Securities Alert – August 2016

Remotely Attended Annual General Meetings

There is a variety of software and communications technology available today that, either separately or in combination, allows participants to attend meetings or conferences remotely. Remote attendees can participate in such “virtual meetings” in a variety of ways, including by asking questions through their computers, by accessing audio or video feeds, by viewing presentation slides and/or by voting.  Recently, several United States public corporations have conducted their annual general meetings (« AGMs« ) virtually, using remote meeting technologies that allow some or all of their shareholders to attend electronically.

AGMs have always been difficult for shareholders to attend personally and are even more so today as shareholders become more geographically dispersed.  Traditionally, this has been addressed through proxy voting but shareholder engagement through proxy voting is not as satisfactory as actual presence at a meeting.  Moreover, the Ontario Securities Commission has expressed doubts about the current proxy voting infrastructure, which it describes as “complex, opaque and fragmented.”  In theory, virtual AGMs could make AGM attendance easier and more accessible and could allow shareholders to participate more actively and to vote directly on matters presented at the AGM.

Of course, virtual meetings can also have drawbacks.  Personal interconnection is not as easy and subtle factors such as body language or vocal tonality are often missed. Furthermore, in a virtual meeting the chairperson is usually able to mute individuals or to designate interactivity time periods where participation is allowed. This differs from in-person meetings, where if someone is being unruly or attempting to be heard, they will be noticed even if they are otherwise ignored. Virtual AGMs could also provide the corporation with opportunities to vet and/or pre-select questions, which could be seen as either real or perceived censorship.

Virtual AGMs also raise other logistical issues.  Even experienced chairpersons will find it challenging to facilitate overlapping discussions, particularly if there are a large number of participants. The group dynamics of large meetings are different in person than they are online and the societal norms that guide the conduct of in person meetings are not always followed online.  This places a far greater responsibility on the chairperson, particularly where virtual attendees are not able to see or fully appreciate the actions of other attendees.  Although real-time virtual voting is now possible, rules of procedure will often need to be rethought in the context of virtual meetings.

Virtual AGMs have not been widely adopted in Canada yet.  However, there do not appear to be any Canadian corporate laws precluding their use. The Canada Business Corporations Act and the Business Corporations Act (Ontario) both clearly state that shareholder and director meetings may be held either partially or entirely through electronic means.

Even if virtual meetings are permitted under Canadian law, are they recommended?  At present, the practical issues of conducting virtual meetings seem to balance out any perceived benefits. However, if history is any guide to the internet, the issues will resolve and the benefits will become more apparent over time.  Virtual AGMs are likely to develop into an acceptable and, over time, normal practice.  The experience to date suggests it would be wise for a corporation intending to switch to virtual meetings to do so gradually instead of by way of an abrupt change.  As an example, it may first opt for a mixed meeting allowing directors, and shareholders to be physically present while other shareholders attend virtually.  This will allow corporations to adapt to the challenges of completely virtual meetings with no physical location.

For more than 40 years, Perley-Robertson, Hill and McDougall has provided financing solutions to a wide variety of clients, including privately held companies, public companies, reporting issuers and companies listed on NASDAQ, the Toronto Stock Exchange, the TSX Venture Exchange and various OTC and private markets.  In addition to providing advice on securities registration and compliance, we have completed venture capital funding transactions, debt and/or equity private placements, initial public offerings, prospectus offerings, capital pool company listings and qualifying transactions, reverse takeovers and limited partnership fundings.  Whatever your financing requirements, we are confident we can find a cost efficient solution tailored to your needs.

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