The Ontario Superior Court of Justice ruled that shareholders cannot use s. 99 of the Business Corporations Act, Ontario (OBCA) to remove a director at a scheduled meeting and must requisition a special meeting under section 105 instead
The case stemmed from a dispute between OneMove, a major shareholder in Dye & Durham, and the company. OneMove sought to remove its nominee, Mr. Prittie, from Dye & Durham’s board of directors by submitting a proposal under s. 99, demanding the removal be included in the company’s information circular for an already scheduled special meeting. Dye & Durham objected, claiming that s. 99 did not allow the removal of directors via a proposal and sought to omit the proposal from the circular.
The Superior Court ultimately sided with Dye & Durham, ruling that s. 99 of the OBCA cannot be used to remove a director. Instead, a special meeting under s. 105, which requires a requisition by shareholders holding at least 5 percent of voting shares, must be called for such an action. The court also noted that s. 99 explicitly allows proposals to nominate directors but does not address director removals, reinforcing the necessity of s. 105 for such matters.
OneMove had argued that since a special meeting had already been requisitioned by another shareholder, it was unnecessary to requisition another meeting. The court, however, rejected this argument, emphasizing that the removal of directors carries significant weight and requires a special meeting with proper notice to the director in question.
The ruling clarified that shareholders do have the right to remove directors but must follow the statutory process under the OBCA, ensuring procedural safeguards for directors. The court also addressed whether OneMove’s proposal was motivated by a personal grievance, as Dye & Durham claimed. It found that OneMove’s concerns about governance and strategy were business-related, not personal, but this issue became moot given the decision on the main question.
In conclusion, the court ruled that shareholder proposals cannot be used to remove directors under s. 99 of the OBCA, and such actions require a properly requisitioned special meeting under s. 105.