Minden Gross LLP & ACC Canada present THE PREPARATION FOR AND CONDUCT OF BOARD MEETINGS November 3, 2010 Presented by: Hartley R. Nathan, Q.C. Partner Minden Gross LLP Ryan Gelbart Associate Minden Gross LLP Guest Speaker: Carol McNamara VP, Assistant General Counsel and Corporate Secretary Royal Bank of Canada

Strategy Tip Do not automatically adopt a “form” of pre- printed By-law for the sake of expediency.

Authority to Call Meetings Provisions relating to the calling of meetings typically contained in company By-laws Generally a duty of the Corporate Secretary S. 126(8) of the OBCA permits a quorum of directors to call a meeting Proceedings conducted at a meeting called by an unauthorized person may be null and void

Strategy Tip A notice should set out by whose authority it has been given and should be signed by the empowered officer - where the secretary signs a notice given by order of the directors or another officer, it is good practice to have it so state.

Notice Requirements Only statutory time requirement is 10 days notice under OBCA for meeting called by quorum Must look to company By-laws Waivers are permitted under OBCA / CBCA

Strategy Tip Even when all of the directors attend a meeting being called on short notice, it is still good practice to have a waiver signed in order to avoid any subsequent challenge to the validity of the meeting on the grounds that proper notice was not given

To Whom To Send Notice Every director has the right to attend board meetings It is not open to a corporation to exclude a director from a meeting on the basis that the director is unfit, has allegedly engaged in misconduct, sits on the board of a competitor or has been convicted of a criminal offence Notice should be given to a director who has indicated verbally that he cannot attend a meeting on the basis that he or she may change his or her mind

Form of Notice Must check By-laws to determine level of disclosure to be set out in notice Few statutory requirements: –Notice of meeting called by quorum under S. 126(8) of OBCA must state general nature of business to be conducted –114(5) of CBCA says that certain matters to be transacted must be listed in notice (i.e. approving take-over bid)

Strategy Tip Avoid surprises - whether or not there is a disclosure requirement in the By-laws, the desirable practice is to provide disclosure of all matters to be addressed at the meeting

Meeting Materials Agenda –Standing Agenda –Specific Meeting Agenda –Chair’s Agenda –Consent Agenda Materials Book –Reliance on info volunteered by management is often not enough

Strategy Tip The corporation should designate a “point person” to whom directors can direct questions or from whom directors are able to obtain access to information or copies of documents, if necessary

Essentials of a Valid Notice Contains the date, time and place of the meeting Contains a description of the purpose of the meeting Contains a description of any special business to be conducted Complies with requirements in corporate statutes and By-laws as to form and content Must be issued on good authority

Essentials of a Valid Notice Cont’d Must be delivered in the manner prescribed in the By-laws Must allow the appropriate length of time between service and the date of meeting Must be sent to every person entitled to receive it Should be accompanied by agenda and materials book

Refusal to Attend A concerted plan by a director to absent himself or herself from a meeting in order to prevent a quorum may be improper Courts have been reluctant to issue an injunction to compel attendance but a damages claim may be available Consider removing the dissident director through a special meeting of shareholders

Strategy Tip By-laws can provide that if a director fails to attend a certain number of meetings without reasonable excuse, he or she will be deemed to have resigned

Role of the Chair Conduct of a board meeting is largely in the hands of the Chair Chair expected to preserve order Chair responsible for conducting votes and granting adjournments Chair authorized to decide on questions arising at the meeting

Strategy Tip If there are divided factions within the board consider an independent Chair, and/or consider counsel for each faction This should be by agreement of the disputing parties, if possible

Debate Corporation entitled to have directors engage in meaningful debate before a decision is made All directors are entitled to participate including the minority even though they will be bound by the majority decision

Casting Vote No casting vote for the Chair at common law or under corporate statutes Must be provided for in the By-laws Casting vote used to remedy occasional tie votes not to deal with continuous and settled deadlock condition Chair must act in good faith in casting a tie- breaking vote but is not compelled to cast it

Secret Ballots Not typically used Could give rise to problems – i.e. How does one dissent in these circumstances and have this reflected in minutes? Could be within the discretion of the Chair to use secret ballots for sensitive decisions

Strategy Tip Drafters of the By-law using some foresight and careful drafting could make effective provision for voting by secret ballot

Appeals from Decisions of the Chair The Chair of a meeting has prima facie authority to decide all questions relating to procedure at the meeting. If the Chair’s decision is challenged, any member may request a ruling from the meeting itself. Other decisions are deemed to be correct unless successfully challenged in Court by a member On procedural matters, appeal is to the meeting On other matters, recourse is to the Court

Dealing with Disorder Procedure and appropriate decorum at a meeting is largely in the hands of the Chair Chair can declare a recess or declare adjournment In extreme cases the Chair can terminate the meeting Chair can expel a director with the support of the majority

Strategy Tip The Board should establish a written code of conduct for directors to adhere to, which includes consequences of non-compliance Code of conduct should be adopted by By-law.

Conflicts of Interest Directors must not allow personal interests to conflict with the interests of the corporation The requirement to disclose interests in contracts are set out in Section 120 of the CBCA and 132 of the OBCA. Under the OBCA s.132(5) a conflicted director may not stay for any discussion regarding the issue under discussion Nominee directors are not to be servient to their appointers Position of a nominee director highlights the conflict situation

The Independence of Directors Directors of regulated corporations Duties are to the corporation as fiduciaries Independent directors should not support a course of action that is inconsistent with their fiduciary duties There are numerous options for a director to consider if unable to acquiesce in a decision

Role of the Corporate Secretary Arrange and manage the process of calling board meetings Ensure effective running of activities of the Board and committees Act as a primary point of contact

Contact Us Hartley R. Nathan, Q.C., Partner Minden Gross LLP (416) Ryan Gelbart, Associate Minden Gross LLP (416)