Lexpert
The Ontario Securities Commission, in its reasons for the recent Eco Oro decision, chastises the Toronto Stock Exchange for approving a private placement that uses questionable tactics meant to block a proxy challenge.
Boards of listed companies that find themselves the objects of unwelcome takeover bids have the option of triggering a poison pill, issuing new equity to shareholders to make an unwanted acquisition more expensive and lessen the chances of success. A board faced with a proxy challenge by dissidents seeking to throw out incumbent members has no such recourse.
What the board of Eco Oro Minerals Corp. did when it faced a proxy challenge was to accelerate the conversion of convertible notes, issuing shares equal to approximately 10 per cent of the outstanding common shares through a private placement to certain existing note holders who supported the incumbents and collectively held approximately 41 per cent of the company's stock. After the new shares were issued, their holding would increase to 46 per cent.
Lexpert contributor Sandra Rubin reports at www.lexpert.ca.
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