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Does the Board of BacTech Environmental Corporation Expect Shareholders to Wink at Years of Non-Compliance?

I’ve just written to the investor relations people at BacTech Environmental Corporation to get some background information on two extraordinary resolutions included on this year’s proxy form.

Both resolutions have to do with the Board’s failure to hold an annual general meeting for several years in a row.

As a result of insufficient financial resources for the years ended 2021, 2022 and 2023, the Corporation has not held its annual general meeting of shareholders pursuant to section 133 of the Canada Business Corporation’s [sic] Act. The Corporation has complied with its continuous disclosure obligations and filed, among other things, its audited and interim financial statements…as required.

There is (on page 9 of the management circular) a broad resolution asking shareholders to “approve, consent, and/or waive the Corporation’s deficiencies with respect to providing notice of and holding its annual general meeting.” It’s a request for blanket absolution, extending from non-compliance with section 79 of the Ontario Securities Act (which has to do with sending out regular financial statements to Ontario shareholders) to past appointments of auditors, and “all past acts of the Board, all lawful acts, contracts, proceedings, appointments, and payments” over the last four years or so.

Another resolution, Ratification of Stock Option Plan (on page 8 of the circular), asks shareholders to ratify and approve retroactively “all past issuance of stock options granted by the board” for fiscal years 2021-2024, “notwithstanding any defect or non-compliance with annual general meeting requirements.”

Right now, I am set on voting against both resolutions.

The Board appears to be looking for release from its obligations to shareholders and legal cover. Essentially, these two resolutions ask shareholders to do for the Board of BacTech Environmental what the Board of BacTech Environmental failed to do for shareholders: namely, bring the Board, and the company, into compliance with Canadian securities law. And while I am aware of the company’s cash flow problems, as indicated by this chart, I still have some trouble accepting the explanation that “insufficient financial resources” are the reason for the board’s failure to hold an annual general meeting. It seems more like a lack of resourcefulness — or, worse, negligence or indifference. This impression may simply be due to the fact that the Board has in its communications with shareholders done a poor job at explaining itself.

I would also like to know (and this is the question I put to the BacTech investor relations people) whether the Board applied for a Court order extending the time for calling an annual meeting in 2021, 2022, and 2023, as described in Section 133 subsection 3 of the Business Corporations Act. A quick search on SEDAR didn’t bring up anything, but maybe there’s another place where a record of these applications would be kept. Timely application for extension each year would at least indicate that the Board was making a good faith effort to comply with the law and was trying to do right by shareholders.

At the moment, the answer to the question asked by my title seems to be “yes,” but I am open to hearing the Board’s side. If I get a response from BacTech before the 12 September voting deadline, I will post it here and revisit my proxy.

Update: I heard back from the CEO of BacTech just a few hours after posting this. See this post.

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