CANADIAN UPDATE – Shareholder Activism and Proxy Contests: Issues and Trends

Executive Summary: The year 2015 was significant for proxy contests in Canada, with a total of 55 contests, exceeding the previous record high of 43 contests set in 2009. Although the spike in the number of contests in 2015 may have been exceptional, coinciding with a period of economic downturn in Canada and continued deterioration in commodity markets, the number of activist contests has shown a relatively steady trend upward, from single digit occurrences in the early-to-mid 2000s to 30, 32 and 30 contests in 2012, 2013 and 2014, respectively. Backed by these numbers, a consensus has formed that shareholder activism has established itself as a permanent feature in the landscape of Canadian corporate governance.

The number of proxy contests alone is not the full measure of the extent of shareholder activism. Past public successes by activists have motivated boards of public companies to engage with activists privately and to implement changes where a convincing case is made by the activist without the dispute ever entering the public arena. In addition, the influence of activists, coupled with the increased focus of regulators, investors and other market participants on corporate governance and shareholder democracy, has prompted many public companies to be proactive in addressing perceived problems in their governance or performance in an effort to ward off activist overtures even before they emerge.

This article discusses activism trends in Canada and some of the principal issues and challenges faced by both activists and target companies. It also highlights notable differences between Canadian and U.S. activist campaigns and the legal environment in which activists operate. Topics include the following:

  • The Right to Requisition a Shareholders’ Meeting
  • Stake-Building and Beneficial Ownership Reporting
  • Competition/Antitrust Legislation
  • Group Formation: Insider Trading and Joint Actor Characterization
  • Poison Pills
  • Selective Disclosure
  • Voting Shares Acquired After the Record Date
  • Empty Voting
  • Classified Boards
  • Short Slate Proposals
  • Limited Private Proxy Solicitation and Advance Notice Bylaws
  • Public Proxy Solicitation and the Broadcast Exemption
  • Compensation Arrangements for Director Nominees
  • Proxy Access: Nominations for Directors Through Shareholder Proposals
  • Universal Proxy
  • Vote Buying: Soliciting Dealer Fees in Proxy Contests
  • Regulatory Developments with Respect to Proxy Advisory Firms

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