The almost immediate response, following the September 11th, 2012 Supreme Court of British Columbia (“BCSC”) decision, arising from the Telus Corp. (“Telus”) v. Mason Capital Management LLC (“Mason”) battle over converting Telus’s dual-class share structure (i.e. voting and non-voting), was for Mason to file an appeal of that decision.
While the matters at issue before the BCSC, and the ones which were dealt with in the September 11th, 2012 judgement focused on whether there was a properly requisitioned meeting of the Telus shareholders by Mason, the underlying tension between Telus and Mason, relates to the proposed alteration to the share structure of Telus, and the resulting elimination of the distinction between Telus shares that have a right to vote, and those that do not. In this instance, Telus wants one class of common shares (all with a vote), while Mason argues that its position as a holder of Telus voting shares will experience an (uncompensated for) reduction in value, if all Telus shares had the right to vote. In short, the premium now accruing to Mason’s shares, would evaporate. For that, it wants compensation for the holders of existing voting shares, including itself.
Although Mason lost its battle to have an alternate shareholders meeting, it is still of the mind that a premium exists for its Telus voting shares, and that Telus’s proposal to extend the voting right to all shareholders, economically prejudices’ its interests. This is where Mason’s appeal of the September 11th, 2012 BCSC decision, comes into play.
Outside of the courtroom, Telus will proceed with its October 17th meeting, where all shareholders shall have a vote on the proposal to exchange non-voting shares for voting shares, on a one-for-one basis. Darren Entwistle, Telus President and CEO, recently stated that:
“We firmly believe this proposal is fair and beneficial to all shareholders, is widely supported by shareholders with a true economic stake in our company, and is consistent with the principles of good corporate governance.”
In a power struggle of this nature, the appeal to democratic corporate governance principles seems, at least initially, to be compelling; however, when Mason acquired its interest in Telus, it had a dual share structure, of voting and non-voting shares. It is generally accepted, as a corporate law truism, that voting rights have value. In fact, there was historically and is currently, a premium paid for the Telus voting shares, and Mason is asking to be compensated accordingly, should the share conversion proceed.
This underlying economic reality will play out in the appeal process and in any other resulting legal and public relations skirmishes between the two companies. Of that, there is little doubt.
In that regard, this case and the ongoing battle between Telus and Mason, highlight the crucial aspect of many disputes. In order to appreciate and be equipped to comprehend the anticipated outcome of a dispute (in this case, amongst shareholders), it is necessary to appreciate the economic realities that caused and continue to underlie that ongoing dispute.
In this case, it will be interesting to see if the economic principles prevail over the democratic norms.