A recent court decision in Ontario has helped reveal some of the potential obstacles to successful shareholder activism.

On July 22, 2013 the Ontario Superior Court released its decision in the matter of Wells v. Bioniche Life Sciences, Inc. The matter involved two dissident shareholders of Bioniche who requisitioned a shareholder meeting under the Canada Business Corporation Act (CBCA) in order to replace the board of Bioniche.

Some important points from the decision:

  • The board of a corporation is only required to accept a meeting requisition when it comes from a registered shareholder holding at least 5% of the corporation’s issued shares. It may choose to accept or reject a requisition from a beneficial shareholder holding at least 5%.
  • A requisition must contain sufficient detail to allow the board to properly consider how to respond. Where a dissident shareholder proposes to nominate directors for election, “sufficient detail” requires, at a minimum, the proposed nominees’ names and some biographical information, which must be provided before the board meets to consider the requisition.
  • A board may refuse to call a requisitioned meeting if a record date for a shareholder meeting has already been fixed and the meeting is scheduled to be held reasonably soon after the receipt of the requisition.
  • If the board of a CBCA corporation has validly refused to call a shareholder meeting requisitioned by a dissident shareholder based on one of the exceptions set out at 143(3) of the CBCA, a dissident shareholder may still call a meeting if it can demonstrate that they would otherwise suffer material prejudice. (Please note that under the Business Corporations Act (Ontario) (OBCA), a shareholder of an Ontario corporation is not entitled to call a meeting if its requisition has been validly refused by the board based on the same exceptions, which are set out in OBCA section 105(3)).

NOTE: This publication is intended to provide information to clients on recent developments in provincial and national law. Articles in this newsletter are not legal opinions and readers should not act on the basis of these articles without first consulting a lawyer who will provide analysis and advice on a specific matter.