A British Columbia court recently granted two companies’ requests to be allowed to delay the holding of their 2020 annual general meetings until December 2020 due to the COVID-19 pandemic, even though they were legally required to do so by June 2020.
The two companies (the “companies”) are corporations existing under the Canada Business Corporations Act (the “CBCA”). Both have their head offices in Vancouver, BC. The companies’ businesses involve the operation of information and marketing solutions.
The companies trade their common shares on the Toronto Stock Exchange (the “TSX”).
The companies held their last annual and special meeting on June 25, 2019.
On March 27, 2020, the companies issued their 2019 Management Discussion and Analysis and annual audited financial statements for the fiscal year ending December 31, 2019. In addition, on that date, the companies issued a news release concerning their year end results.
By the time of the filings by the companies in late March 2020, the COVID-19 pandemic had already taken hold around the world. The companies’ news release identified impacts already being felt by them as a result of the pandemic, while noting that the true extent of those impacts were not yet known. The companies noted in the news release that they were taking a wide variety of measures to protect the health of their staff, to help reduce the spread of the virus and to maintain the companies’ businesses as best as possible.
Section 464 of the TSX Company Manual provides that a company must hold its annual shareholder meeting within six months from the end of its fiscal year, or at such earlier time as is required by applicable legislation. As a result, the companies were required to hold their 2020 annual general meetingson or before the end of June 2020.
The companies sought an order extending the time with respect to holding their annual general meetings at any time during 2020, up to and including December 31, 2020.
The Companies’ Arguments
The companies identified two broad concerns regarding the holding of their respective 2020 annual general meetings:
1) The logistical difficulties of holding the meetings in light of government restrictions concerning large gatherings and social distancing; and
2) The difficulties in preparing the necessary management information circulars and distributing the circulars before the meetings, where the impact of the COVID-19 pandemic on the companies’ operations will not be known. In normal circumstances, the circular would include management’s recommendations on various matters affecting the companies’ operations. The circular would address a variety of matters on which the shareholders would vote at the annual general meetings, including the election of directors and executive compensation.
On March 23, 2020, the TSX issued a bulletin which provides certain temporary relief to companies as a result of the COVID-19 pandemic. Among other things, the TSX will permit companies to hold their 2020 annual general meeting on any date in 2020 up to and including December 31, 2020 regardless of a company’s fiscal year end.
However, the bulletin also stated that the TSX continues to expect companies to comply with applicable legislation regarding the timing of their 2020 AGM.
The court agreed with the companies that an extension of the time for the filing of their respective 2020 annual general meetings was appropriate in the circumstances, stating:
“Firstly, it is beyond dispute that the COVID-19 pandemic is an extraordinary and unprecedented event in our collective and individual histories. The effects of this pandemic have reached into every corner of the world and into every person and organizations’ very existence. Like everyone else, the Companies have been affected and the Companies’ management is wondering what lies before them, both in the short and long term.
In those circumstances, I accept the Companies’ submissions that management is not currently in a position to advise as to how the Companies’ operations should be conducted into the future and what proposals should be put to the shareholders in that respect.
I also accept that there are practical difficulties in even commencing the necessary preparations toward the holding of an AGM, including preparing the necessary Circular, given the staffing issues arising from the pandemic.”
Additionally, the court found that there were very significant issues as to whether the meetings could be held in any event, or at the very least, held in a manner that would achieve the salutary objectives of convening an annual general meeting, given the social distancing directives and travel restrictions in place.
As a result, the court granted an order that the companies may hold their annual general meetings at any time during 2020, up to and including December 31, 2020.
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