On October 2, 2012, I blogged about court intervention in shareholder proxy contests in British Columbia. One of the cases referenced was a petition brought by TELUS to quash a meeting of TELUS’s shareholders requisitioned by an American hedge fund, Mason Capital Management LLC (“Mason Capital”). This meeting was requisitioned in an attempt to block a merger of TELUS dual share structure. TELUS was successful in quashing the requisition and the Chambers Judge made an interesting foray into a discussion of whether an “empty voting” strategy could be challenged in Canada.
On October 12, 2012, the British Columbia Court of Appeal overturned the TELUS decision. Of greatest interest was the commentary by the Court that “empty voting” does not violate the law and that there is no statutory provision which would allow the Court to intervene against it on broad equitable grounds. While the Court found empty voting to be of concern, it said the “remedy must lie in legislative and regulatory change.”
In allowing the requisitioned meeting to proceed, the Court ruled that:
- The requisition for a meeting need only be executed by the registered shareholder under the British Columbia Business Corporations Act, not also the beneficial shareholder as required by the Chambers Judge;
- The resolutions put forward by Mason Capital did not have the effect of amending the articles of TELUS and were not therefore “ultra vires” as seeking an amendment through an invalid process;
- Technical difficulties with having this meeting occur on the same day as a meeting called by TELUS is a concern but that the concern does not allow the Court to cancel the requisitioned meeting.
In the end, the Court directed the parties to attend before the Supreme Court and work out the mechanics as to how these two meetings would proceed in tandem. The Court’s decision will be seen by many as representing a strict exercise in statutory interpretation and one that may limit more expansive notions of the Court’s jurisdiction in similar circumstances.