In a dispute between three petitioning directors (the Petitioners) and three requisitioning shareholders (two of whom were also directors) (the Requisitioning Shareholders) of Photon Control Inc. (Photon) (TSX-V: PHO), the Petitioners asked the British Columbia Supreme Court (the Court) to exercise its powers under the Business Corporations Act (British Columbia) (the Act) to intervene in the calling, holding and conduct of a shareholders' meeting that the Requisitioning Shareholders had requisitioned under the Act. The Court dismissed the petition. In addition, the Court also ruled that the chair of the requisitioned meeting did not have to be independent and could be one of the Requisitioning Shareholders, even if that shareholder was also a director of Photon and the business of the meeting involved the removal and election of directors.
The Court in Goldstein v. McGrath stated that a court's power to call a general meeting of shareholders under section 186 of the Act should only be exercised in extraordinary circumstances. In this case, the Requisitioning Shareholders requisitioned the Board under the Act to call a general meeting of shareholders in order to, among other things, remove the Petitioners and elect two new directors to the Board. The Board was deadlocked at the time and was not able to call the meeting within the time required under the Act. As a result, the Requisitioning Shareholders called the meeting by issuing a notice of general meeting to shareholders of Photon under the requisitioning provisions of the Act. The Petitioners petitioned the Court to order a combined annual general meeting and requisitioned meeting of shareholders, and further asked the Court put conditions on the meeting and the parties, including a requirement for an independent chair (as opposed to one of the Requisitioning Shareholders who would be entitled to chair the meeting under Photon's articles).
Court's power to order a shareholders' meeting should only be exercised in extraordinary circumstances
The Court explained that it should only exercise its discretionary powers to order a meeting of shareholders under the Act in extraordinary circumstances, including if it is impracticable for the company to call or conduct the meeting or if the company fails to hold the meeting of shareholders in accordance with the Act or the company's organizational documents.
The Court then ruled that a deadlocked Board was not enough to warrant calling the meeting. To the contrary, the court stated that it was practical for the Requisitioning Shareholder to call the requisitioned meeting, as it followed the clear statutory process available to shareholders under the Act, and the Petitioners could not rely merely on their own unwillingness to call that meeting as a reason to petition the Court to intervene.
Chair of requisitioned meeting does not need to be independent of the requisitioning shareholders
The Petitioners also claimed that the chair of the meeting should not be one of the Requisitioning Shareholders, and should be someone independent. The Court explained that in order for it to make such a ruling, it must be shown that the chair proposed by the Requisitioning Shareholders has demonstrated a capacity for potential impropriety at the meeting, and absent such evidence there is no basis for the Court to intervene.
Importantly, the Court ruled that even if there was an apprehension of bias of the proposed chair and the proposed chair was a director of the company and one of the Requisitioning Shareholders, this still would not warrant the Court's appointment of an independent chair for the meeting. The Court explained that an existing director will always have an interest in the outcome of a meeting in which his or her election is to be considered, and that alone is not sufficient to demonstrate the potential impropriety of the director acting as chair of the meeting or to order that an independent chair be appointed instead.
 2017 BCSC 586.
About Norton Rose Fulbright Canada LLP
Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.
Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.
Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.
For more information about Norton Rose Fulbright, see nortonrosefulbright.com/legal-notices.
Law around the world
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.