SETTING THE RECORD STRAIGHT: Protecting Against Illegal Proxy Solicitation During A Proxy Contest

During a proxy contest, strategic consideration should be given to strictly abiding by proxy solicitation rules and hawkishly assessing whether your opponent is doing the same. A recent decision provides guidance on factors that a court will consider in determining a seldom litigated issue – when is communication by the company during a proxy contest an illegal proxy solicitation?

Generally speaking, corporate statutes in Canada prohibit the solicitation of proxies unless the sender (board or dissident) provides shareholders with a proxy circular containing prescribed information. Under the Canada Business Corporations Act, "solicitation" is broadly defined to include communication with shareholders "under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy".