Next steps for Rogers family war
There are currently two groups that claim to be the legitimate Rogers Communications Inc. (RCI) board of directors. Only one is correct, of course, but determining which board is bona fide will neither be easy, nor quick.
Edward Rogers, the only son of late company founder Ted Rogers and chair of the family trust that controls Canada’s largest wireless carrier, was removed as chair of the corporate board last week after a power struggle that included a failed attempt to oust Joe Natale -- the former Telus Corp. executive he recruited as chief executive in 2017. In response, Mr. Rogers said he availed himself of his leadership position with the Rogers Control Trust to replace the five independent Rogers corporate directors who voted to remove him via a written resolution the following day.
Lawyers retained by the company as well as Walied Soliman, the Canadian chair of Norton Rose Fulbright -- who is representing Melinda Rogers-Hixon (one of Mr. Rogers’ sisters), insist the resolution is “invalid” and “simply false at law.” That didn’t stop Mr. Rogers from convening a meeting of what he considers to be Rogers’ new board on Sunday to discuss the company’s planned $26-billion deal to acquire Shaw Communications Inc.
Determining which side is correct “is going to have to be resolved by a court,” veteran securities lawyer Phil Anisman said in an interview Sunday.
“I have seen the [statement from Rogers] saying that [Edward’s] resolution removing those directors is invalid, but I haven’t seen anything that explains how they reached that conclusion or what the basis for that is,” Anisman said.
Their basis has to either be in corporate law, he said, or in the authority he has under the trust agreement. While the Control Trust structure has been described in general terms in various regulatory filings by Rogers, the exact terms of the chair’s authority to replace directors with a written resolution - as opposed to convening an official meeting of shareholders - remains unclear.
“In terms of validity, it would either be that [Mr. Rogers] has the authority under the trust agreement or he doesn’t,” Anisman said.
He said Edward Rogers’ opponents are likely to pursue one of two legal options in order to advance their challenge. They can either challenge the terms of the trust agreement, which would likely be in Ontario; or they can bring an action under the British Columbia Business Corporations Act (BCBCA), where Rogers is incorporated.
It is possible that the use of a written resolution to replace directors “could somehow under corporate law be invalid,” Anisman said, under what is called the Oppression Remedy. That is an aspect of corporate law that requires business leaders “to conduct the affairs of a corporation in a manner that is not unfairly prejudicial to other shareholders.”
“It is basically a fairness standard based on the reasonable expectations, in this case of the shareholders,” he said. “And the other possibility is if [Mr. Rogers] has not complied with the technical requirements of the [BCBCA] for a consent resolution, as it is called.”
Because the specific details of the Control Trust are not in the public domain, Anisman said it might need to be disclosed in order to reach a resolution.
“There is a good argument that the [trust] document should be disclosed to investors,” he said. “That is a matter of principle since the trust agreement really is the document that governs the matter of voting of RCI shares, meaning it governs the terms of control” of the company.
In his statement Friday decrying Mr. Rogers’ written resolution as “simply false at law”, Soliman added “the change that Edward Rogers is seeking will conservatively take many months.”
Unless both sides eventually decide to settle, Anisman agrees resolution will come at the pace of jurisprudence: “Otherwise what are you looking for,” he asked, “for God to come down and resolve it?”