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An Ontario Superior Court judge has complicated, but not blocked, efforts by ex-Dye & Durham Ltd. DND-T chairman Tyler Proud to remove his nominee to the board. Justice Michael Penny denied a request by Tyler Proud and his personal holding company OneMove Capital Corp.
to require the Toronto real estate software company, led by brother Matthew Proud, to add a proposal to an upcoming special shareholder meeting to vote off his nominee to the board, Edward Prittie, and replace him with hedge fund manager Eric Shahinian. At the meeting, called at the behest of activist Engine Capital LP, shareholders are to vote on whether to remove three directors – former chairman Brian Derksen, chair Colleen Moorehead and Leslie O’Donoghue – and replace them with nominees of the hedge fund, which owns 7.1 per cent of the stock.
It was postponed from its original Aug. 20 date because of the litigation. Ms.
O’Donoghue resigned this summer. Another activist, Blacksheep Fund Management, also plans to put forward a nominee. OneMove had also asked the board to add its proposals to the meeting circular.
While D&D agreed to nominate Mr. Shahinian, it rejected the request to put forward the proposal to vote off Mr. Prittie, arguing it was invalid because it was related to a personal grievance and had nothing to do with company’s business affairs.
Under an investor rights agreement, each of the brothers’ holding companies is entitled to nominate a director (who isn’t Tyler Proud) at shareholder meetings as long as they own 5 per cent of the stock. Tyler’s OneMove Capital has 8.4 per cent but lacks the unilateral right to remove its nominee from the board.
Mr. Prittie has been his nominee since the company went public in 2021 and elected every time. Justice Penny concluded that according to Ontario business law a shareholder seeking to remove a director must requisition a special meeting for that purpose “and cannot impose such drastic action simply as a ‘tagalong’ proposal to a different meeting called for a different purpose.
” But the judge disagreed with D&D that Tyler Proud was motivated by a personal grievance or that his effort was unrelated to business affairs. “The company has not discharged its burden of showing the proposal has been advanced in order to vindicate a personal claim or grievance.” Court filings show Tyler Proud and other shareholders grew increasingly frustrated with D&D’s strategic direction, mounting debt, pace of acquisitions and board oversight over management over the past two years.
Several investors, including OneMove, pushed chairman Mr. Derksen, when he was still chairman, to resign last fall, then withheld their support for him at the December annual meeting when he didn’t. Tyler Proud told the court he lost confidence in Mr.
Prittie this year after learning a search for a new chair wasn’t being conducted by the board’s corporate, governance and nominating committee but by his brother and Mr. Derksen, and after D&D did a dilutive stock offering months after buying back shares at a higher price. After asking Mr.
Prittie to quit to no avail, he decided to take a more formal route by piggybacking on the Engine meeting. If OneMove had won, it could have led to four dissident-backed outsiders joining the seven-member board, upending the power balance. Now, just three spots will be in contention, leaving four incumbents, assuming D&D appoints a friendly replacement for Ms.
O’Donoghue beforehand. OneMove said in an e-mailed statement it was reviewing the ruling, adding D&D’s arguments “highlight the board’s desperation to avoid a reckoning with its shareholders and distract from long-standing and ongoing poor governance.” D&D’s litigation lawyer Joe Groia said: “I hope Tyler comes to his senses and realizes his conduct is not helping the company or its shareholders.
” But Justice Penny also ruled the investor rights agreement does not stop OneMove from asking shareholders to remove its nominee “at a properly constituted shareholder meeting.” That means Tyler Proud could either just wait until the annual general meeting in December and propose another nominee, or requisition a separate special meeting to remove Mr. Prittie, Toronto corporate lawyer Philip Anisman, who isn’t involved in the case, said after reviewing the ruling.
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