On September 7, 2012, the British Columbia Court of Appeal, sitting as the Yukon Court of Appeal, heard the appeal from the Yukon Supreme Court decision in Matre et al v. Crew Gold Corporation, 2011 YKSC 75. The Court of Appeal’s eventual decision will address the question of whether beneficial, as opposed to registered, shareholders can exercise dissent rights under section 193 of the Business Corporations Act, R.S.Y. 2002, c. 20 (“YBCA”). As the grant of dissent rights under the YBCA is similar to many other corporate statutes in Canada, the Court of Appeal’s decision will have Canada wide implications.
Crew Gold was a corporation registered under the YBCA. A Plan of Arrangement was proposed to allow Crew Gold’s 93% shareholder to acquire the remaining outstanding shares at $4.65 USD. The Plan of Arrangement gave the remaining shareholders the right to “dissent” from the Arrangement and, instead, be paid fair value for their shares. The remaining minority shareholders held their shares beneficially in that their shares were legally registered in the name of a nominee bank. The individual minority shareholders, who all lived in Norway, wrongly believed they were registered shareholders and delivered notices of dissent in their own personal names. At the meeting to approve the Plan of Arrangement, they were all advised their notices of dissent were ineffective. They applied to have these Notices declared valid.
There is a long line of Canadian jurisprudence that limits the exercise of dissent rights to the registered shareholder. Notwithstanding this fact, the Yukon Supreme Court ordered that the beneficial shareholders be granted dissent rights. It did so because it found the circumstances of the Norwegian shareholders to be “exceptional” and that Crew Gold should not be allowed to succeed on a “technical objection.” The Court relied on the fact that the minority shareholders’ confusion arose from Crew Gold, who the Court found to have acted evasively. The Court held that Crew Gold had an obligation to address the concerns of the minority shareholders given the minority shareholders’ attempts to obtain clarification on the dissent procedure. In addition, the Court noted that Crew Gold listed two of the beneficial shareholders on its website as two of its top 50 shareholders and that Crew Gold’s circular did not include any meaningful information about how beneficial shareholders should go about exercising their dissent rights.
The Canadian courts have traditionally held that shareholders have to strictly comply with the statutory requirements in order to exercise dissent rights. Accordingly, Matre represents a significant departure from traditional corporate practice in Canada. We will need to wait to see whether the Court of Appeal returns to the traditional analysis and limits dissent rights to registered shareholders or whether the Court alters normal corporate practice by endorsing the chambers decision in Matre.