Court Orders Not-for-Profit Corporation to Revise Proxy Form

17 août 2016 | Nicole K. D’Aoust, Susan M. Manwaring

( Disponible en anglais seulement )

In an important decision of the Ontario Superior Court of Justice released on August 4, 2016, the Ontario Medical Association (“OMA”) was ordered to revise the contents of a proxy form it circulated to its members in advance of a general meeting held on August 14, 2016. Although there were other procedural issues before the Court in this case, its reasons for ordering revisions to the proxy are of particular significance to not-for-profits and charities.

The proxy was circulated in respect of a vote held at a general meeting of OMA’s members (approximately 42,000 physicians) to ratify a new Physicians Services Agreement (“PSA”), which sets out the fee schedule for medical services provided to patients in Ontario. These fees are paid for through the Ontario Health Insurance Plan.

The sections of the proxy form that troubled the Court are as follows (excerpts reproduced in the judgment):

 …

4. This proxy will be voted as directed by the member, however, if such a direction is not made in respect of any matter and you [the Member] have not appointed a person other than the persons whose names are printed herein, this proxy will be voted as recommended by the OMA Management.

6. This proxy confers discretionary authority in respect of amendments to matters identified in the Notice of Meeting or other matters that may properly come before the meeting.

VOTING RECOMMENDATIONS ARE INDICATED BY HIGHLIGHTED TEXT OVER THE BOXES.

1. Resolution to ratify the 2016 Physicians Services Agreement (as defined in the Notice of Meeting).

ForAgainst

These sections of the proxy form raised the following concerns for the Court: (i) the fact that the proxy could, in certain circumstances, be voted as recommended by OMA Management (see Section 4, above); (ii) the fact that the proxyholder was empowered, in certain circumstances, to vote as he or she saw fit (see Section 6, above); (iii) the proxy form contained instructions to vote “For” or “Against” only one of the three resolutions to be debated; and (iv) the proxy form contained a highlighted recommendation to vote “For” that single resolution (see Resolution 1, above).

The Court stated that, in the form proposed, the proxy was “all of unhelpful, unclear, unbalanced, and unfair.” It would have been “far fairer,” in the Court’s view, to have either: (i) provided no instructions and no recommendations for the three resolutions to be debated; or (ii) provided instructions and no recommendations. In addition to these general comments, the Court made the following specific revisions to the proxy:

  • the Court removed all voting recommendations;
  • the Court provided instructions for a “For” or “Against” vote in respect of each of the three resolutions to be debated;
  • the Court used the subjunctive verb tense and the words “in the future” to make clear that a vote on two of the resolutions did not preclude a vote on the resolution dealing with the PSA;
  • the Court commented generally that it revised the language in the proxy to show that proxyholders “are voting on matters of policy and not purporting to make findings of fact, findings of law, or findings of mixed fact and law, which are matters better addressed by a court.”

The principle of law cited by the Court in support of these revisions is that a proxyholder is fundamentally the agent of the member who authorized the proxy. In other words, the proxyholder’s mandate to vote on a particular resolution, through the proxy, must be as instructed by the member. It is not the role of the proxyholder to make independent findings on resolutions being debated.

Notably, the OMA raised the argument that the Court did not have the jurisdiction to cancel or revise its proxy form.  However, the Court found the matter to be fully within its purview because the proxy form circulated by the OMA would have precluded the meeting from being conducted fairly and in accordance with corporate law.

Although this judgment may not affect most charities and not-for-profits, it is a noteworthy example of the types of issues that come before the courts when there is contention amongst members of an organization.

To read the full text of this decision, click here.

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