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Court refuses to invalidate proxies obtained via deficient proxy circular

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 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 that had been obtained pursuant to the deficient circular.

Weyburn called a special meeting of shareholders in order to obtain approval for a plan of arrangement with respect to a sale of all the outstanding shares of the company. 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 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…

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