordering shareholder meetings) when the business or affairs of the company have been carried on or the powers of the directors of the company have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interest of any shareholder or other stakeholder of the corporation. Often, a breach of fiduciary duty claim will be made in conjunction with an oppression remedy application. 
  Forum selection by-laws (which attempt to limit the initiation of certain shareholder actions against a company to a specific jurisdiction), while not common in Canada, have been adopted by certain public companies in Canada (most frequently by those who have recently undertaken an initial public offering).
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• 12. 
  What advice do you give companies to prepare for shareholder activism? Is shareholder activism and engagement a matter of heightened concern in the boardroom? 
  
   
  Both shareholder activism and shareholder engagement are matters that are receiving heightened attention by boards of directors in Canada. Canadian companies are no longer immune to activism, including companies with large market capitalisations, and there is an increased focus on appropriate shareholder engagement.
  The best defence to activism is strong performance and good governance practices. In addition, companies should: 
  • be aware of shareholder (and other stakeholder) composition and be attuned to their expectations and sentiment; 
  • communicate directly and proactively with key stakeholders. In this regard, a continuous and well-aligned shareholder engagement and investor or public relations strategy is essential; and 
  • monitor for warning signs of potential unrest or activism including share price performance; accumulation of shareholding positions or unusual trading activity; increased contact by concerned shareholders; or other signs of unrest (ie, negative publicity (analyst reports and press coverage) or rumours). 
• In addition, companies and their boards should understand their business and where they have potential vulnerabilities (ie, poor share price performance, large cash positions, non-core assets, etc). Where performance has been less than optimal, management and boards should consider alternatives and examine their strategic plan. 
  Experience has proven that preparedness can be a key to success when faced with an activism scenario. Many public companies have preparedness measures in place in case of an approach by a would-be activist so that a board and senior management can react appropriately, within tight timelines and in the best interests of the company.