Clearwater Case Has Far Reaching Consequences

The Clearwater ruling at the Appeal Court earlier this year, removed any time restrictions for advance proxy votes being received by a company for an AGM or any special resolutions being tabled.

The ruling has created a potential administrative headache for company secretaries and strategic nightmares for resolutions being tabled by the boardroom to investors.  This is especially so, given that up to 90 per cent of votes cast at an AGM are by proxy. It has effectively, enabled shareholders to go right to the wire in casting their votes affirming their rights under section 58 of the companies act to appoint a proxy ‘at any time’. A company cannot therefore under the ruling specify a proxy to be lodged on or before a particular set time and date. As a result, companies could potentially be unable to ascertain voting intentions, and resolution momentum, beforehand.

“Not all companies are the same and don’t operate in the same environment, so it is essential communications to stakeholders and shareholders are tailored to meet the individual issues companies want to convey,” said Alvise Recchi, CEO, Morrow Sodali.

In short, he offers the following practical tips for proxy communication:

• Check the logistics of cross-border voting - regulatory deadlines, unbundling, ADR votes, other barriers to voting.

• Engagement with Proxy Advisors.

• Engagement with investors: selection, access to the right contact

• Prepare a direct communication plan with investors to neutralize the appearance of possible activist behaviour.

• Present alternatives to the Board before publication - measure in advance the impact of the decision, evaluate vulnerabilities, plan of action to maximize support.

• "Mobilize" the shareholder in a controlled manner

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