Canada saw 69 shareholder activist campaigns in 2023 – an unprecedented high from previous years.1 The 2024 proxy season saw a continued evolution of the shareholder activism landscape with a record-breaking 76 activist campaigns across 55 Canadian companies and 11 sectors.2 Investors are continuing to seek change through activist measures and, with increased focus, are seeing higher success rates – nearly doubling the success rate of that of management.3

With the 2025 proxy season fast approaching and Canada viewed as activist-friendly territory, now is the time for issuers to prepare for increased pressure and scrutiny from shareholders.

Notable Trends in the Activist Landscape

The 2024 proxy season saw an increase from 2023 in ESG-related proposals, although support for environmental specific proposals remains low.4 With the recent passage of Bill C-59 and its new greenwashing provisions under the Competition Act, issuers, in particular those in the resource sectors, must carefully balance the need to demonstrate sound ESG-related policy and commitments to investors, who often have their own ESG-related requirements and policies for investments, with compliance under the new provisions. Non-compliance with the Competition Act amendments may prove to be fresh ground for activists. But with key terms not defined and no guidance published to date, the precise actions necessary to ensure compliance remain an open question.

Activists continue to use “withhold” or “against” campaigns as an alternative to a traditional campaign of nominating a dissident slate of directors for election. The 2022 amendments to the Canada Business Corporations Act ushered in fresh concerns that activists may use the new “against” voting mechanism to remove directors from the board without the cost and burden of nominating their own slate.

Activists, who themselves are increasingly composed of a mix of players, continue to focus on a wide range of other issues, including succession planning, executive compensation, undervalued share prices and transactional campaigns. Activists have shown little patience for underperformance and a willingness to advance their concerns publicly.5

M&A has proven to be a focal point for activists. In 2023, nearly half of all activist campaigns, globally, focused, at least in part, on executing an M&A demand.6 M&A will likely continue to be a key theme for activists as interest rates continue to drop and M&A opportunities increase.7

Focus on Defence Preparedness

Preparation, decisiveness, and efficiency are essential when responding to an activist. Engagement can evolve into hostile territory without a meaningful and timely response. Here are a few concrete actions that an issuer can take to prepare itself this coming proxy season:

  • Inform the board and management: Consult with legal and other professional advisors to understand the vulnerabilities of your business or industry, generally. Ensure that the board of directors and management are informed of the risks, potential forms of activist activity, key tactics and best practices.   
  • Implement a preparedness and response plan: Build your team of advisors externally and internally and create a framework that will prepare for and respond to activist measures. Allocating responsibilities and defining first steps will facilitate decisive and efficient responses.
  • Prepare a poison pill: Prepare and consider adopting a shareholder rights plan and/or a “tactical rights plan”. While a shareholder rights plan won’t prevent a hostile bid, it will buy time and provide an orderly process. Tactical shareholder rights plans are bespoke, temporary instruments designed to respond to a specific threat.
  • Adopt an “against” or “withhold” campaign bylaw: Adopt a new bylaw to provide protections from “against” campaigns. The permissive framework in Canada has allowed activists to become more aggressive in their efforts to target one or more directors to be voted out.
  • Engage meaningfully with shareholder base: Frequent and meaningful engagement with investors will ensure the board and management are in tune with shareholder sentiment and changing tradewinds.

Conclusion

Preparedness is key to navigating the increasingly turbulent Canadian landscape. Canadian companies should actively assess their vulnerabilities and take action to prepare for activist activity, so that they may respond decisively and efficiently when the time comes.

To discuss developing your preparedness and response plan for the upcoming 2025 proxy season, please contact the authors. The authors wish to thank Sahar Sultani, articling student, for her help in preparing this legal update.

1 Kingsdale Advisors, “2023 Proxy Season Review: Change is Here” (29 November 2023) at 16, online: https://cdn.b12.io/client_media/JJQJEh5Z/ca0720ce-ae41-11ee-85eb-0242ac110002-Kingsdale_Advisors_2023_Proxy_Season_Review_Final-_pdf.pdf.

2 Kingsdale Advisors, “2024 Canada Proxy Season Review: Boards Under Fire”, online: 2024 Proxy Season Review.

3 Ibid.

4 Ibid.; Sodali & Co, “2024 Canadian Proxy Season Review” (10 October 2024), online: https://global.sodali.com/l/895961/2024-10-09/3q1t2x/895961/1728488759k48uSu98/2024_Canadian_Proxy_Season_Review_1.pdf.

5 Kingsdale, supra note 2.

6 Barclays Investment Banking, “Activists Secure More Board Seats and Demand More M&A” (12 February 2024), online: Activists secure more board seats and demand M&A | Barclays CIB.

7 Ibid.