Guide to Shareholder Activism and Proxy Contests in Canada

20 Davies | – As discussed above, shareholders with 5% of the shares also have the right to requisition a meeting. Prior to the 2022 CBCA amendments, the deadline for requisitioning a meeting would typically occur much later than the deadline for submitting a proposal. Thus, any shareholder considering submitting a nomination via a proposal could instead submit a requisition at a later date and then agree with management that the requisitioned business (for example, to elect the dissident’s nominees) could be dealt with at the annual meeting instead. – Mere inclusion of a dissident’s nominees in management’s circular and on management’s proxy card is generally not viewed as being sufficient to give a dissident any significant likelihood of success unless the initiative is accompanied by a robust solicitation effort by the dissident. In addition, such inclusion does not relieve the dissident of an obligation to mail its own circular to shareholders if it wishes to engage in a general solicitation of proxies. Moreover, management has considerable control over how the dissident’s nominees are presented in the circular and management proxy card. Thus a dissident will typically prefer to mail its own circular to present its nominees and use its own proxy card. With the elimination of some of these drawbacks, the shareholder proposal mechanism is a potentially useful tool for a shareholder wishing to put its nominees up for election in the least expensive way possible. This could be particularly effective for a significant shareholder or group of shareholders that are not dependent on a broad public solicitation to win support for a dissident slate. Relying on management to include the dissident’s nominees on the management proxy card and then privately soliciting up to 15 shareholders under a limited private solicitation (discussed below) could be sufficient in some cases to achieve a low-cost proxy contest victory. PROXY ACCESS U.S.-style proxy access proposals have generated relatively little interest in Canada. A brief flurry of proposals in 2017 resulted in two of Canada’s largest banks—Royal Bank of Canada (RBC) and The Toronto-Dominion Bank (TD Bank)—receiving proposals to adopt proxy access bylaws. The proposals were submitted to the banks by the same shareholder asking that the boards adopt bylaws similar to the most typical U.S.-style proxy access bylaw, allowing shareholders beneficially owning 3% or more of the bank’s outstanding common shares continuously for three years to nominate directors. The proposal narrowly passed at TD Bank’s 2017 annual shareholders’ meeting, with 52.2% shareholder support. The same proposal was narrowly defeated at RBC’s 2017 annual shareholders’ meeting, with 53.2% of shareholder votes against. TD Bank and RBC adopted proxy access policies following their respective 2017 annual shareholders’ meetings that entitle shareholders that beneficially own 5% or more of the bank’s outstanding common shares continuously for three years to nominate directors, provided that they satisfy the other requirements of the proxy access policy. Shortly afterward, six other Canadian financial institutions adopted similar proxy access policies (Canadian Imperial Bank of Canada, Bank of Montreal, The Bank of Nova Scotia, National Bank of Canada, Sun Life Financial Inc. and Manulife Financial Corporation).