In Smoothwater Capital Partners LP I v. Equity Financial Holdings Inc., 2014 ONSC 324, the Ontario Superior Court of Justice held that a press release issued by Equity Financial Holdings Inc. (the “Company”) which defended its board’s actions was not a proxy solicitation and was thus permitted under the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (the “CBCA”).


Smoothwater Capital Partners LP I, a dissident shareholder of the Company (the “Dissident”), issued a press release critical of the Company’s board and soliciting proxies in support of its efforts to replace the board. The Company responded with its own press release defending its board’s actions and criticizing the Dissident (the “Press Release”). The Press Release stated that the Company would “provide a management information circular that will be mailed to shareholders”. It did not contain a request for proxies.

The Dissident applied to Court for an order that the Company comply with, and be restrained from, acting in breach of s. 150 of the CBCA. The Dissident asserted that section 150 of the CBCA prohibited the Press Release, as the Company solicited proxies before delivering a management proxy circular. The Company responded that the Press Release was intended to inform its shareholders and rebut inaccurate statements made in the Dissident’s press release, but did not solicit proxies.

Justice McEwen held that while “solicitation” under the CBCA should be defined broadly, no such solicitation had taken place in this case. The test of whether a document solicits proxies is based on its “principal purpose”, not whether it had been created during a proxy fight. In the context of this case, the principal purpose of the Press Release was to provide certain explanations and defend the Company’s historical position, not to solicit proxies. Justice McEwen found that the Company was thus entitled to respond to the Dissident’s allegations in a single press release, but noted that he was not asked to consider whether multiple press releases could constitute a proxy solicitation.

Justice McEwen distinguished the decisions in Western Mines Ltd. v. Sheridan, [1975] B.C.J. No. 54 (S.C.), Brown v. Duby, 1980 CanLII 1734 (Ont. S.C.J.) and Polar Star Mining Corporation v. Willock, 2009 CanLII 11436 (Ont S.C.J.) as the press releases in those cases expressly referenced an intention to solicit. He further distinguished these cases – and an additional American case cited by the Dissident – on the grounds that the press releases therein were issued by shareholders and there was thus no corporate position to defend.


This case stands for the proposition that a corporation is entitled to defend itself from attacks during a proxy fight provided that the principal purpose of the communication is not to solicit proxies. It appears that the Company’s decision not to request proxies in the Press Release and not to issue further press releases on this matter were factors in Justice McEwen’s finding that the Press Release was not a proxy solicitation.