Sandpiper Calls the Tune – Ontario Court Examines Shareholder Meeting Timing Requirements
How much time can a board take to convene a requisitioned meeting of securityholders? The recent decision of the Ontario Superior Court of Justice in Sandpiper Real Estate Fund 4 Limited Partnership v. First Capital Real Estate Investment Trust provides guidance to board members both as to how contextual factors may inform the decision and as to the process boards should undertake in addressing the question.
Background
The case arose from a meeting requisition delivered on December 12, 2022 to First Capital by Sandpiper entities that together beneficially owned approximately 9% of First Capital’s outstanding units. The requisition was made in the wake of First Capital’s announcements of an enhanced capital allocation and portfolio optimization plan, and of the first asset disposition under the new plan. Sandpiper’s requisition sought a special meeting of First Capital unitholders to be held not later than March 1, 2023 to replace four members of the board with Sandpiper nominees. First Capital’s board of trustees announced that the special business specified by Sandpiper would be addressed at First Capital’s annual general meeting to be held May 16, 2023, approximately two and one-half months after First Capital’s requisitioned deadline and five months after the delivery of the requisition. Sandpiper indicated it would accept the longer timeline in exchange for an undertaking to postpone implementation of the optimization plan, but First Capital refused.
The question of how quickly boards must convene securityholder meetings is not prescribed by applicable corporate legislation (except in British Columbia) or in the organizational documents of non-corporate issuers (like First Capital) that typically parrot the corporate law framework. Corporate statutes require only that the meeting be called within a specified period, but leave open the question of how quickly the meeting must actually be held.
The Decision
The Sandpiper decision frames its analysis by referencing jurisprudence that recognizes securityholders’ rights to have requisitions dealt with expeditiously, and requires that boards act reasonably with an appropriate degree of prudence and diligence.
The Court analyzed issues relating to the board’s process in assessing the degree of deference to be afforded to the board’s decision. On the basis that the board addressed the matter at a single two-hour meeting with other agenda items, with the directors proposed to be removed participating without any acknowledgment or consideration of their potential conflict, the Court concluded the board had not engaged in a scrupulous and diligent process and that consequently a high level of deference to the board’s judgment was not warranted.
As for the substance of the board’s action, the decision focused mostly on First Capital’s position that the delay was warranted to permit the optimization plan to further unfold. The Court concluded that, in the absence of a specific, anticipated event, which would better inform unitholders’ decisions, the general wish to permit the plan to further unfold was not a reasonable basis for delay, contrasting the situation with another case where a similar delay was permitted as the issuer was awaiting a pertinent tax ruling. First Capital’s position that two meetings would be costly and distracting was determined to be not persuasive for a well-capitalized and stable issuer such as First Capital.
Finally, the Court was not persuaded by First Capital’s argument that the delay would give unitholders more time. The decision weighs these factors against the prejudice from the longer period that would arise from the delayed oversight of the optimization plan by the Sandpiper nominees. Ultimately the Court ruled that the meeting had to occur on the faster timetable, being March 1, 2023 or as soon thereafter as 2022 financial information could be timely delivered to unitholders.
This timing issue cannot be fixed by simply amending corporate statutes to specify timelines. The appropriate timeline will, as the Sandpiper case demonstrates, be very fact-dependent, warranting an exercise of judgment. The issues addressed in the Sandpiper decision, from both process-oriented and substantive perspectives, will certainly be weighed heavily by boards facing this question going forward.
For further information on the Sandpiper decision or related matters, please contact any member of our Mergers and Acquisitions Group.
Expertise
Authors
Insights
-
Mining
Ontario Proposes Limits on Critical Mineral and Essential Infrastructure Investments by Non-Canadians
In a political environment charged with concerns about foreign control over critical minerals and essential infrastructure, the Ontario government has introduced new legislation to safeguard those… -
Shareholder Activism
Navigating shareholder activism: The role of shareholder-called meetings, Lexpert
In a recent article for Lexpert.ca, authors Jonathan Feldman and Gurratan Gill discuss the legal framework governing shareholder-called meetings in Canada and highlights key considerations for both… -
Mergers and Acquisitions
Canada's Updated Merger Control Laws-How the Changes Impact Strategies for Practitioners and Merging Companies, American Bar Association
David Rosner authored Canada's Updated Merger Control Laws-How the Changes Impact Strategies for Practitioners and Merging Companies in American Bar Association's Antitrust Source Magazine. This… -
Capital Markets
Canada Initiates Consultations and Proposes New Measures to Strengthen Anti-Modern Slavery Efforts
The Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”) came into force on January 1, 2024, implementing enhanced reporting requirements for certain entities to combat… -
Capital Markets
Canadian Securities Regulators Moving Forward With Access Model for Delivery of Continuous Disclosure Documents
On November 19, 2024, the Canadian Securities Administrators (CSA) announced they are moving forward with the previously announced access model (the “Access Model”) for non-investment fund reporting… -
Capital Markets
Clarification on Rules Relating to the Removal of Directors by Shareholders
In OneMove Capital Corporation v. Dye & Durham Limited (“OneMove v. D&D”), the Ontario Superior Court of Justice (the “Court”) held that shareholders may not submit a proposal under section…
Featured Work
-
Technology
WonderFi Technologies Inc. to be acquired by Robinhood Markets, Inc.
Goodmans LLP is advising the Special Committee of independent directors of the board of directors of WonderFi Technologies Inc. in connection with its agreement to be acquired by a wholly owned… -
Mergers and Acquisitions
Onex to sell WestJet stakes to Delta and Korean Air
Goodmans LLP is advising WestJet Airlines Ltd. and its controlling shareholder, Onex Corporation, in the sale of Onex’s minority stakes in WestJet to Delta Air Lines and Korean Air… -
Private Equity and Venture Capital
Apex Group Technologies Inc. to acquire a controlling stake in MapsPeople
Goodmans LLP is advising Apex Group Technologies Inc., a company backed by Round13 Capital, in connection with its agreement to acquire at least 51% and up to approximately 64% of the shares of… -
REITS and Income Securities
BSR REIT completes strategic asset sale with Avalon Bay Communities Inc.
Goodmans LLP advised BSR REIT in connection with the sale of an aggregate of nine properties, consisting of 2,701 apartment units, to AvalonBay Communities, Inc. for gross consideration valued at… -
Mining
Paulson and NOVAGOLD RESOURCES INC. to acquire Barrick Gold Corp.’s 50% stake in Donlin Gold LLC for US$1 billion
Goodmans LLP is advising Paulson & Co Inc. in connection with a backstop financing commitment entered into as part of its agreement to jointly acquire with NOVAGOLD RESOURCES INC. a 50% interest… -
Mining
Mandalay Resources Corporation and Alkane Resources announce merger
Goodmans LLP is advising Mandalay Resources Corporation in connection with its agreement to combine in a merger of equals transaction with Alkane Resources Ltd., pursuant to which Alkane will acquire…
News & Events
-
- 11:45 AM Shareholder Activism
Jon Feldman at IMN's Corporate Dealmakers Forum
Join Goodmans partner Jon Feldman at the IMN Corporate Dealmakers Forum for the session, “Deal-Focused Activism: What is Fueling Shareholder Activism Campaigns in 2025?” taking place on Wednesday… -
Banking and Financial Services
Goodmans Lawyers Once Again Recognized in the Lexpert Special Editions: Finance 2025 and Mergers and Acquisitions 2025
We are proud to announce the Lexpert Special Editions: Finance 2025 and Mergers and Acquisitions 2025 once again feature Goodmans lawyers among Canada's experts.Congratulations to… -
- Mergers and Acquisitions
Allan Goodman at the NACO Summit 2025
Join Allan Goodman at the NACO Summit 2025 on April 29-30th at the National Arts Centre in Ottawa where he will be moderating a panel entitled, “Mining M&A Roll-Ups: Lessons in Consolidation…