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Isn’t That Special – What Should That Resolution Say?

As you read this, you are invariably working from home and avoiding social situations or public gatherings due to the current COVID-19 pandemic, so it might seem strange to be considering the law applicable to arcane procedural matters applicable to an annual general meeting (“AGM”) for various types of organizations. In fact, many AGMs have been postponed for the foreseeable future. Even worse, some might still be proceeding by way of online conferencing methods many had not even heard of several months ago. As well, the topic under consideration might be on the outer perimeter of what falls within the rubric of administrative law, but simply because the topic does not involve judicial review proceedings does not mean that it does not. It is also the type of topic one gets to enjoy when the intended article, along with its backups, is inadvertently deleted by its author. At least it provides a break from the overwhelming focus there has been on the topic of standard of review in the months preceding and following Vavilov[1].

Over the years, I have attended many AGMs for many different types of organizations, such as societies, charitable organizations, strata corporations, professional governing bodies, and others. For many of those AGMs, notice of the meeting included notice of special resolutions to be decided at the meeting. Depending on the governing legislation – as each of these organizations were creatures of statute – or the organization’s bylaws, those entitled to attend and vote had to be given 14 days’ notice of the special resolution. As well, under the applicable law or bylaws, in order to pass these required a vote in favour by more than the usual 50% plus one (e.g. 66%, 75%).

In the course of these AGMs, someone invariably put forth a motion to amend the proposed special resolution. Usually these resolutions were “friendly”, in that they did not significantly change the intent or primary substance of the special resolution. In other cases, they significantly changed the substance of the proposed special resolution.

Often at the AGMs I have attended, those present simply debated the proposed amendment and, if successful, proceeded to vote on the main motion. It never crossed my mind that this might be anything other than standard procedure. Imagine my surprise at one AGM for a society incorporated under the Society Act, RSBC 1996, c 433, when an attendee objected to a motion from the floor to amend the special resolution that was under consideration, on the basis it was not permitted by the rules of procedure or by law. This person informed the meeting that this was the position of the Registrar of Societies. I had not been aware of any such legal authority on the point, but after some quick-and-dirty research on my laptop during the meeting, it seemed that the proposition was correct – at least in the context of that meeting and for that society.

Armstrong v. Clark, 2002 BCSC 730, involved a society incorporated under the Society Act. The society called a general meeting and provided notice to the membership of a special resolution that proposed removing 8 of the society’s 12 directors. At the meeting, the special resolution was amended to provide for the removal of 11 directors and the appointment of 5 others as an interim board of directors. The special resolution passed by the requisite percentage of votes. The 11 deposed directors brought a petition before the BC Supreme Court against the 5 interim directors, seeking to invalidate the special resolution and reinstatement to the board.

While citing case law in the context of companies, the court relied on English authorities that supported the proposition that a special resolution can only be passed in the exact form as it appeared in the notice and cannot be amended at the meeting. The court noted that there was statutory authority empowering the court to remedy an irregularity such as what occurred in this case; however, in the court declined to do so given the circumstances of what happened at the meeting. In particular, the court noted only 22 out of 320 members of the society had attended, in part by being misled by the notice and by failure to properly notify all members.

Armstrong was considered in The Owners, Strata Plan NW971 v. Daniels, 2009 BCSC 1235 (“Daniels”). In Daniels, the issue did not involve the sufficiency of notice of a special resolution or whether an amendment could be proposed at the meeting for a special resolution for which there had been proper notice. Rather, it addressed the sufficiency of notice of a special general meeting in which the same special resolution was reconsidered. However, Daniels was cited in subsequent cases regarding the sufficiency of the description of the resolutions to be decided at a general meeting.

For example, in Farrell v. The Owners, Strata Plan K 414, 2018 BCCRT 382, the BC Civil Resolution Tribunal considered circumstances where notice of the AGM did not provide a sufficient description of the special resolutions that were to be decided. As a result, the resolutions adopted by the owners at the meeting were not valid. The Vice Chair ordered the strata to hold the AGM anew, with proper notice of the wording of the special resolutions that were to be decided. While the circumstances differ from those of Armstrong, the analysis in Farrell suggests that the wording of a proposed resolution cannot be changed, corrected, or clarified at the AGM itself.

These cases support the proposition that, absent statutory mandate, valid bylaws, or other authority, a special resolution cannot be amended at an AGM. The cases I have cited only deal with societies or strata corporations, but the authorities cited in Armstrong originate in older corporate law that would apply to any similar organization that is a creature of statute. This means that these types of organizations should ensure that the wording of a special resolution in a notice of an AGM reflects what the proponents wish to enact at the meeting. One question not addressed in the few authorities there are is whether a motion to amend the special resolution can be put considered if its proponent provides proper notice, in the same terms as are required for notice of the AGM and any special resolutions that are to be considered.

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[1] It is doubtful at this point in time, and with the multitude of articles on the case, that readers require the citation, but for those who do: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65.

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