The following letter was sent yesterday on behalf of a group of PTSOs to both Equestrian Canada and all the Voting Members outlining their issues with the proposed changes.
Re: AGM on September 28, 2021
Dear Ms. Krueger;
I have been retained by Cheval Quebec on behalf of itself and the following entities; Newfoundland and Labrador Equestrian Federation, Nova Scotia Equestrian Federation, New Brunswick Equestrian Association, Prince Edward Island Horse Council, Manitoba Horse Council, Saskatchewan Horse Federation, Alberta Equestrian Federation, Horse Council of British Council, Equine Association of Yukon and their corresponding Category B Members in connection with the Annual General Meeting to be held on September 28, 2021 (“AGM”) and, in particular, certain votes scheduled to be held at this meeting dealing with EC’s articles of incorporation and bylaws.
EC is incorporated under the Canada Not-for-profit Corporations Act (the “Act”). The Act contains the following sections;
197(1) A Special Resolution of the Members, or if Section 199 applies, of each applicable class or group of members – is required to make any amendment to the articles or the by-laws of a corporation to
(d) create a new class or group of members;
(f) change the designation of any class or group of members or add, change or remove any rights and conditions of any such class or group;
(n) add, change or remove any other provision that is permitted by this Act to be set out in the articles.
It is noted that the EC Board intends to bring an Ordinary Resolution to amend the articles and bylaws for a matter to which s. 197(1) applies. The Act goes on to state;
199(1) The members of a class or group of members are, unless the articles otherwise provide in the case of an amendment referred to in paragraphs (a) and (e), entitled to vote separately as a class or group on a proposal to make an amendment referred to in subsection 197(1) to;
(a) effect an exchange, reclassification or cancellation of all or part of the memberships of the class or group;
(b) add, change or remove the rights or conditions attached to the memberships of the class or group, including
(i) to reduce or remove a liquidation preference, or
(ii) to add, remove or change prejudicially voting or transfer rights of the class or group;
(c) increase the rights of any other class or group of members having rights equal or superior to those of the class or group;
(d) increase the rights of a class or group of members having rights inferior to those of the class or group to make them equal or superior to those of the class or group;
(e) create a new class or group of members having rights equal or superior to those of the class or group; or
(f) effect an exchange or create a right of exchange of all or part of the memberships of another class or group into the memberships of the class or group.
This section of the Act requires EC to bring a Special Resolution to the Members and for Section 197(1)(e) EC needs to bring a Special Resolution to each class to change the group structure from three equal groups to one singular group. Further, under s. 199(1)(b), (d) & (f) the three classes are entitled to vote on the issue separately, but all three classes must agree to the change before it can be enacted by EC. Thus, the group structure can only be changed by Special Resolution and for 199(1)(f) with each group’s approval. EC is hereby put on notice of its error.
The requirements found in Section 3.15(b) of the by-laws has not been complied with. Section 3.15(b) requires the approval of 2/3 of the PTSOs before it can be amended. Additionally, Section 9.2 of the by-laws allow for the amendment of any by-law by Ordinary Resolution subject to both the Articles of Incorporation and s.3.15(b). Thus, EC may not remove/delete either by-law Section 9.2 or 3.15(b) by Ordinary Resolution before it has obtained the approval of 2/3 of the PTSO’s, which approval has not been sought or obtained. EC is hereby put on notice of its error.
In addition, under the Act, the amendments sought to EC’s Articles can only be amended by Special Resolution requiring a 2/3 majority approval. EC has failed to provide the required notice to bring a Special Resolution at the AGM.
Pursuant to Section 253 of the Act, a complainant may bring an application against EC to restrain an action that is oppressive or unfairly prejudicial to or unfairly disregards the interests of any member. The power of the court includes the ability to order or reverse an amendment of EC’s articles or bylaws.
We are writing to notify the Directors of EC that the intended resolutions regarding the membership/group changes are in breach of the Act and should be withdrawn, failing which the PTSOs intend to bring an application for oppression under the Act to enjoin the amendment vote as improperly constituted and not in accordance with EC’s articles and the Act, and/or for oppression to reverse any vote taken that is not in compliance with the by-laws, Act or Articles and to effect a proper vote.
Diane Staples, LL.B., MBA