Jan 4, 2016
Through 2015, an increasing number of Canadian companies passed U.S.-style bylaws, making their home province the only jurisdiction in which shareholders can launch a broad range of lawsuits. This “exclusive forum” trend is likely to continue moving forward.
A recent article in The Globe and Mail examined the issue, soliciting feedback from shareholder representatives who believe such bylaws will “unduly limit shareholders’ legal options” and will likely “end up being appealed” as well as from corporate lawyers who argue that the bylaws “will not have a major impact” since most cases are already brought in a corporation’s home province.
Osler partner Allan Coleman comments in the article that exclusive forum bylaws “could be most useful for companies incorporated under federal business legislation, because they can clarify which province’s main courts must be used for shareholder litigation.”
Allan goes on to explain that the bylaws likely aren’t meant to be applied to securities class-action cases, and that “companies would be unlikely to get approval to shift typical securities class-action cases from the U.S. to Canada … because U.S. courts have made it clear they have jurisdiction when shares are sold” on a U.S exchange.
The issue appears to be contentious among shareholders as well, the article concludes, with large institutional investors likely to support the bylaws and others wanting to keep their legal options open, while proxy firms like ISS and Glass Lewis are likely to oppose the proposed bylaws.
Read Shareholders protest new forum bylaws in Canada in the December 28, 2015, edition of The Globe and Mail.