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ADVANCE NOTICE REQUIREMENTS notice requirements, as occurred with Mundoro Capital Inc., when the shareholders voted against a resolution to amend the articles to incorporate the advance notice provisions. WHEN ARE ADVANCE NOTICE REQUIREMENTS IMPLEMENTED? Although advance notice bylaws are relatively new in Canada, they tend to be adopted during proxy contests. In our view, an advance notice requirement is less open to court challenge where it is adopted before a company has knowledge of a possible proxy contest. A company also will have the added advantage of having adequate time to obtain shareholder approval if the requirement is adopted in advance of the proxy contest. It may also be easier to obtain the requisite shareholder approval if a proxy contest is not ongoing. CONCLUSION Advance notice requirements for director nominations have come to Canada. They have been adopted by a growing number of Canadian companies, gained recognition by the courts and have been endorsed by the leading proxy advisory firms. Advance notice requirements ensure all shareholders receive adequate notice of director nominations and information on nominees, thereby allowing shareholders to make an informed vote. Advance notice requirements also allow the company time to investigate and critique the dissident shareholder and the dissident's director nominees, and to formulate a strategy to combat the dissident. Advance notice requirements are an important tool for Canadian companies, which do not have access to staggered boards that are used by American companies to combat a proxy fight. An advance notice requirement is an important aspect of a company's preparedness for the increase in shareholder activism in Canada. Companies considering an advance notice requirement will need to ensure that its terms balance, ensuring an orderly and informed shareholder meeting with the right of shareholders to elect directors. Companies must also give consideration to the timing of the implementation of an advance notice requirement, as there are increased risks if implemented in the face of a potential proxy fight or hostile take-over bid. Consideration should also be given to whether it is appropriate for an advance notice bylaw or policy to contain any additional requirements beyond the basic advance notice provisions. Dissident shareholders must also now take into consideration whether a company has adopted an advance notice bylaw or policy and how to comply with, or take advantage of ambiguities in, the terms of the requirements. Also, a dissident shareholder contemplating a stealth proxy fight must plan for the contingency that an advance notice requirement may be implemented. Trevor R. Scott Farris, Vaughan, Wills & Murphy LLP Tel: (604) 661-1732 Fax: (604) 661-9349 tscott@farris.com Trevor Scott provides strategic and legal advice in diverse business areas. He has extensive experience advising senior public and private companies, national investment dealers and boards of directors on debt and equity financings, M&A, restructurings, take-over bids (friendly and hostile), corporate governance matters, shareholder activism and proxy contests. Teresa Tomchak Farris, Vaughan, Wills & Murphy LLP Tel: (604) 661-1711 Fax: (604) 661-9349 ttomchak@farris.com Teresa Tomchak has extensive experience in securities litigation and enforcement. Teresa was involved in the first securities class action in Canada to deny leave under the secondary market provisions of the Securities Act. Teresa has also been involved in numerous shareholder disputes, hostile take-over bids and proxy fights. 42 | LEXPERT • June 2013 | www.lexpert.ca C-00-Firm.indd 42 13-05-17 10:06 AM