A British Columbia court has ruled that Edward Rogers is the legitimate chair of Rogers Communications Inc., a major legal victory in his battle to take control of the company that bears his family name.
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A British Columbia court has ruled that Edward Rogers is the legitimate chair of Rogers Communications Inc., a major legal victory in his battle to take control of the company that bears his family name.
Justice Shelley Fitzpatrick of the B.C. Supreme Court ruled on Friday that Edward, who was the architect of a plan to oust the company’s CEO Joe Natale in September, only to be blocked by members of his own family, is entitled to call himself the legitimate chair of the company.
“I’m granting the order sought by Edward, and granting him costs,” the judge said.
Edward was chair of the board at Rogers Communications Inc. up until last month, when the plan came to light and other members of the board voted him out as chair. But he used his power as head of the voting trust that controls 97 per cent of the company’s voting shares to fire five members of the board, replace them with his hand-picked choices, and reinstate himself.
The court was being asked to decide who was in charge of the company: the original board that removed Edward as chair, or the newly constituted one he created. The case was heard in B.C. because that is where the company is incorporated.
‘Shakespearean’ family squabble
In her ruling, the judge acknowledged the firestorm of turmoil that has engulfed the company since the board room and family rift came to light.
“These family squabbles are an interesting backdrop to this dispute that would be more in keeping with a Shakespearean drama,” she wrote in her decision.
“They have no doubt added a voyeuristic element on the part of many into the lives of a very wealthy Canadian family and this aspect of the dispute has driven some media coverage. However, in my view, the family issues are of little assistance in determining the narrow legal issue raised and certainly do not need to be addressed or resolved in this court,” she said. “At best, they are a distraction.”
Camden Hutchison, a law professor at the Allard School of Law in Vancouver, says the ruling was what he expected. Because Edward controls 97 per cent of the voting rights, what he did is “permitted under the Business Corporations Act of British Columbia and also under the articles of Rogers Communications,” he told CBC News in an interview Friday.
Under an obscure loophole in a part of B.C. corporate law, anyone with two-thirds control of shareholders can add or remove directors through a simple consent resolution, without the need for a full shareholder meeting.
The company’s lawyers argued that Edward didn’t follow the right protocol by replacing board members unilaterally and had silenced the wishes of non-voting shareholders, but argument didn’t hold any legal weight.
“It’s not a legal argument,” Hutchison said.
WATCH | Rogers drama like a ‘soap opera’:
Rogers fight ‘a soap opera’
Business professor Glenn Rowe says it’s rare to see public fights like this at a company as big as Rogers, even when they are controlled by families. 0:39
The judge seemed to agree, concluding in her ruling that based on the letter of the law, “it was not necessary for the [non-voting] shareholders to participate in the process … or that they attend an actual meeting of shareholders.”
“I have concluded that the process by which Edward obtained the consent resolution was available him under the articles and the act,” she said. “In accordance with the articles and the act, the consent resolution is deemed to be valid and enforceable.”
Lawyers for the company asked the judge to put a stay on her ruling coming into force, in order to give them time to appeal. But that request was denied; the ruling is in force immediately.
It’s not immediately clear if the company plans to appeal, but Prof. Richard Powers with the Rotman School of Management in Toronto says there would be little point.
“It’ll be a moot point by that point, because Edward will make the changes that he wanted to do. The senior management team will be gone. His directors will be in place and things move forward,” he said in an interview.
‘No joy’ in decision
In a statement to CBC News following the court ruling, Edward took a conciliatory tone.
“I take no joy in the decision or the events of past weeks,” he said. “The steps I have taken in the face of constant attacks in the media were difficult for me and my family … Our family has disagreements like every other family. I am hopeful we will resolve those differences privately, as any family would. I know every member of our family wants the brightest future for Rogers Communications.”
As for Natale’s role at the company moving forward, Edward seemed to suggest he might still have a future at the company.
“Mr. Natale remains CEO and a director of Rogers Communications and has the board’s support. Our focus must be on the business [and] a return to stability,” Edward said.
Either way, the ruling is a decisive win for Edward in his plans to overhaul the company.
Family members who opposed him strongly denounced the ruling. “We are very disappointed with the court’s ruling, which represents a black eye for good governance and shareholder rights and sets a dangerous new precedent for Canada’s capital markets by allowing the independent directors of a public company to be removed with the stroke of a pen,” Edward’s sisters, Martha and Melinda, and his mother Loretta, said in a statement to CBC News.
“The company now faces a very real prospect of management upheaval and a prolonged period of uncertainty, at perhaps the worst possible time.”
Hutchison says that, regardless of what happens now, the ruling is a positive thing for the company for the certainty alone, after a tumultuous few weeks.
“I’m not saying anything good or bad about Mr. Rogers [or] everyone else in terms of their ability to run the company, but just having certainty as to who’s in control, I think that that’s going to be a positive for [Rogers Communications Inc.]” he said.