Contentious Issues in the Boardroom – April 2025 Edition
The April 2025 edition of the Director’s Briefing is now available via LexisNexis. Co-authored by myself, Laura H. Wolfe, and Hartley R. Nathan, K.C., this issue delves into recent developments in corporate governance and offers practical insights for directors navigating complex boardroom challenges.
Highlights from this Issue:
Director Resignation and Retention Risks Under the OBCA
The Ontario Business Corporations Act (OBCA) imposes constraints on the resignation of "first directors" named in the articles. In Soulliere v. Canada, the court held that such resignations are ineffective unless a successor has been appointed and the first shareholder meeting has occurred.Directors Cannot Rely on POAs to Circumvent Governance Rules
In Al-Ali v. Al-Ali, a director's attempt to remove another director using a power of attorney (POA) was invalidated. The court emphasized that corporate governance procedures must be followed, and a POA does not grant authority to bypass the procedures for removing a director under the OBCA.Shareholders May Proceed if Directors Fail to Act
In Mellace v. Mellace, the Court affirmed that under section 105(4) of the OBCA, shareholders may call a meeting if the board fails to do so within 21 days of receiving a valid requisition. The shareholder-led meeting was upheld, and the resulting removal of a director stood. The Court emphasized that the objecting director had not sought injunctive relief, which weighed against any later attempt to set aside the meeting.
Courts Will Enforce Shareholder Agreements in Governance Disputes
In McGinn v. Bleeker, the court enforced a shareholders agreement that mandated arbitration for disputes. A CEO's unilateral removal of a co-founder from the board, in violation of the shareholders agreement, was overturned. This case reinforces the binding nature of shareholder agreements and the courts' willingness to uphold them.
Recent Case Summaries:
Invalidation of Meetings for Procedural Defects: A British Columbia Court of Appeal decision emphasizing the importance of adhering to procedural requirements in corporate meetings.
Derivative Actions in Limited Partnerships: Insights from Binscarth Holdings LP v. Anthony on the rights of limited partners to initiate derivative actions.
Breach of Contract in Executive Recruitment: The Ontario Superior Court's decision in Bigwin Group Inc. v. Trade X Group of Companies Inc. addresses contractual obligations in executive recruitment processes.
To access a copy of the April 2025 issue, please click here or email me directly.
