Focusing on the August 14th announcement, stating the intention to “take a step back and appoint a new board of directors in coordination with some of the company's most significant shareholders,” raises several critical concerns that may demand immediate attention.
https://revolugroup.com/news/revolugroup-canada-inc-announces-the-welcome-of-an-interim-ceo-interim-chairman-and-two-new-directors-and-the-resignation-of/
Board Resignations on August 14th: The wholesale resignation of the entire board of directors on a single day, August 14th, is highly irregular. If resignations occur on different days, the company is required to disclose each resignation date individually, along with the name of the departing director. The fact that all resignations were synchronized on a single day suggests a coordinated effort that may be aimed at avoiding such detailed disclosure.
Appointment of New Directors: According to the announcement, the outgoing board appointed new directors. This implies a highly questionable process, likely executed in a concertina fashion, where resignations and appointments occurred in rapid succession, evidently within 24 hours or the same business day. The absence of a clear timeline and detailed disclosure regarding this process is deeply troubling and raises serious questions about the legitimacy and transparency of the appointments.
Selective Disclosure to Shareholders: The most alarming aspect of this announcement is the suggestion that only a select group of shareholders were consulted in the process. If we peruse the posts on this forum since the news was released there are some statements that appear to confirm selective disclosure occurred. The statement that the board acted “in coordination with some of the company's most significant shareholders” implies that certain shareholders were also privy to material, non-public information. This selective disclosure is not only profoundly unfair to minority shareholders, but it also represents a serious breach of corporate governance standards. The implication that an informal vote or consultation may have occurred among a select few, without broader shareholder involvement, undermines the fundamental principles of fairness and transparency that should govern any publicly traded company in British Columbia and as far as I can see anywhere in Canada.
These actions not only cast doubt on the integrity of the board’s decision-making process but also threaten to erode shareholder confidence. The selective consultation of certain shareholders over others is a particularly egregious violation of trust, and it should not be tolerated in a Canadian market that prides itself on fairness and equal treatment for all investors.
I would not be surprised if regulatory bodies are not already investigating this matter thoroughly to uphold that the rights of all shareholders, particularly minority shareholders, whose rights appear to have been flaunted.
Shareholder Approval and Proxy Requirements: In Canada, shareholders typically have the right to vote on significant changes to the composition of the board of directors. Major changes to the board usually require a shareholder meeting, proper notice, and the opportunity for shareholders to vote, typically via proxy if they cannot attend in person. Ignoring these requirements could be a violation TSXV policies enumerated below, corporate law and the company's own bylaws.
Aforemntioned TSX Venture Exchange (TSXV) Policies: The TSXV has strict guidelines on corporate governance, including rules on shareholder approval for significant changes in board composition. The lack of a proxy vote or shareholder approval could be seen as a violation of these listing guidelines.
Continuous Disclosure Requirements: Publicly traded companies are required to provide accurate and timely information to shareholders. If the company has failed to disclose important details about the board changes or misrepresented shareholder consultation, it could be in violation of continuous disclosure obligations under the Securities Act.
1. TSXV Policy 3.1 – Directors, Officers, Other Insiders & Personnel and Corporate Governance: Section 2.1 – Directors: This section outlines the requirements for the appointment, qualification, and approval of directors. Any changes to the board of directors must comply with TSXV rules, including the need for proper disclosure and potentially requiring shareholder approval, depending on the circumstances.
Section 4.1 – Corporate Governance: This section emphasizes the importance of good corporate governance practices. Actions like replacing the entire board without adequate shareholder consultation could be seen as a violation of these governance principles.
2. TSXV Policy 4.1 – Private Placements: Section 4.3 – Notice of Private Placements: Although this policy generally relates to private placements, it also touches on the need for transparency and disclosure to shareholders. If the new board's appointment was somehow tied to a financing arrangement, this policy might require shareholder notification and approval.
3. TSXV Policy 4.7 – Normal Course Issuer Bids and Special Purchases: Section 2.1 – Approval and Filing: Any significant transactions, including those involving changes in control or significant board changes, typically require TSXV approval and proper disclosure to shareholders. Failure to comply with these requirements could be a violation.
4. TSXV Policy 5.1 – Loans, Loan Bonuses, Finder's Fees, and Commissions: Section 3.2 – Transactions Involving Insiders: If the board changes were linked to transactions involving insiders, such as financing, loans or bonuses, this policy requires TSXV approval and detailed disclosure to shareholders.
5. TSXV Policy 5.9 – Protection of Minority Security Holders in Special Transactions: Section 2.2 – Special Transactions: This policy deals with transactions that may affect the control of a company, requiring fairness and the protection of minority shareholders. The sudden change in the board without shareholder approval might be viewed as an action that compromises minority shareholders' rights, triggering concerns under this policy.
6. TSXV Policy 6.2 – Continuing Listing Requirements: Section 2.1 – Corporate Governance: Continuing listing requirements include adherence to proper corporate governance practices. The TSXV expects listed companies to maintain high standards, and a wholesale change in the board without proper shareholder approval could be considered a failure to meet these standards.
7. TSXV Policy 3.2 – Filing Requirements and Continuous Disclosure: Section 4.1 – Material Information: Any material changes, including changes to the board of directors, must be promptly disclosed to shareholders and the market. Failure to do so could be a violation of this policy, especially if the board changes were not properly reported or were misrepresented.
8. TSXV Policy 3.4 – Investor Relations, Promotional Activities, and Timely Disclosure: Section 2.2 – Timely Disclosure: The policy requires timely and accurate disclosure of material information. If the company failed to properly disclose the board changes or the process by which they were appointed, it could be a violation of this policy.
There’s a lot to unpack here, but let’s be honest—this whole situation doesn’t exactly pass the sniff test.
In short:
All in all, this whole thing reeks of unfairness, especially to the minority shareholders. When the playing field isn’t level, it’s not just bad optics—it’s bad business. Time for the regulators to take a closer look, because this sure doesn’t look kosher from where I’m standing.