In Weyburn Inland Terminal Ltd. v The Director of Corporations for Saskatchewan, 2014 SKQB 46, the Court of Queen’s Bench for Saskatchewan ordered dissident shareholders of Weyburn Inland Terminal Ltd. (the “Company”) to revise their proxy circular which suggested how shareholders should vote but not why they should vote against a certain transaction proposed by the Company. However, the Court did not go the extra step of disallowing proxies which had been obtained pursuant to the deficient circular.
The Company called a special meeting of shareholders (the “Meeting”) in order to obtain approval for a plan of arrangement with respect to a sale of all the outstanding shares of the Company (the “Plan”). Certain of the Company’s shareholders and former directors (the “Dissidents”) opposed the Plan and began soliciting proxies for the Meeting. The Dissidents’ proxy circular (the “Circular”) stated that its purpose was to solicit votes against the Plan. The Circular also set out procedural information for voting but did not provide information explaining why shareholders should vote against the Plan. The Company applied for the court’s intervention in respect of the solicitation.
The Court held that the Circular was deficient as it did not provide any information setting out the Dissidents’ plan for the Company and thus, did not allow shareholders to form a reasoned and informed judgment of the Plan. The Court ordered that the Dissidents cease soliciting proxies based on the Circular and amend it to include the Dissidents’ proposals for the Company in the event the Plan was defeated. The Court further ordered the Dissidents to distribute the revised Circular together with a letter of explanation and a revocation of proxy form. The Court made this order pursuant to its general remedial jurisdiction, sections 144 and 148 of The Business Corporations Act (Saskatchewan), the regulations thereunder and applicable securities legislation.
The Court expressly refused to invalidate proxies obtained pursuant to the Circular or halt future proxy solicitation by the Dissidents, as the order would address any deficiencies which might have misled a shareholder.
Although this case was decided pursuant to the SBCA, the relevant provisions are essentially identical to those in the Canada Business Corporations Act (the CBCA contains certain exceptions which are not relevant to the facts in this case). This case demonstrates that the purpose of the court’s supervision of proxy fights is to ensure that shareholders are able to make a reasoned and informed judgment, not to ‘punish’ a party for providing deficient materials. Here, the Court took the least intrusive step in ordering that shareholders be provided with additional information and did not impose further sanctions. However, the deficiencies in this case were those of omission, not commission. Had the Dissidents provided inaccurate (as opposed to incomplete) information, the Court may not have allowed previously solicited proxies to stand.