As we predicted in a previous blog post recapping our webinar on the evolving activism landscape in Canada and the U.S., we have seen increased levels of  shareholder activism in 2025.

In this post, we take a closer look at how today’s economic climate—shaped by escalating tariff wars, heightened market volatility, and broader economic uncertainty—has contributed to increased settlement agreements with activists, and discuss an often overlooked element of a common settlement feature: board nomination rights. Although parties often turn their minds to the process for nominating specific directors to the board, they rarely consider incorporating clauses for making changes to those appointments. This post discusses statutory limitations to changing board appointees and the possibility of using conditional resignation agreements to avoid these limitations.  

Board Nomination Rights Remain the Status Quo as Settlement Agreements Increase

Board nomination rights are a standard feature of settlement agreements between companies and activists. These provisions allow activists to nominate or appoint individuals to serve on the company’s board of directors, typically as a means of resolving legal disputes or governance-related conflicts. They serve as a form of compromise or remedy, providing activists with a degree of influence or oversight in corporate decision-making while helping both parties avoid the expense and disruption of a lengthy proxy battle or litigation.

According to Barclays, global shareholder activism has surged in early 2025, with campaign activity already outpacing the levels seen in 2024. Activists continue to concentrate on two primary areas: board composition and corporate strategy. In the first quarter alone, 29 global companies entered into settlement agreements with activists—a 32% increase compared to the same period last year. Notably, every one of these agreements included board nomination rights, with the number of board seats granted per settlement ranging from one to three.

Implications of Board Nomination Rights Amidst Economic Uncertainty

In times of economic uncertainty, board nomination rights can serve as a tool for constructive engagement, allowing activists to contribute to strategic decision-making and push for accountability. However, when these arrangements are structured to last over a longer term, or if there are changes in strategy, direction, or control at the activist level, a significant divergence of interest can emerge between the activist and their nominated or appointed board member. This misalignment becomes especially problematic during periods of market volatility, when timely and unified strategic decisions are paramount.

While activist investors may nominate or appoint directors with the intent to influence corporate direction, under Canadian corporate law these directors, once seated, owe fiduciary duties to the corporation and cannot prefer the interests of the nominating activist. owe fiduciary duties to the corporation. As a result, directors may pursue actions that diverge from the activist’s original objectives and undermine the intention of the parties’ settlement agreement.

The Current Statutory Framework for Removing Activist Nominees

Under most Canadian corporate statutes, the removal of a director from the board, including one nominated by an activist, is subject to significant procedural constraints. Directors cannot generally be removed unilaterally.

Specifically, statutory mechanisms typically allow for removal only by:

• a resolution of shareholders passed at a duly called meeting; or
• the voluntary resignation of the director.

Importantly, Canadian corporate statutes do not provide a direct or automatic mechanism that would allow an activist shareholder to compel the removal or resignation of a director they originally nominated.

Conditional Resignations as a Potential Solution

Given the limited statutory framework in Canada for removing activist-nominated directors, activists seeking board nomination rights through settlement agreements should approach negotiations with particular care. Activists may consider incorporating conditional resignation provisions—such as pre-signed undated resignations, removal triggers tied to ownership thresholds, or clauses allowing for removal at the activist’s discretion. This strategy is especially valuable in the Canadian legal context, where corporate statutes lack a clear mechanism for director removal outside of shareholder votes. By embedding these terms into settlement agreements from the outset, activists gain a direct and efficient means of managing nominee turnover if circumstances change. In turn, companies negotiating across from activists should carefully consider how and when a nominated director could be removed, so as to ensure that the parties to the settlement are aligned on this issue.

Key Takeaway

In an era marked by political disruption, economic recalibration, and evolving investor priorities, both companies and activists should carefully consider how board nomination rights are structured in settlement agreements. Conditional resignations—where a nominee agrees in advance to step down under specified circumstances—offer a pragmatic mechanism for activists to maintain their control and influence, whereas companies should ensure that the scope to remove nominees is consistent with their intentions around settlements.