Disclaimers: https://www.transactionaldelights.com/disclaimers

A recent report from Bloomberg, states that although Edwards Rogers was removed from his role as Chair of the RCI Board, he has maintained his ability to vote shares from the Rogers Control Trust[1] (an entity that controls RCI). In order to understand the reasoning behind these moves, it is first necessary to identify the three hats that Edward Rogers wears/wore for RCI: (i) Chair of the RCI Board (officer position), (ii) Shareholder (through his position as Chair of the Rogers Control Trust), and (iii) Director of the RCI Board. While Rogers was removed as Chair of the Board, he retains his position as a director on the Board, and as shareholder/Chair of the Rogers Control Trust.

RCI Chair and Board Member

So why was Rogers removed only as Chair of the RCI Board, and not as a director of the Board, or Chair of the Rogers Control Trust? Well, under RCI’s Articles, a dual-class corporation, governed by British Columbia law only shareholders have the ability to remove a member of the Board.

Under the Articles, the Chair is an officer[2], and the Board has the ability to remove an officer. So, while the Board retained the ability to remove Rogers from his position as Chair, the Board members in their capacity as directors, did not have the power to remove Rogers from his position as a Board director.

With respect to Edwards Rogers’ ability to remove and replace the Board, he had to turn to his shareholder hat, since he was incapable of doing that with either his Chair hat, or Director hat, and so the fight had to turn to the Rogers Control Trust (the entity that controls RCI through its ownership of RCI’s Class A shares) if Edward Rogers is to successfully remove and replace five members of the RCI Board.

RCI Shareholder (Rogers Control Trust)

So now, the fight has to turn to the shareholders in the form of the Rogers Control Trust. What are the key elements of the Rogers Control Trust?

• Edward S. Rogers is the Control Trust Chair (“The Control Trust Chair has the duty to vote the proxies on the election of directors of RCI and to approve, disapprove, or otherwise use reasonable efforts to influence other matters affecting RCI, in each case in his or her discretion, subject to the obligations imposed on the Control Trust Chair under the estate arrangements and the authority of the Advisory Committee”)

• Melinda M. Rogers-Hixon is the Control Trust Vice-Chair (“The Control Trust Vice-Chair assists the Control Trust Chair in the performance of his or her duties”)

• Advisory Committee (The current members of the Advisory Committee are: Loretta A. Rogers, Lisa A. Rogers, Edward S. Rogers, Melinda M. Rogers-Hixon, Martha L. Rogers, and David A. Robinson ((Rogers family members)); Alan D. Horn, Thomas I. Hull, and John H. Tory ((trustees of a trust for the benefit of Rogers family members)); and Philip B. Lind.)

  • Accountability. Both the Control Trust Chair and the Control Trust Vice-Chair are accountable to the Advisory Committee.

  • Appointment and Removal Powers. “The Advisory Committee is responsible for the appointment and removal of the Control Trust Chair and the Control Trust Vice-Chair (with preference being given to members of the Rogers family in accordance with the order of priority set out in the estate arrangements)

  • Significant Transactions and Changes of Control. “The approval on behalf of the Rogers Control Trust of certain significant transactions affecting RCI, including any transaction that would result in a change of control of RCI or any of its material subsidiaries or the sale by any of them of all or substantially all of its assets, or the acquisition by any of them of significant assets, and the imposition of conditions, if any, on the voting of proxies by the Control Trust Chair.

  • Voting Threshold. Decisions of the Advisory Committee generally require approval by two-thirds of its members and the concurrence of the Trustee.

So, while the Control Trust Chair has voting power for elections (relevant for Edward Rogers’ proposal to remove five directors from the RCI Board), the Advisory Committee has the ability to appoint and remove the Chair of the Trust – a position that Edwards currently hold. Fortunately for Edward Rogers, the voting threshold for a decision by the Trust requires two-thirds of its members (i.e., 7 members of the Advisory Board have to vote in favor for the removal based on public disclosure).

Here’s the rub. Bloomberg states that four individuals on the Advisory committee (Edward Rogers’ mother - Loretta, two of his sisters – Melinda and Martha, and Toronto Mayor John Tory) tried to limit Rogers’ power, but that was only 4 out of 10 possible members of the Advisory Committee, which does not meet the 2/3rds threshold requirement to limit Rogers’ ability to vote his proxies in an election.

So, what now? Bloomberg notes that “Rogers may not be able to replace the five directors through a written shareholder proposal on Friday… [and] believes the former chairman will have to hold a shareholder meeting to do so, potentially dragging out the fight for months.”[3]

We will keep our eyes out.

[1] “The trustee of the Rogers Control Trust (the Trustee) is the trust company subsidiary of a Canadian chartered bank and members of the family of the late Ted Rogers are beneficiaries. As at February 22, 2021, the Rogers Control Trust and private Rogers family holding companies controlled by the Rogers Control Trust together owned 108,403,398 Class A Shares, representing approximately 97.52% of the outstanding Class A Shares, and 38,938,700 Class B Non-Voting Shares, representing approximately 9.89% of the outstanding Class B Non-Voting Shares.”

[2] “Furthermore, the Board may assign to the chairman, if appointed, any of the powers and duties that are by any provisions of these Articles capable of being assigned to any other officer… The Board, in its discretion, may remove any officer of the Corporation.”

[3] In the backdrop is the Rogers – Shaw deal, with Shaw CEO Brad Shaw not commenting to Bloomberg on the matter.