Fighting Back: Considerations for Addressing a Dissident Proxy Battle

Contested shareholder meetings are often dramatic events which have the potential to result in, among other things, enhanced scrutiny of a board of directors, increased media coverage and litigation. Emotions tend to run high and decisions often need to be made quickly (particularly for those facing a dissident group who followed the advice given in Matthew Cumming’s blog post, Dissident Ambush of a Shareholders' Meeting - Tactics to Consider).

If faced with a dissident proxy battle, a careful and deliberate approach can mitigate reputational risk, result in an orderly meeting and assist in avoiding unnecessary costs and litigation. The following are some items for a board of directors of a company faced with a dissident proxy solicitation to consider:

  1. Has outside counsel and a proxy solicitation firm been engaged? If not, these should be the first items on the board’s action plan.
  2. What are the views of the company’s shareholders? Shareholder outreach and education are often key elements to a successful proxy battle. A proxy solicitation firm can provide tremendous assistance on this front.
  3. Know your dissident group. Understanding the dissident group, their goals and their past campaigns (if any) can yield valuable information.
  4. Ensure that a careful review of the company’s constating documents is undertaken and all requirements regarding proxies and shareholder meetings are met.
  5. Confirm the management proxy and circular and that of the dissident group comply with applicable laws.
  6. Consider engaging an independent chair for a contested meeting. This may reduce vulnerability to claims of bias or conflicts of interest, which can cloud the issues at hand and increase the likelihood of a legal challenge.
  7. Consider negotiating the "ground rules" for the shareholder meeting with the dissident group to deal with items including permitted dissident attendees, the meeting agenda, protocol for tabulation and inspection of proxies and the procedures to deal with over-voting.
  8. Ensure ongoing custody of evidence including proxy materials, ballots and other relevant materials related to the shareholder meeting.
  9. Consider if the company’s board is entitled to adjourn the meeting and what advantage, if any, will that result in?

What is the best strategy to deal with a dissident proxy battle? The truth is each situation is unique and one strategy doesn’t fit all. The development of a well-crafted strategy, with consideration of the facts and players at hand, is the best defense.

Now that I have given you some food for thought, let me know if you have additional thoughts on the subject. I look forward to hearing from you.

board of directors Dissident Proxy dissident shareholders proxy materials proxy solicitation shareholder meeting



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