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A stock photo of a corporate boardroom.Arpad Benedek/Getty Images/iStockphoto

There is nothing messier than a proxy battle in Canada's junior mining sector.

Ousted executives rally shareholders to reclaim the throne. Duelling slates of directors vie for board control. Investors attack management practices. And, oh, the allegations. Oppressive! Egregious! Outrageous! Mining roughhousing has delivered some of the best corporate theatre in Canadian business history. It has also shaped some of the country's most important case law on the boundaries of shareholder rights and corporate conduct.

Although it is early days, the proxy battle at Aberdeen International Inc. is casting a helpful light on a key Toronto Stock Exchange rule that limits how much stock company insiders are allowed to buy.

San Francisco activist Ryan Morris has requisitioned a meeting of Aberdeen shareholders to vote for a new slate of directors to replace the company's seven board members. Its directors include Canada's former Ambassador to Iran Ken Taylor and Toronto mining financier Stan Bharti, whose family-owned Toronto-based company Forbes & Manhattan manages the mining company.

Mr. Morris is critical of Aberdeen's governance practices and this week filed a complaint to the Ontario Securities Commission about the company's recent private sale of $2-million of stock and warrants. A spokeswoman for the regulator confirmed it is reviewing the complaint.

A spokesman for Aberdeen did not return phone calls.

Mr. Morris argues the terms of the stock issue are beneficial to Aberdeen insiders and an affiliate company that bought the majority of the new stock units. Buyers were able to buy each unit, which included one share and a warrant to buy another share, for 20 cents at a time when a single share of Aberdeen's stock was trading at 20 cents on the Toronto Stock Exchange. He complains that the sale of 10 million stock units also dilutes the value of shares held by other investors at a company with 97 million shares outstanding.

The activist, who owns a five per cent stake in Aberdeen, proposed buying another less dilutive Aberdeen stock sale with fewer warrants, but the company in a press release dismissed the proposal as one designed for his "own selfish benefit."

Toronto Stock Exchange rules restrict company insiders, such as major shareholders, executives and officers, from purchasing more than 10 per cent of a listed company's outstanding shares without shareholder approval. The regulation is designed to protect minority shareholders from stock deals that favour insiders.

Aberdeen said in a statement last month that only 1.9 million of the 10 million stock units sold in the $2-million offering were purchased by company insiders. The 1.9 million units fall below the TSX's threshold of 10 per cent of outstanding shares.

Mr. Morris through his lawyer, Goodmans LLP partner Jonathan Feldman, are challenging the company's definition of what constitutes and insider. Mr. Feldman filed a complaint on Mr. Morris' behalf to the OSC about Aberdeen's disclosure on the stock sale. Not counted in Aberdeen's definition of an insider is Sulliden Mining Capital Inc., a mining startup that recently disclosed it purchased nearly 50 per cent of the disputed stock sale.

Four of Sulliden's directors, including Mr. Bharti and former federal minister Pierre Pettigrew, also served as Aberdeen directors at the time of the stock sale. Mr. Pettigrew resigned from Aberdeen's board last week and could not be reached for comment.

Mr. Feldman said the close ties between Aberdeen and Sulliden effectively mean that more than 10 per cent of Aberdeen shares have been placed in friendly hands at a time when shareholders are challenging the company's board and governance practices.

"We have raised our concerns with the OSC about the offer and the parties to whom the shares were issued and we understand the regulator is taking this matter very seriously," Mr. Feldman said.

If investors are lucky, the long term dividend of this increasingly fractious proxy contest could be sharper boundaries for insider stock purchases.