The increasing prevalence of shareholder activism in Canada has significantly impacted issuers and investors alike in the Canadian capital markets.
Consequently, an understanding of the Canadian regulatory landscape governing activist activities has become increasingly important for both sides of an activist struggle. A key element of this understanding is acknowledging that the regulatory landscape is not always uniform from province to province.
Proxy solicitation in respect of Alberta corporations which are reporting issuers is governed under two legislative schemes: Part 12 of the Business Corporations Act (Alberta) (the ABCA) and Part 9 of National Instrument 51‑102 – Continuous Disclosure Obligations (NI 51-102). Compliance with the requirements of both legal regimes by a person or corporation attempting to solicit proxies from securityholders of an Alberta corporation is mandatory.
Section 150 of the ABCA governs the solicitation of proxies with respect to Alberta corporations. Essentially, subsection 150(1)(b) forbids the solicitation of proxies by a dissident securityholder unless that securityholder has sent out a dissident’s proxy circular in the prescribed form. The requirements of subsection 150(1) apply to all solicitations of proxies if the reporting issuer has more than 15 holders of voting securities listed on its register of securityholders.
Alberta’s proxy solicitation rules are unique in that, in every other Canadian province, a shareholder is permitted under NI‑51-102 to solicit proxies from up to 15 shareholders without sending a dissident proxy circular. Legislation in Alberta does not allow this as a matter of right – an application must be made to the Alberta Securities Commission for an “exemptive relief order”, which allows the (dissident) shareholder to solicit from up to 15 shareholders without a proxy circular.
As well, in contrast to the requirements of the ABCA, Part 9 of NI 51-102 applies to all proxy solicitations regardless of the number of voting securityholders on the register of the reporting issuer. Further, under Part 9 of NI 51-102, proxies may also be solicited by a dissident without a proxy circular in certain other specified circumstances, such as solicitations made by broadcast, speech or publication (generally known as the public broadcast exemption).
Further, certain activities pertaining to proxy solicitation are specifically carved-out from the definition of “solicit” under NI 51-102 but are not carved-out from the corresponding definition under the ABCA.
These differences require careful evaluation of activist activities which may be considered proxy solicitation involving reporting issuers governed by the ABCA. Without an in depth understanding of these differences, solicitation activities that may be expressly permitted under Part 9 of NI 51-102 may nevertheless be in violation of the ABCA, unless the correct steps are taken.
The Special Situations Team of Norton Rose Fulbright Canada LLP’s Calgary office have played leading roles in Alberta’s most high-profile shareholder activist and defence mandates, such as the August 2013 decision of the Alberta Court of Queen’s Bench in Genesis Land Development Corp. v. Smoothwater Capital Corporation et al.