Local authorities continue to encourage people to refrain from gathering in large groups and to practice social distancing. As we have seen in other jurisdictions, it is expected that the Government of Saskatchewan will continue to implement new (and increasingly stricter) laws to restrict business operations and large gatherings of people. In this landscape, corporations should consider alternative means of holding director and annual shareholder meetings in the coming months.
This article addresses the legislation applicable to corporations incorporated under The Business Corporations Act (Saskatchewan) (the “Act”). While corporations incorporated under federal or other provincial statutes are subject to similar rules, the specific incorporating statute should be carefully reviewed in each case. In addition, directors should bear in mind that there is no one-size-fits-all approach, and it is recommended that directors consult with legal counsel to determine the best approach for their corporation to ensure the safety of all parties.
Typically, annual general meetings of the shareholders (“AGM”) often involve a number of shareholders meeting in a physical location within Saskatchewan. Given that meetings over a certain number of attendees is now prohibited in Saskatchewan (currently gatherings of more than 25 people in one room are prohibited), and leaving one’s home is strongly discouraged, holding an AGM in person is no longer feasible. It is also important to remember that unless the required number of shareholders are present at a meeting, there will be no quorum reached and decisions cannot be made.
Given the current environment, what options are available to corporations?
1. Postpone the AGM
Under the Act, the directors of Saskatchewan corporations are required to call an AGM not later than 18 months after the corporation comes into existence and subsequently not later than 15 months after holding the last preceding AGM. Depending on the timing of incorporation and/or the last AGM, it may be possible to postpone the AGM to a later date. While it is uncertain how long the prohibitions on public gatherings may last, postponing the AGM by a few months may be worth considering.
2. Virtual AGM
A virtual AGM would take place over a virtual platform which would allow people to attend via telephone or videoconference. The Act allows shareholders of a corporation to attend a meeting of shareholders by means of telephone or other communication facilities as long as all participants are able to communicate adequately together. Directors contemplating holding a virtual AGM should consider the following:
- Corporate articles, by-laws, and unanimous shareholders’ agreements (“USA”): directors will need to review the corporate articles, by-laws, and USAs to determine whether these documents prohibit a virtual meeting. Directors should also consider any procedural matters contemplated within the by-laws or USA, including notice requirements, taking votes, and quorum requirements.
- Method of holding meeting: the directors will need to find some kind of technology or service that will allow for adequate communication between all shareholders and other attendees of the AGM. If the parties are not able to communicate to each other, the validity of the meeting could be challenged.
- Business of the meeting: if the agenda contains contentious matters, it is often preferable to deal with such matters in-person rather than in a virtual AGM. If a virtual AGM is to be convened, directors should consider the agenda and entertain the possibility of deferring any contentious business to a later date.
- Voting: generally, voting at a meeting of shareholders is done by a show of hands. In the event that some attendees are not visible in a virtual AGM (making the counting of hands impossible) directors will have to determine how votes will be tallied in a fair and reliable manner.
- Notice: in addition to providing the information required by the Act, by-laws, and/or any USA, a notice to the shareholders should contain detailed instructions on how to attend the virtual meeting.
Similar to AGMs, meetings of the board of directors of a corporation are traditionally held in-person at a location in Saskatchewan. However, the Act also allows directors to attend a meeting of directors by means of telephone or other communication facilities that allow all attendees to hear each other.
While the considerations discussed above are relevant in determining whether a director meeting should be postponed or held in a virtual forum, the directors must be sure to review the corporate articles, by-laws, and any USAs. These documents may dictate when and where meetings of directors must be held, and other related procedural aspects.
For more information, please contact:
Jon M. Ponath