COVID-19 and CBCA companies: Supreme Court of British Columbia first Canadian court to rule on a petition seeking an extension of the delay to hold the annual general meeting
Both the short- and long-term functioning of many companies have been affected by the COVID-19 pandemic. One of the important functions being significantly affected is the preparation and holding of a company’s annual general meeting (“AGM”). The Canada Business Corporations Act (the “CBCA”) provides that companies must hold their AGMs not later than fifteen months after holding the last preceding annual meeting but also no later than six months after the end of the corporation’s preceding financial year. This requirement is proving difficult to fulfill for many companies as a result of the numerous technical and logistical difficulties posed by the COVID-19 pandemic.
Various provincial governments have responded to these difficulties by providing relief in respect of the timing of AGMs for companies incorporated under provincial legislation. However, no such relief has yet been provided for companies incorporated under the CBCA. In fact, the CBCA Director confirmed in a guidance publication dated March 26, 2020 (the “CBCA Guidance”) that federally incorporated businesses will need court approval to delay an annual general meeting. The Supreme Court of British Columbia recently issued a decision with respect to petitions for the extension of the holding of the AGM of two CBCA companies, namely Glacier Media Inc. (“Glacier”) and GVIC Communications Corp. (“GVIC”) (collectively, the “Companies”)1. It is, to our knowledge, the first court in Canada to rule on this issue.
Glacier and GVIC were faced with the duty of having to hold their 2020 AGM on or before the end of June 2020. Glacier and GVIC are reporting issuers in most of the provinces in Canada and their shares are listed on the Toronto Stock Exchange (the “TSX”). While the TSX has already permitted companies to hold their 2020 AGMs on any date in 2020, up to and including December 31, 2020, regardless of a company’s fiscal year end, it also continues to expect companies to comply with applicable legislation regarding the timing of their 2020 AGMs. Following the CBCA Guidance, the Companies sought an order from the Supreme Court of British Columbia extending the time with respect to the holding of their 2020 AGM at any time during 2020, up to and including December 31, 2020. The Companies cited several areas of concern regarding the holding of their respective 2020 AGMs within the required time frame.
The Court agreed with the Companies that an extension of the time for the holding of their respective 2020 AGMs was appropriate in the circumstances. The Court accepted that management was 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. It also accepted that there were 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. The Court further stated that the difficulties in convening such an AGM have a real potential to disenfranchise many shareholders from attending the AGM in a meaningful way and participating in the affairs of the Companies, including their ongoing governance. The Court underlined that such ability to participate in the affairs of a company is a fundamental right of a shareholder.
Additionally, the Court identified as an issue the fact that even if a virtual meeting could be held, many people would want to attend important meetings such as an AGM in person and that holding the AGM by another means may not provide the same level of participation that a person would otherwise obtain. We note that the CBCA Guidance confirmed that CBCA corporations can hold virtual shareholder meetings as long as the corporation’s by-laws do not prevent it. The CBCA Guidance also confirmed that if a corporation’s by-laws prohibit virtual meetings or are silent on holding them, the board of directors may change the by-laws, with the change being effective until the next meeting of shareholders (when the change can be confirmed or rejected).
The Glacier-GVIC decision could come as an important precedent for those CBCA corporations anticipating difficulties with holding their AGM over the next few months and who are not prepared or willing to hold virtual meetings (or where their by-laws prohibit them). Although the decision of the Supreme Court of British Columbia is the first one to be issued on the topic, we can reasonably predict that it is unlikely to be the last.
If you are a director or a shareholder of a CBCA corporation, whether listed on the TSX or not, you must ensure that the legal requirements of the CBCA are followed in accordance with the CBCA Guidance.
1 Glacier Media Inc. (Re), 2020 BCSC 591 (CanLII).