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Edward Rogers misinterpreting B.C. law on removal of board members: family's lawyer

VANCOUVER — The lawyer for the head of the Rogers family trust says his client had a right to remove and replace five directors without a meeting of shareholders, but a lawyer who represents opposing family members argues that's a simplistic interpre

VANCOUVER — The lawyer for the head of the Rogers family trust says his client had a right to remove and replace five directors without a meeting of shareholders, but a lawyer who represents opposing family members argues that's a simplistic interpretation of corporate laws in British Columbia.

Stephen Schachter, lawyer for Edward Rogers' mother and two sisters, who are board members, told a B.C. Supreme Court judge Monday that "ordinary resolution" stipulates removal or election of directors must occur at a meeting where shareholders have a right to participate.

He said that's part of the long-standing public commitment to strong corporate governance practice by Toronto-based Rogers Communications Inc., which is incorporated in B.C.

"He cannot be thumbing his nose at due process," Schachter said of Edward Rogers, who was not in court. "This is a publicly traded company."

However, Ken McEwan, a lawyer for Edward Rogers, told Justice Shelley Fitzpatrick earlier that his client had the authority to make that decision under "ordinary resolution" of the board of shareholders because the trust controls 97.5 per cent of the shares in Rogers Communications.

"That is the default mode of resolution throughout the (B.C. Corporations) Act," McEwan told Fitzpatrick, who adjourned the case until Friday.

Schachter said the company has specifically rejected filling vacancies of board directors outside of a meeting. 

"It's relevant, contextual information for your ladyship to know the public commitments by the company, signed off by Edward, are not in line with the one-day written resolution to remove the independent directors and replace them," Schachter told Fitzpatrick, who must decide if the newly constituted board is valid.

The son of the company's founder, the late Ted Rogers, claimed in an affidavit that he had the power to fire and appoint board members because he is chair of the Rogers Control Trust, prompting the feud with his mother Loretta Rogers and sisters Melinda Rogers-Hixon and Martha Rogers.

They are the respondent in the case and argue the board he appointed is illegitimate and the only valid board is the one that existed prior to his changes.

But McEwan said the respondent is seeking "to misdirect the fact" that the case is about an exercise of shareholder rights.

"It has filed evidence of what it asserts are best practices in Canadian corporate governance in an attempt to constrain or influence the statutory rights of shareholders," he said.

"The respondent seems to distract from the simplicity of the issue before the court in that it goes so far as to attempt to invoke minority shareholder rights, suggesting they are compromised."

David Conklin, a lawyer for Rogers Communications, said any removal or replacement of directors from the board of Rogers Communications should have been publicized in order to inform all shareholders about decisions to vote at a meeting about governance or to buy or sell stocks.

He said the company depends on all stakeholders, including those who make up 70 per cent of class B non-voting shareholders of the publicly traded company. Regular practice involving a change in governance would involve notice of a meeting to the 30 per cent of class A shareholders, who would be informed about what they were being asked to do and why, Conklin said.

However, shareholders were given three or four lines of explanation that "there's been a disagreement" leading to Edward Rogers' decision to replace independent directors of the board.

"That is not consistent with the environment in which Rogers operates," he said.

Conklin said Edward Rogers' actions are also in contrast to a "memorandum of wishes" by Ted Rogers, who "actually foresaw these events" before his death in 2008.

McEwan said the document from the late patriarch has, up until now, been treated as confidential, wouldn't meet a legal test and wasn't known to all shareholders.

"The only time it became a matter of public record was when it was filed by management," he said of documents filed in court on Friday by Ted Rogers' wife Loretta Rogers. 

The dispute has left the telecom company with two boards that each claim to be in power and has publicly pitted members of the Rogers family against one another amid negotiations to buy rival Shaw Communications Inc. for $26 billion, pending approval by regulators.

Loretta Rogers says in an affidavit that the decision to unseat her son as chairman of the board was an extremely difficult one for her and other family members after weeks of trying to work with him.

The family matriarch said she disagrees with her son's portrayal of the facts in his affidavit and was misled about the reasons he wanted to fire CEO Joe Natale, who learned "by accident" that he was to be replaced by the chief financial officer.

Loretta Rogers said she disagrees with her son's "personal view that he is entitled to exploit his entrusted position as control trust chair to circumvent Ted’s wishes, the interests of the Rogers family members and the governance structure that has allowed Rogers to become a successful public company despite family control."

This report by The Canadian Press was first published Nov. 1, 2021.

Companies in this story: (TSX: RCI)

Camille Bains, The Canadian Press

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