Business Corporations

This commentary was first published in the Financial Post on April 28, 2012.

The collapse of Magna’s dual-class share structure in 2011 via an insider bid for Frank Stronach’s holdings raised eyebrows because of the unprecedented pay out of an 1,800% premium that Mr. Stronach (through a private holding company) received in the transaction. Dual-class structures are once again in the spotlight with the recent proposal by Telus to eliminate its dual class structure. It was clear that Magna concerned securities regulators at least from a disclosure standpoint. By contrast, regulators have been conspicuously silent on the Telus transaction.

Under the terms of the Telus proposal, which goes to a shareholder vote on May 9, each non-voting share would be converted to a common share on a one-for-one basis. The two classes of shareholders will vote separately on the transaction. Two-thirds approval from each class is required in order for the votes to pass. Thus, a concern about shareholder participation that existed in previous dual class transactions, such as Canadian Tire, falls away since shareholders in each class have a vote.