Shareholders of companies located in Canada are raising concerns over the jurisdiction limitations stapled in new by-laws in which lawsuits can only be filed in the business institutions' home provinces.
The new forum bylaws seem to be a learned tactic in belief that the defending businesses will have more protection should the lawsuits against them be held in their own court, although it makes quite little difference about the place where a company should be sued as most of the cases are already being fought in the company's region.
"There hasn't been demonstrated economic harm for a company due to having litigation coming in from other jurisdictions," reveals John Roe, executive director of Institutional Shareholder Services (ISS) Corporate Solutions.
According to him, no substantial benefits are gained from creating these forms of bylaws and companies also make no mention of any cost-saving perks in the litigation process.
These limitations are useful for companies incorporated under federal business legislation, says lawyer Allan Coleman, because they can make their province court of choice that will be used for all shareholder litigations involving their business.
There are more exclusive forum by-laws expected to be created next year says Lawyer Ed Waitzer. He adds that once these additional bylaws are commenced, many companies will follow through because they don't want to draw attention to themselves by adopting the changes first as it might shed them a bad light.
"From my perspective, it's a good precaution to put in. It may well be the choice of forum would end up being Canada anyway but why not stick it in your by-laws just to remove uncertainty?" points Waitzer.
Kingsdale Shareholder Services Vice President Victor Li warns that seeking shareholder approval for new by-laws would now be getting more complicated. Some proxy firms such as ISS and Glass Lewis are determined to eliminate such conditions so that new proposals are more likely to get turned down in the coming years.
However, companies can still trudge on their luck and pass bylaws assigning their home province in Canada for jurisdictions as other investors are wary to sue companies because excessive litigations will cause both sides to spend more money for causes that can be avoided entirely.
