It will come as no surprise to those who have participated in a proxy fight to learn that these disputes can be heated affairs. Parties to a fight will routinely seek to discredit the other side to bolster their own narrative or otherwise gain a strategic advantage. In such an atmosphere, it can be difficult to draw the line between behaviour that’s merely aggressive and behaviour that crosses into unethical or illegal territory. A recent U.S. District Court case, Eshelman v. Auerbach et al, provides an example of the serious consequences that can ensue for those who cross this … Continue Reading
Earlier this year, Commissioner Robert Jackson Jr. of the US Securities and Exchange Commission declared that cybersecurity is “the most pressing issue in corporate governance today.” Indeed, widespread digitization has fundamentally transformed the way that people do business, ushering in new heights of efficiency and connectivity. It has also created significant risk management issues for public companies in all sectors, from securing consumer information to responding to data breaches.
However, despite the growth of digitization and its concomitant risks for public companies, it appears that many board members still rely on outdated and unsafe software to protect sensitive materials and … Continue Reading
Activist investors engaged in proxy fights typically mount aggressive public relations campaigns in order to undermine shareholder confidence in a target company’s performance and leadership, whether through social media, online forums or by using the more traditional PR channels. In response, target companies have turned to a number of defensive measures, many of which have been previously discussed on this blog. As part of their proxy defence playbooks, target companies may threaten or actively pursue legal action, such as by filing complaints with securities regulators or by suing for defamation.
Naturally, the decision to commence legal action must take into … Continue Reading
In its recent PointNorth Capital Inc. decision, the Alberta Securities Commission (ASC) was called upon to consider the appropriateness of a soliciting dealer arrangement that had been entered into by the issuer, Liquor Stores N.A. Ltd., in the context of a proxy fight. The arrangement was intended to address management’s constrained ability to solicit proxies due to the fact that many of the shareholders were “objecting beneficial owners” who could only be contacted indirectly through brokers.
The ASC dismissed the application by dissident shareholders of Liquor Stores, the PointNorth limited partnerships, for orders requiring Liquor Stores to terminate the arrangement, … Continue Reading
Proxy contests spill over into court for many reasons, but there are certain flashpoints of which both activists and issuers should be mindful. For activists, these are pitfalls to avoid, while for issuers they may represent opportunities to push back on sharp tactics and maintain a level playing field in the struggle for shareholders’ votes.
Some common reasons for which parties may find themselves before a judge include:
- Securities disclosure requirements: Securities laws require disclosure of positions at specific thresholds, and these requirements can vary from one jurisdiction to the next. An activist wants to focus on its message for
The Ontario Superior Court of Justice (Commercial List) recently confirmed that “demonstrated impropriety” is required to warrant court intervention in the appointment of an independent chair of a shareholders’ meeting in a proxy contest. In Meson Capital Partners, LLC v Aberdeen International Inc. (Aberdeen), Norton Rose Fulbright Canada’s Special Situations Team successfully represented the Special Committee of Aberdeen International Inc. (the Company) on an Application brought by Meson Capital Partners, LLC and Nightscape Capital (UK) LLP (together the Dissidents) for relief in respect of a special meeting of the shareholders of Aberdeen (the Meeting).… Continue Reading
According to the recently published Global Institutional Investors Insight survey, shareholder activism is on the rise. The survey, which canvassed over 500 institutional investor and sell-side research analysts from across North American, European and Asian markets, reports that more than three quarters (77%) of those surveyed believe that activism levels will increase in the coming three years and become more prevalent worldwide.
The survey also highlights the four most prevalent factors that investors evaluate when considering whether to invest in a company:
- Good track record in meeting earnings expectations (65% of investors).
- An equity story that is clearly defined
Norton Rose Fulbright Canada LLP and Lexpert will again be co-hosting two full-day seminar sessions entitled “Corporate Governance 2014: Corporate Governance in Special Situations” on December 4th (Toronto) and December 8th (Calgary). These seminars will include discussions on corporate governance developments in special situations, with specific focus on the trends, tools and defences used during proxy fights, M&A transactions, and situations of financial distress.
The seminars will be co-chaired by our partners, Walied Soliman and Orestes Pasparakis, who will be joined by the following speakers.
Norton Rose Fulbright Speakers:
- Ava Yaskiel, Partner
- Justin Ferrara, Partner
The 2015 proxy season is fast approaching, PwC and Broadridge released a quarterly research report which reviews proxy related data from 4,113 shareholder meetings
held between January 1 and June 30, 2014 and highlights several themes and trends that may inform how shareholders and companies will interact on four key issues:
Director Elections: Director elections continue to attract widespread voting, with 93% of elections at large companies garnering votes between 90-100%. In contrast, only 75% of voted shares were cast in the 90-100% range for small-cap firms. Moreover, of the 22,554 directors up for election, roughly 5% failed to … Continue Reading
On May 2, 2014, the British Columbia Securities Commission (the Commission) extended the life of the shareholder rights plan of Augusta Resource Corporation (Augusta) until July 15, 2014, provided that Hudbay Minerals Inc. (Hudbay) held its bid for Augusta shares open until July 16, 2014 and agreed to a ten-day extension in the event any shares were taken up by Hudbay. On June 24, 2014, the Commission released detailed reasons for the lengthy extension, which was, in part, responsive to Augusta needing until June 30, 2014 to obtain certain project permits that would help it … Continue Reading
In its recent decision in Orange Capital, LLC v Partners Real Estate Investment Trust, 2014 ONSC 3793, the Ontario Superior Court has offered new guidance on the interpretation of advance notice provisions used in the context of a proxy contest. The decision is another victory for Norton Rose Fulbright’s Special Situations team, which represented Orange Capital in this litigation.
In April 2014, Partners Real Estate Investment Trust (the REIT) announced that its annual and special meeting of unitholders (the Meeting) would be held on June 26, 2014. The REIT later postponed the Meeting to July 15, 2014. … Continue Reading
In Wells v. Bioniche Life Sciences Inc., a group of dissident shareholders attempted to gain control of Bioniche Life Sciences Inc. (the “Company”) by requisitioning a shareholders’ meeting to replace the Company’s management. Bioniche’s Board of Directors resisted the Dissidents, and the parties eventually came before Justice D. M. Brown of the Ontario Superior Court of Justice to have him determine several issues relating to a shareholder’s right to requisition or call meetings under s. 143 of the Canadian Business Corporations Act. An article summarizing Justice’s Brown’s findings and analyzing the practical implications of the decision was recently … Continue Reading
In a contest for shareholder support, control of the narrative is crucial, and the difference in perception between a board acting decisively to protect shareholders’ investments, and a board willing to do or say anything to hold onto control, can be one of timing. A board that acts proactively, supported by expert advice and a cogent rationale, invites the conclusion that it has exercised its judgment in the best interests of the company, but a board that acts defensively in reaction to a dissident risks the inference that its decisions are influenced by the directors’ desire to keep their jobs.… Continue Reading
In the wake of Dole Food Co.’s $2.4 billion management buyout, the question of whether the exercise of shareholder appraisal rights is an effective tool in the Canadian shareholder activism scene emerges.
In late 2013, management of Dole Foods offered to purchase the remaining 60% of shares not already owned by CEO and founder, David Murdock at what the market and analysts deemed an “underwhelming” offer. The buyout was accepted by a majority of the minority shareholders (barely!) however, certain shareholders (hedge funds following the lead of Carl Icahn), reserved and exercised their appraisal rights during the process. Ultimately, about … Continue Reading
A recent trio of hotly contested proxy fights involving Norton Rose Fulbright’s Special Situations Team helped further clarify and define the rights of a board of directors to determine the timing of a shareholders’ meeting.
Bioniche Life Sciences Inc.
With the July 18, 2013, decision of Justice Brown of the Ontario Superior Court in Wells v Bioniche Life Sciences Inc.,1 Norton Rose Fulbright obtained an important victory for its client Bioniche Life Sciences Inc. Justice Brown’s decision affirms and clarifies that a reasonable exercise of business judgment by the board of directors in setting the timing for shareholders’ … Continue Reading