It is likely that a trend will emerge in the coming months of cancelled transactions leading to litigation as to whether the impact of the novel coronavirus (“COVID-19”) amounts to a “disaster” or a force majeure under various agreements. Standard underwriting agreements contain termination provisions, some of which may be triggered by COVID-19.

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New Paper Discusses the Rise of Advance Notice Provisions in Canadian Corporate Bylaws

In recent years many Canadian firms have amended their corporate bylaws to include advance notice provisions (ANPs). ANPs provide for advance disclosure from shareholders who propose to nominate directors at a shareholders’ meeting. As recently as 2011, no Toronto Stock Exchange (TSX)-listed firm had adopted an ANP. Fast forward to today, and nearly half of all firms on the TSX have added an ANP in their bylaws.

What are ANPs and what accounts for their rapid adoption by Canadian public firms? A recent study and paper, An Empirical Analysis of Advance Notice Provisions in Corporate Bylaws: Evidence from Canada, by Anita Anand and Michele Dathan of the University of Toronto’s Faculty of Law and its School of Management, respectively, provides insight into the recent ANP trend. The authors analyze a sample of 1,156 TSX-listed firms to identify the shared characteristics and rationale among firms that have adopted ANPs.

What are ANPs?

ANPs are corporate bylaw provisions that stipulate advance disclosure requirements from shareholders who propose to nominate directors at a shareholders’ meeting. The disclosure must be circulated to all shareholders (typically at least 30 days in advance of the meeting), and pertain to information about the nominating shareholder and the proposed director or directors. The information required may include the nominating shareholder and proposed director’s name, occupation, residency, shareholdings in the company, descriptions of key agreements or arrangements between the nominating shareholder and proposed director, their relationship with competitors, as well as information that would be required in a dissident proxy circular.

What characterizes a firm likely to propose an ANP?

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