presented by: hartley r. nathan, q.c. partner minden gross llp ryan gelbart associate
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Minden Gross LLP & ACC Canada present
THE PREPARATION FOR AND CONDUCT OF BOARD MEETINGS
November 3, 2010Presented by:
Hartley R. Nathan, Q.C.PartnerMinden Gross LLP
Ryan GelbartAssociate Minden Gross LLP
Guest Speaker:
Carol McNamara VP, Assistant General Counseland Corporate SecretaryRoyal Bank of Canada
Strategy Tip
• Do not automatically adopt a “form” of pre-printed By-law for the sake of expediency.
Authority to Call Meetings
• Provisions relating to the calling of meetings typically contained in company By-laws
• Generally a duty of the Corporate Secretary• S. 126(8) of the OBCA permits a quorum of
directors to call a meeting• Proceedings conducted at a meeting called
by an unauthorized person may be null and void
Strategy Tip
• A notice should set out by whose authority it has been given and should be signed by the empowered officer - where the secretary signs a notice given by order of the directors or another officer, it is good practice to have it so state.
Notice Requirements
• Only statutory time requirement is 10 days notice under OBCA for meeting called by quorum
• Must look to company By-laws• Waivers are permitted under OBCA /
CBCA
Strategy Tip
• Even when all of the directors attend a meeting being called on short notice, it is still good practice to have a waiver signed in order to avoid any subsequent challenge to the validity of the meeting on the grounds that proper notice was not given
To Whom To Send Notice
• Every director has the right to attend board meetings
• It is not open to a corporation to exclude a director from a meeting on the basis that the director is unfit, has allegedly engaged in misconduct, sits on the board of a competitor or has been convicted of a criminal offence
• Notice should be given to a director who has indicated verbally that he cannot attend a meeting on the basis that he or she may change his or her mind
Form of Notice
• Must check By-laws to determine level of disclosure to be set out in notice
• Few statutory requirements:– Notice of meeting called by quorum under
S. 126(8) of OBCA must state general nature of business to be conducted
– 114(5) of CBCA says that certain matters to be transacted must be listed in notice (i.e. approving take-over bid)
Strategy Tip
• Avoid surprises - whether or not there is a disclosure requirement in the By-laws, the desirable practice is to provide disclosure of all matters to be addressed at the meeting
Meeting Materials
• Agenda– Standing Agenda– Specific Meeting Agenda– Chair’s Agenda– Consent Agenda
• Materials Book
– Reliance on info volunteered by management is often not enough
Strategy Tip
• The corporation should designate a “point person” to whom directors can direct questions or from whom directors are able to obtain access to information or copies of documents, if necessary
Essentials of a Valid Notice
• Contains the date, time and place of the meeting
• Contains a description of the purpose of the meeting
• Contains a description of any special business to be conducted
• Complies with requirements in corporate statutes and By-laws as to form and content
• Must be issued on good authority
Essentials of a Valid Notice Cont’d
• Must be delivered in the manner prescribed in the By-laws
• Must allow the appropriate length of time between service and the date of meeting
• Must be sent to every person entitled to receive it
• Should be accompanied by agenda and materials book
Refusal to Attend
• A concerted plan by a director to absent himself or herself from a meeting in order to prevent a quorum may be improper
• Courts have been reluctant to issue an injunction to compel attendance but a damages claim may be available
• Consider removing the dissident director through a special meeting of shareholders
Strategy Tip
• By-laws can provide that if a director fails to attend a certain number of meetings without reasonable excuse, he or she will be deemed to have resigned
Role of the Chair
• Conduct of a board meeting is largely in the hands of the Chair
• Chair expected to preserve order• Chair responsible for conducting votes and
granting adjournments
• Chair authorized to decide on questions arising at the meeting
Strategy Tip
• If there are divided factions within the board consider an independent Chair, and/or consider counsel for each faction
• This should be by agreement of the disputing parties, if possible
Debate
• Corporation entitled to have directors engage in meaningful debate before a decision is made
• All directors are entitled to participate including the minority even though they will be bound by the majority decision
Casting Vote
• No casting vote for the Chair at common law or under corporate statutes
• Must be provided for in the By-laws• Casting vote used to remedy occasional tie
votes not to deal with continuous and settled deadlock condition
• Chair must act in good faith in casting a tie-breaking vote but is not compelled to cast it
Secret Ballots
• Not typically used
• Could give rise to problems – i.e. How does one dissent in these circumstances and have this reflected in minutes?
• Could be within the discretion of the Chair to use secret ballots for sensitive decisions
Strategy Tip
• Drafters of the By-law using some foresight and careful drafting could make effective provision for voting by secret ballot
Appeals from Decisions of the Chair
• The Chair of a meeting has prima facie authority to decide all questions relating to procedure at the meeting. If the Chair’s decision is challenged, any member may request a ruling from the meeting itself. Other decisions are deemed to be correct unless successfully challenged in Court by a member
• On procedural matters, appeal is to the meeting
• On other matters, recourse is to the Court
Dealing with Disorder
• Procedure and appropriate decorum at a meeting is largely in the hands of the Chair
• Chair can declare a recess or declare adjournment
• In extreme cases the Chair can terminate the meeting
• Chair can expel a director with the support of the majority
Strategy Tip
• The Board should establish a written code of conduct for directors to adhere to, which includes consequences of non-compliance
• Code of conduct should be adopted by By-law.
Conflicts of Interest
• Directors must not allow personal interests to conflict with the interests of the corporation
• The requirement to disclose interests in contracts are set out in Section 120 of the CBCA and 132 of the OBCA.
• Under the OBCA s.132(5) a conflicted director may not stay for any discussion regarding the issue under discussion
• Nominee directors are not to be servient to their appointers
• Position of a nominee director highlights the conflict situation
The Independence of Directors
• Directors of regulated corporations
• Duties are to the corporation as fiduciaries
• Independent directors should not support a course of action that is inconsistent with their fiduciary duties
• There are numerous options for a director to consider if unable to acquiesce in a decision
Role of the Corporate Secretary
• Arrange and manage the process of calling board meetings
• Ensure effective running of activities of the Board and committees
• Act as a primary point of contact
Contact Us
Hartley R. Nathan, Q.C., PartnerMinden Gross LLP(416) 369-4109hnathan@mindengross.com
Ryan Gelbart, AssociateMinden Gross LLP(416) 369-4172rgelbart@mindengross.com
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