Company Press Releases During Proxy Fights May Not Be Proxy Solicitations

Overview

In Smoothwater Capital Partners LP I v. Equity Financial Holdings Inc., 2014 ONSC 324, the Ontario Superior Court of Justice held that a press release issued by Equity Financial Holdings Inc. (the "Company") which defended its board's actions was not a proxy solicitation and was thus permitted under the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (the "CBCA").

Discussion

Smoothwater Capital Partners LP I, a dissident shareholder of the Company (the "Dissident"), issued a press release critical of the Company's board and soliciting proxies in support of its efforts to replace the board. The Company responded with its own press release defending its board's actions and criticizing the Dissident (the "Press Release"). The Press Release stated that the Company would "provide a management information circular that will be mailed to shareholders". It did not contain a request for proxies.