TORONTO, ONTARIO–(Marketwired – Nov. 29, 2016) – Ellipsiz Communications Ltd. (formerly NXA Inc.) (TSX VENTURE:ECT) (the “Company” or “ECL”) announces that on November 25, 2016 a judge of the Superior Court of Justice – Ontario refused to permit Tat Lee (Michael) Koh to call a meeting of shareholders.
In respect of a release issued by Mr. Koh on November 28, 2016 confirming the cancellation of the shareholder’s meeting he had purportedly called, of the 48% of the shares that Mr. Koh claims to have received in support, almost 43% were his own shares. In other words, even though Mr. Koh’s proxy solicitation was not contested by the Company (as we believed the meeting to be invalid), Mr. Koh only obtained the support of an additional 5% of all shareholders.
In Reasons released on November 28, 2016 the Court agreed with the conclusion reached by the Company, as previously disclosed in a press release dated October 4, 2016, whereby the Board of Directors refused Mr. Koh’s requisition to call a meeting of shareholders on the basis that it was clear that the primary purpose of Mr. Koh’s requisition was to redress a personal grievance against the Company and the directors who Mr. Koh sought to replace. The Court also rejected Mr. Koh’s request for the Court to exercise its discretion to call a meeting of shareholders, on the same grounds relied on by the Board of Directors to refuse Mr. Koh’s requisition to call a meeting.
As a result of the Court’s Order, Mr. Koh announced that the meeting of shareholders he had purportedly called for November 28, 2016 had been cancelled. Mr. Koh had called the meeting for the sole purpose of removing and replacing three current members of the Board of Directors who had been duly elected at a meeting of shareholders held on June 30, 2016, with three persons nominated by Mr. Koh.
As found by the Court, Mr. Koh “has failed to demonstrate any issue of such concern to shareholders that it is necessary to convene a meeting to consider the Resolution [to remove and replace the three directors] prior to the next annual and general meeting of shareholders of ECL”.
In concluding that Mr. Koh’s attempt to call a shareholders meeting was for the primary purpose of redressing Mr. Koh’s personal grievances against certain directors Mr. Koh wanted to remove from the Board, the Court concluded that a “personal grievance involves a dispute that does not entail an issue of corporate policy or operations but rather involves an issue primarily pertaining to the personal interests of the complainant.” Having impeded Mr. Koh’s ability to pursue his “personal interests”, interests which cannot be reconciled with a Board member’s fiduciary duties, by calling the meeting Mr. Koh attempted to remove the directors who stood in his way.
While the Company filed the affidavits of three Board members, including the affidavit of Mr. Tan (the President and senior officer of the Company’s operating subsidiary in Taiwan), in order to evidence Mr. Koh’s true purpose in seeking to call the meeting, Mr. Koh did not tender any evidence before the Court regarding his purpose in requisitioning the meeting, apart from representations made by his counsel. The Court found that there was “no evidence” to support those representations, which included claims that the Board functioned in a dysfunctional manner and that members of the Board had engaged in clandestine activity. Furthermore, the Court noted that there was no evidence that any shareholder other than Mr. Koh had any complaint regarding the conduct of the Board, or the directors Mr. Koh sought to remove.
Among the items the Court found formed part of Mr. Koh’s personal grievance against the directors was his desire to personally negotiate a potential acquisition by the Company based on his status as the “single largest shareholder” and because he claimed that he was “the one to finance the deal”. The Court found that Mr. Koh was “confusing his role as director and shareholder” and that the “Applicant’s fiduciary duty [as a director] required that he approach the issue of the negotiator with a view to maximizing the prospects of a successful negotiation”. Mr. Koh’s insistence that he engage in the negotiations was instead based on a “question of respect for him personally”. In addition, the court found that the “there is also reason to doubt whether the proposed financings [which are no longer on the table] were credible”.
Similarly, in respect of Mr. Koh’s objections to steps taken by the Board of ECL to reconstitute the Board of the operating subsidiary (including removing Mr. Koh as a director and Chairman of the operating subsidiary), in order to enhance operational and financial controls over the subsidiary, the court noted that the changes were supported by Mr. Tan. Moreover, the court noted that Mr. Koh’s claim that the changes may cause management of the subsidiary to resign “were never credible” and that Mr. Koh’s concern was simply to “maintain his position as a director and chairman” of the operating subsidiary.
The Court expressly noted “this is not a case in which there is a dispute between two groups of investors. The applicant is on his own”. The Court found, consistent with the conclusion reached by the Board of Directors, that the position advanced by Mr. Koh “reflects his own personal interests rather than any larger sense of the best interests of ECL”. As a result, the court concluded that Mr. Koh “has failed to demonstrate any issue of such concern to the shareholders that it is necessary to convene a meeting to consider the Resolutions prior to the next annual and general meeting of shareholders of ECL”.
The Company is continuing to evaluate the implications of the Court’s decision as it relates to the ongoing affairs of the corporation, including Mr. Koh’s continued participation on the Board of Directors.
Neither the Exchange nor its Regulation Services Provider (as that term is defined in policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release.
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