Monday, April 4, 2011

dissent is a specific term in securities law

There was some confusion on Stockhouse that I addressed with the following post, and I was asked to copy it over here, as well. Here goes....

I'd like to clarify some terminology that is being misused in these discussions. One of the most important errors is to use the word dissent to describe shareholders who oppose the merger transaction proposed by WTG. In common usage, dissent is the antonym to consent; the meaning is 'not in agreement with', as opposed to 'in agreement with'. In securities law, dissent is a specific form of opposition to the underlying transaction, in which the dissenter seeks a "fair value" payout (almost always cash), rather than the proposed payment (either securities, cash, or a combination thereof), which they believe to be inadequate.

In order to dissent (the procedure is spelled out in Section 190 of the Canada Business Corporations Act, a shareholder must be in physical possession of the share certificate. Therefore, a beneficial shareholder (shares held in a brokerage account) cannot dissent, as he is not in possession of the share certificate. In order to dissent, a shareholder would have to become a registered shareholder, by requesting their broker to instruct the transfer agent to issue the physical share certificate. That takes some time, and a nominal fee is involved. (Your broker is the registered shareholder, and should co-operate with the initial filing of the notice of dissent. After that, you will have to proceed by obtaining the share certificate, and following the explicit steps described in the CBCA.)

The WTG merger document includes a clause that if more than 5% of registered shareholders file notices of dissent, then WTG has the option of cancelling the transaction. They are not obligated to cancel it. They may choose to proceed, if they desire. Because dissenting shareholders lose voting rights, that may be to their advantage, as pro-merger votes would face reduced opposition, but I'm getting a little off on a tangent.

The stockigloo website, as well as many posters here, are using the word dissent in its common usage, but it is incorrect to use the word that way, solely because the word has a clearly defined meaning in securities law. The stockigloo register of dissatisfied shareholders might better be called that, or shareholders opposed to the offer, or something similar. That list is nothing more than a demonstration of unified opposition. It has no legal standing, and confers no benefits, nor limits any rights.

The record date must fall between 30 and 60 days prior to the special meeting being called. The transfer agent holds a list of all registered and/or beneficial shareholders, each such shareholder being a 'shareholder of record'. That list of names will be used to determine who is eligible to vote, and who will receive the proxy documents, and the Management Information Circular describing the proposed transaction. Those documents do not have to be sent out until 21 days before the meeting, although they are typically distributed 3 or 4 days before that minimum threshold, to ensure compliance with the law.

For retail shareholders, today was the last day to buy shares which will create a record of the transaction being recorded by the transfer agent, prior to the official record date. That is because the settlement period for retail trades is 3 business days. However, there are institutional trades that settle in 1 day, so that is not a universal guideline. Moreover, share certificates can be transferred on the record date, so long as the transfer agent receives the appropriate documentation before the close of business on the 7th.

We will have to see just how the proxies are set up. It may be that a NO vote will be registered by any shareholder who does nothing. Or, the documents might indicate that a failure to register the proxy allows management to assume that the vote is YES. My point is, we will have to see how the documents are drafted before we can determine what needs to be done.

I am a member of the Century Shareholders Committee, formed to oppose this merger as it is offered. We are working very hard to determine effective strategies. I trust that you will remain patient, as it takes time to work through all of the possible outcomes. We will provide public statements as soon as we feel we are in a position to do so. One does not negotiate in public. We hope you understand why that is so.



relic said...

I am well aware of the specific meaning attached to the word dissent in securities law. To say that the use of the word here is "misused" and in "error" is in my opinion an error. Dissent in its "common usage" most accurately describes the shareholders who oppose this merger. Nobody is referring to that list as a list of registered shareholders seeking a fair value payout. It quite clearly says on the page when you click on the tab "Please fill out this form if you are voting NO to the proposed WTG/CMM merger." Thats pretty clear and straight forward. Click on the link again and see for yourself. The title of tab(not the actual form) has to be short and I can think of no shorter way of saying "voting NO to the proposed WTG/CMM merger" than to use the word dissent(in its common usage). Is using the word dissent confusing in this context?... it in error? I can't possibly see how anyone could be confused by the language used on the form "Please fill out this form if you are voting NO to the proposed WTG/CMM merger."

Hoov said...

Relic, the real issue I was addressing was some really erroneous discussion on Stockhouse. I copied that message here, on request of stockigloo.


flash said...

My shares are in various roker accounts. Are you telling me that my broker cannot vote my shares as per my instructions? Are you telling me that I have to get physical possession of the share certificate and then have that registered swith Century or its agent before I can get to vote them?
Please clarify and indicate what are the steps.
Thank you.

relic said...

My apologies Lar. I just checked my email for the 1st time today which includes an email from Carib about the subject and the request.

I do appreciate you pointing out the securities law and its definition of dissent and what it means for century shareholders(NOBOs and OBOs). Most of us are likely to be NOBOs.


nt300 said...

Flash, I posted your question for better visibility. You should now get a good answer(s)...