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