The novel coronavirus outbreak is spurring many Canadian companies to hold their annual general meetings online but experts say businesses need to move quickly to line up technology providers and also ensure legal approval of the changes.
Canadian publicly-traded companies have traditionally clung to in-person shareholder meetings even as other countries embraced formats that allow for online voting on the election of directors and other matters. Only a handful of businesses have held virtual meetings in recent years, but that is changing rapidly this year as major corporate players including Rogers Communications Inc., Canadian National Railway Co. and Telus Corp. have made plans to take their meetings online. Enbridge Inc. was the first large issuer to do so, announcing its plans early last week.
Businesses must hold annual general meetings (AGMs) within six months of the end of their fiscal year, and April and May are the prime months for AGMs for companies with calendar year ends, creating a distinct challenge this year as the coronavirus crisis forces a wave of temporary closures and restrictions on in-person gatherings.
The issue is even more pressing for Canadian banks, which have fiscal years ending Oct. 31 and must hold AGMs by the end of April. All of the country’s five largest banks plan to hold their meetings within a nine-day period, beginning with Bank of Montreal on March 31. As of press time, none have announced plans to move to virtual meetings.
In an e-mailed statement on Tuesday, the Canadian Securities Administrators, the umbrella group that represents the provincial regulators, said it is “aware that many issuers are quickly moving toward virtual meetings as a result of social-distancing measures," adding, “The CSA is supportive of measures issuers are taking to mitigate the risk of transmission and will publish guidance on this topic as soon as possible.”
Rima Ramchandani, a securities law partner at Torys LLP, says she expects many companies to switch to virtual-only AGMs while others will strongly discourage broad physical attendance at in-person meetings. “It will be a rare issuer that decides to proceed with the status quo this proxy season,” she said.
Companies need the legal authority to conduct a virtual meeting, and ensuring that can depend on both the business’s own bylaws as well as the relevant corporate legislation.
Ontario’s law authorizes virtual meetings, but other jurisdictions are not as flexible. There are also requirements related to the timing of filings and the means of notifying shareholders, and in some cases, a court order may be required to facilitate a virtual meeting. Osler LLP said last week that Telus Corp. obtained a court order in British Columbia, for example.
But Ms. Ramchandani noted that recent announcements regarding court closures stemming from the coronavirus outbreak could make it impossible for companies to get orders on a timely basis.
“Issuers will start to balance the legal risk of being technically offside the bylaws,” she said, noting that there is likely a low risk of a company facing a legal challenge to the format of their AGM if it does not involve a proxy contest or other contentious issues. “If it is not practical to obtain a court order because the courts are closed, companies might have to drive on and get comfortable with the risk.”
From a logistical perspective, Ms. Ramchandani noted that there are only two technology providers that support virtual AGMs in Canada (Broadridge Financial Solutions and Lumi Global) and clients are scrambling to line up their services. “Their phones are ringing off the hook.”
“We have been expanding the number of associates that can support virtual shareholder meetings," said Patricia Rosch, president of investor communications solutions at Broadridge, adding that the company is testing its systems in advance to prepare for the increased demand.
Richard Taylor, chief executive officer of Lumi, said it could be problematic from a staffing point of view “if every single company wanted the same day at the same time. ... But we’re on that."
Companies that have already filed their materials might also have to reprint them, said John Valley, a corporate law partner at Osler, who noted that print houses could face capacity constraints because of coronavirus-related employee absences.
“The timing ... complicates matters for issuers significantly. They are being forced to contend with difficult decisions in dynamic circumstances,” Mr. Valley said.
Influential proxy advisory firms ISS and Glass Lewis have taken a cautious view of supporting online AGMs, said Ian Robertson, Canadian president of shareholder advisory firm Kingsdale Advisors. But he said companies can address concerns about ensuring shareholder participation in meetings by communicating clearly about how they can take part and including a question-and-answer session with management.
Mr. Robertson has spent the majority of the past five days speaking with clients about whether and how to move meetings online. “Last Thursday as of 10 a.m., we had four people who were considering a virtual AGM, and by 11 a.m. we had 30," he said. “I think this is going to mark a shift in the way shareholders engage companies when it comes to AGMs.”
With a report from Rita Trichur