Photo of Mohamed AmeryBy Mohamed AmeryJune 19 2017
Litigation

Right to Call Meeting Must Not Be Refused

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A group of shareholders with a stake of 5% or more in a corporation may, under Alberta’s Business Corporations Act (section 142), requisition the corporation’s directors to call a shareholders meeting. The written requisition must state the business that the group seeks to have transacted at the meeting and must be sent to all directors as well as the corporation’s registered office.

Under the legislation, the corporation (i.e. the directors) is not required to comply with the requisition if, for example, it “clearly appears that the proposal has been submitted by [the group] primarily for the purpose of enforcing a personal claim or redressing a personal grievance against the corporation, its directors, officers or security holders […].”

Ontario’s corporations legislation has sections that mirror those of Alberta.  A recent Ontario court decision (“Koh”) provides helpful clarification regarding the extent to which directors can refuse, by way of the “personal grievance” exception, a shareholders group’s attempt to requisition a shareholders meeting.  The shareholder in question requisitioned a shareholders meeting in which he sought to challenge the election of certain directors.  The board of directors refused the request, reasoning that the shareholder’s true intention was to advance a personal grievance against particular directors and install himself as chairman. 

On the specific facts in Koh, the Court held that the shareholder did not have a personal vendetta or axe to grind but instead exhibited, in the evidence, a material difference in opinion about the direction of the corporation.

The Court held that the board took the “personal grievance” exception too far, finding that “personal grievance” is not to be equated with mere personal interest.  Specifically, 1) the exception has a “very high threshold”, 2) the alleged “personal grievance” needs to be the “primary purpose” of the sought meeting, 3) the determination by the board must be made on “objective evidence”, and 4) the right of shareholders to requisition a meeting is a “fundamental right”.   

The important takeaway is that the exception requires a “personal grievance”, not just “personal interest”. 

Invitation for Discussion

Our litigation lawyers are skilled in corporate law. If you would like to discuss this blog in greater detail, or any other business litigation matter, please do not hesitate to contact Mohamed Amery or one of the lawyers in the Business Litigation Group at Shea Nerland LLP.

Disclaimer:

Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.

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