Expect strict compliance with your advance notice bylaw, but no more

Companies use advance notice bylaws to ensure orderly, transparent and informed shareholder meetings. They help to avoid tactical ambushes by dissident groups and ensure that there is a thorough disclosure and vetting of board nominees. But a British Columbia court recently ruled that such bylaws were not to be stretched beyond their clear terms. This is a good case-study for reviewing the language in your advance notice bylaw or articles, because while courts will give effect to the words chosen, they are unlikely to give companies anything more than that. The Court’s ruling also provides useful takeaways for developing best practices in how board Chairs should be communicating with dissidents.

The fight over Skychain’s Board

In 1154557 B.C. Limited v. Skychain Technologies Inc., 2025 BCSC 1924, The numbered company petitioner was a shareholder in Skychain Technologies Inc., a TSX-Venture listed company that transitioned from cryptocurrency mining to non-fungible tokens and decentralized finance. The Petitioner held about four percent of Skychain's shares and was aligned with other dissident shareholders seeking to replace the incumbent board.

Skychain's history was marked by internal turmoil. From 2018 to 2022, it focused on a cryptocurrency data center project in Manitoba under its former CEO. In late 2021, a new investor acquired a significant stake, became CEO, and ousted the former CEO amid allegations of financial misconduct, leading to ongoing litigation in multiple jurisdictions. Under the new leadership, Skychain abandoned the project, incurred substantial losses, faced a cease-trade order, and failed to hold annual general meetings (AGMs) in 2022 and 2023.

The conflict escalated in 2024. A subsidiary of major shareholder that held just under ten percent of the shares requisitioned an AGM, and issued a dissident proxy circular proposing a new board slate (the Dissident Slate). Skychain responded by scheduling its own AGM for a few weeks after the requisitioned meeting date. The shareholder withdrew its requisition, but the Petitioner stepped in to start a proxy contest at the AGM, issuing an advance notice and a dissident proxy circular, soliciting "yellow" proxies for the same Dissident Slate.

Skychain challenged the Petitioner's compliance with its articles, particularly section 14.12(5)(b), which requires disclosure of any "proxy, contract, agreement, arrangement or understanding" giving the nominating shareholder a right to vote or direct the voting of shares. Correspondence between the parties highlighted Skychain's concerns about undisclosed coordination with the former CEO and the major shareholder. Skychain's chair consulted legal counsel and decided to invalidate the yellow proxies based on a confidential memorandum.

At the AGM, the Chair declared the yellow proxies—representing 54.77 percent of shares—invalid without explanation, allowing the management slate to be acclaimed. Objections from dissident representatives were dismissed, and a post-AGM press release reiterated the invalidity without details. The Petitioner then sought relief under section 227 of the Business Corporations Act, alleging oppression.

The Supreme Court’s reasoning

Justice Kirchner applied the two-part test for oppression from BCE Inc. v. 1976 Debentureholders, 2008 SCC 69: first, identifying the claimant's reasonable expectations; second, determining if those expectations were violated by conduct that was oppressive or unfairly prejudicial. The court emphasized that shareholders have a fundamental expectation of fair participation in corporate democracy, including proper consideration of dissident proxies.

Deference to the Chair's decision and procedural fairness

Skychain argued that the chair's decision was entitled to deference under common law and section 11.19 of its articles, which makes the chair's good-faith rulings on voting disputes final. However, the court held that section 11.19 applies only to disputes arising during a poll, not pre-meeting disqualifications. Citing Hastman v. St. Elias Mines Ltd., 2013 BCSC 1069, the court noted that while chairs receive deference on procedural matters, their decisions are reviewable for reasonableness or legal error.

Here, the process fell short. The chair refused to provide reasons before or during the AGM, deferring to counsel who stated that details on the Dissident Slate "were not disclosed" and "not public at this point." This lack of transparency violated shareholders' legitimate expectations of an impartial and reasoned process, especially in a contested proxy battle. The court found a reasonable apprehension of bias, as the chair's consultation with company counsel and refusal to explain created unfair prejudice. As Justice Kirchner noted: "Proxy voting is a routine aspect of corporate AGMs and fundamental to shareholder democracy. It follows that shareholders have a legitimate expectation that dissident proxy initiatives will be fairly considered and properly addressed at AGMs in accordance with corporate and securities law and the articles and constitution of the corporation."

Compliance with advance notice provisions

Turning to the merits, the court narrowly interpreted section 14.12(5)(b) of Skychain's articles. The provision requires disclosure only of arrangements that grant the nominating shareholder a "right to vote or direct the voting" of shares—not mere coordination or joint efforts to elect a slate. Evidence showed collaboration among the Petitioner, the former CEO, the major shareholder and others (e.g., adopting the earlier circular and shared nominees), but no binding voting agreements.

The court distinguished Swan v. Nickel 28 Capital Corporation, 2023 BCSC 1262, where broader disclosure was required for arrangements "relating to the voting of any securities." Ties between Dissident Slate candidates and the former CEO were not disclosable under this clause, and Skychain had already publicized such connections in its press releases.

Additionally, the second part of section 14.12(5)(b)—requiring information mandated by the BCA and securities laws, such as National Instrument 51-102—did not apply. Proxy solicitations for director elections are exempt from certain disclosure rules under Form 51-102F5. The court held the disqualification was procedurally oppressive and, on the merits, rested on an incorrect and unreasonable reading of s. 14.12(5)(b).

While the Court found in favour of the Petitioner, it did not grant a specific remedy, asking instead for submissions from counsel on the appropriate remedy. Presumably a new meeting will be ordered, perhaps with directions on who will be chairing that meeting.

Implications for shareholders and corporations

This decision provides critical guidance for corporations and shareholders in proxy contests, emphasizing the need for precise drafting in governance documents and procedural transparency.

Review advance notice bylaws carefully: First, corporations should promptly review their advance notice bylaws to ensure the language captures the types of relationships and arrangements that may influence nominations. The court highlighted that Skychain's provision was limited to disclosures of agreements granting a "right to vote or direct the voting" of shares, which did not extend to informal coordination or joint solicitation efforts.

In contrast, the decision referenced cases like Swan v. Nickel 28 Capital Corporation, where broader wording—"any contract, agreement, arrangement, commitment or understanding relating to the voting of any securities"—required disclosure of voting-related arrangements.

Had Skychain's articles included such expansive language, the undisclosed collaborations might have triggered disclosure obligations, potentially justifying the proxy disqualification. This underscores the importance of tailoring bylaws to prevent "ambush" nominations while avoiding overly restrictive interpretations that could be challenged as oppressive.

Set out positions in advance: Second, the ruling serves as a cautionary tale on the necessity of transparency from chairs and corporations in raising objections to dissident initiatives. Advance notice provisions exist to protect companies and shareholders from surprise tactics, but the court made clear that dissidents are equally entitled to avoid ambushes. Here, Skychain's failure to specify the alleged deficiencies in the Petitioner's circular—despite pre-AGM correspondence—deprived the dissidents of an opportunity to rectify issues or make supplemental public disclosures, such as through press releases. The chair's reliance on a confidential legal memorandum and refusal to provide reasons at the AGM exacerbated this, leading to a finding of procedural unfairness and reasonable apprehension of bias. Corporations must ensure that challenges to proxies are communicated clearly and in advance, allowing for dialogue and potential cures, to align with shareholders' reasonable expectations of fairness.

Meeting chairs: Finally, the case reinforces the value of appointing independent chairs in some contested meetings, particularly when the entire board is targeted for replacement. Although not a decisive factor, the court noted that the chair was a management nominee and lacked independence, which contributed to perceptions of partiality. In high-stakes proxy battles, engaging an impartial chair—such as a neutral third party or independent director—can mitigate bias risks and enhance the legitimacy of decisions, reducing the likelihood of successful oppression claims.