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CORPORATIONS - Meetings of shareholders - Voting - Entitlement to vote at meeting - Oppression remedy - Powers of the court

Friday, July 21, 2017 @ 8:14 AM  

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Appeal by Harrington and Wolfe, shareholders of Eco Oro Minerals Corp. (Eco Oro), from the adjournment of an upcoming shareholders’ meeting pending the outcome of regulatory proceedings before the Ontario Securities Commission (OSC). Eco Oro was a British Columbia (BC) corporation with shares listed on the Toronto Stock Exchange (TSX). Harrington and Wolfe disputed a transaction in which the corporation converted debt instruments held by Trexs Investments LLC, Amber Capital LP, Paulson & Co. Inc. and Stylianides into shares of Eco Oro, shortly before the date scheduled for a shareholders meeting, requisitioned by Harrington and Wolfe for the purpose of replacing Eco Oro’s board of directors. Harrington and Wolfe took the position that the new shares had been issued for the improper purpose of tipping the vote at the shareholders meeting. Harrington and Wolfe initiated proceedings in the BC Supreme Court, where an oppression action was launched, and before the OSC, where an appeal from a TSX ruling approving the share issuance was initiated and the OSC’s public interest jurisdiction was invoked. In the court proceeding, the remedy sought by Harrington and Wolfe included an order cancelling the share issuance, or alternatively, an order directing that the new shares could not be voted at an upcoming shareholders meeting. The oppression action was dismissed on April 12, 2017. Shortly before the chambers judge’s decision was to be released on April 24, Harrington and Wolfe informed the Court that the OSC had set aside the TSX’s approval of the share issuance and ordered that the new shares were not to be voted at the shareholder’s meeting, scheduled for April 25. The judge, on his own motion, adjourned the shareholders meeting to September 30, 2017, stating that the dismissal of the oppression action was at odds with the OSC’s decision, such that it was not realistic for the shareholders meeting to proceed as scheduled. Eco Oro had since filed an appeal from the OSC decision.

HELD: Appeal allowed. The BC court decision and the OSC decision were not at odds with each other. At issue in the BC court case was the governance of the corporation and the rights of its shareholders, while the OSC proceeding dealt with the regulation of the public market and the public interest in the market’s fairness. The BC court had no jurisdiction to address the quality of the capital markets or the public interest, while the OSC had no jurisdiction to grant relief from oppression. The BC court decision did not address what was to happen at the shareholders meeting, therefore nothing further from the Court was necessary on this issue. The adjournment undermined the direction of the OSC that the new shares not be voted. The chambers judge's order adjourning the shareholders' meeting was set aside.

Harrington Global Opportunities Fund Ltd. v. Eco Oro Minerals Corp., [2017] B.C.J. No. 1081, British Columbia Court of Appeal, M.V. Newbury, M.E. Saunders and D.F. Tysoe JJ.A., June 7, 2017. Digest No. TLD-July172017009