CCGG warns law firm’s proposed by-law weakens shareholder rights 

October 20th, 2023

The Canadian Coalition for Good Governance (CCGG) has criticised a proposed bylaw that would give companies the ability to automatically postpone AGMs if votes against a director cross a certain threshold.

The bylaw was proposed by law firm Norton Rose Fulbright Canada to close a potential loophole in an amendment to the Canada Business Corporation Act, which it has been claimed allowed ‘sneak attacks’ by activist investors.

The act prevented company nominees to the board being appointed because there are no challengers.

However, the proposed bylaw will introduce an automatic 45-day postponement of an annual general meeting if the number of votes against a director crosses a certain threshold, giving the company time to try and change minds or encourage more shareholders to vote for the candidate.

CCGG CEO Catherine McCall told the Globe and Mail: “The real sneak attack investors should be worried about is the law firm’s attempt to water down hard-won shareholder rights.

“The time gives the issuer additional means to thwart any activist campaign in progress against any one or more of the directors.”

However, the postponement could be triggered regardless of whether there is an activist campaign in progress or not.

McCall said: “In essence, the bylaw has the potential to make every uncontested election a contested one. In situations where there is no fight for board seats, and shareholders are simply voting against a candidate they don’t want, the bylaw gives the board the opportunity to turn it into a fight.”