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Walied Soliman has never been busier.

The chair of law firm Norton Rose Fulbright Canada, whose team specializes in corporate proxy battles and hostile takeovers, has seen his caseload triple compared to last year. Market volatility and economic uncertainty are pushing investors globally to adopt a more aggressively activist mindset, experts say, with Canadian companies positioned as especially attractive targets.

“Canada is the most fertile ground for strategic [acquirers] looking to do a hostile bid and for shareholders looking to cause change on a board in the entire Western world,” Mr. Soliman said in an interview.

There have been 35 proxy contests launched in Canada since the start of July, 2022, according to data from Kingsdale Advisors, a Toronto-based consulting firm that works with public companies on issues involving shareholder votes. That is already equivalent to the entire 2022 season, which Kingsdale measures from the start of July each calendar year through the end of the following June.

“History tells us that activism booms following periods of uncertainty, and this proxy season is no exception,” said Kingsdale chief executive officer Ian Robertson. “We expect this uptick in activism to continue for the foreseeable future as activists look to strategically strike before companies have had a chance to recover in the postpandemic period.”

Aimia Inc. was the latest target – with the loyalty-turned-holding company’s board of directors only narrowly surviving an ouster attempt from its largest shareholder at its April 18 annual general meeting – but it was far from the first. Parkland Corp., Suncor Energy Inc., First Capital REIT and H&R REIT have all been embroiled in proxy battles of varying types with disgruntled shareholders so far this year. That is by no means a complete list.

Glencore’s US$22.5-billion bid for Canada’s Teck Resources, for example, is not a proxy battle despite being both unsolicited and opposed by the company. Teck shareholders will vote on whether to split the company in two on Wednesday.

“This really is the age of shareholder activism,” Kai Li, a finance professor at the University of British Columbia’s Sauder School of Business and the Canada Research Chair in Corporate Governance. “Management teams in Canada should not be complacent, because investors are really chasing returns.”

That is why Mr. Soliman at Norton Rose always advises his clients to “think like an activist” because “you are in a jurisdiction where you can easily be attacked by one, so you need to think like one.”

Those attacks can stem from a wide range of motivations. In the case of Parkland, for example, activist hedge fund Engine Capital LP has a specific goal: to convince the Calgary-based company to sell off its refinery and fuel-distribution businesses and focus more on its fuel and convenience store retail network.

Others, as in the recently resolved cases of Suncor and First Capital, are geared toward broader goals, such as replacing some or all of what activists often see as a complacent or ineffective leadership team.

While the goals and attributes of activist investors targeting Canadian companies differ, almost all of them share a common attribute: They come from abroad. Most are American, some are British or European or Middle Eastern, but few are actually from Canada.

That is at least partly because the rules governing Canadian corporations do provide activist investors with certain advantages that do not exist elsewhere. In the United States, for example, companies can implement a shareholder rights plan – also known as a just-say-no defence or a poison pill – that effectively blocks any hostile takeover attempt.

Canadian companies can also employ a poison pill defence, though it is rarely effective here as it heavily dilutes the value of a company’s existing shares and the pill itself can be struck down by the courts. The American version of a just-say-no defence, whereby a target company simply rejects a takeover offer outright, does not exist in Canada.

In 2016, securities regulators changed Canada’s corporate takeover rules by extending the minimum amount of time a bid must remain on the table. The timeline was tripled to 105 days from 35 days, which in theory was intended to provide target companies with more time to find a better deal. In practice, however, the change made little difference as last-minute rival suitors – also known as white knights – still very seldom appear.

In another key difference, American corporations can have staggered boards, meaning only a portion of a company’s board comes up for re-election each year. Canadian corporate directors, by contrast, must all be re-elected every year.

That difference makes it possible for an activist investor to replace an entire Canadian board in one fell swoop, whereas achieving the same result at some companies in the United States would take several years.

Investors in American companies are also required to disclose any position they hold that exceeds 5-per-cent ownership, but in Canada the threshold is 10 per cent.

“In Canada, you can accumulate 9.9999 per cent of a company’s stock and launch an attack and nobody has to know how many shares you own,” said Mr. Soliman.

Canadian proxy battles can also be resolved much more quickly than in the U.S. as investors here can requisition shareholder meetings to occur in between annual meetings. American activist investors have to wait for the next annual meeting.

For decades, none of these comparative advantages for activists were widely known outside Canada. It wasn’t until late 2011, when Canadian Pacific Railway Ltd. was targeted by Bill Ackman’s Pershing Square Capital Management LP, that word got out.

“That caused a huge level of awareness and also turbulence in what was, at the time, a relatively tranquil capital market in Canada,” Prof. Li said.

Rules aside, there is one undeniable aspect of Corporate Canada that at least reduces the intensity of the activist deluge: our diminutive size.

“There is a very limited talent pool of corporate directors in Canada with lots of companies connected to one another through directors sitting on various boards,” Prof. Li said. “That makes it very difficult for any shareholder activist to find a truly independent and capable director as a replacement to the slate of directors recommended by management. You just have to recycle the same people, which defeats the purpose of having a clean slate.”

That may have been true in the past, but according to Lynn Beauregard “it is in the process of changing.”

“Some enlightened organizations widen their search [for directors] beyond the same search firms,” Ms. Beauregard, president of Governance Professionals of Canada, said in an interview. “And there are also some search firms that are becoming more pro-active at looking into different communities for candidates.”

There are also a growing number of organizations dedicated to increasing the size and diversity of Canada’s corporate director talent pool, she said, such as the BlackNorth Initiative and Women Get on Board.

It is also worth noting that Canadian residency is not a requirement for most members of a Canadian board of directors. According to Prof. Li’s research, just 42 per cent of corporate directors placed on boards through activist campaigns between July, 2021, and June, 2022, were residents of this country.

As far as Mr. Soliman is concerned, whatever other limitations may exist will not be nearly enough to prevent the activist trend from continuing to accelerate in Canada.

“We’ve come to a place in 2023 where strategic [companies and investors] around the world are looking at their stock prices, looking at their revenue growth, and they’re saying we have to do something,” he said. “Then they notice Canada is good ground for this and they’re taking their shot.”

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