Economical Mutual Insurance is holding its Annual and Special General Meeting on May 26. Among the agenda items is a vote on the Board of Directors. Economical is hoping that the 943 mutual policyholders will vote to re-elect the current Board of Directors. Shareholder rights firm VC & Co. has been leading a campaign with some of Economical’s dissident policyholders to elect a new board as the property and casualty company embarks on a process of demutualization.
How did it get to this point? Below is a timeline chronicling the demutualization process and the battle with VC & Co. for mutual policyholder support.
October 28, 2009: Economical’s Board creates a Special Committee on Mutual Membership to maintain and develop mutual policy membership
February 24, 2010: Economical’s Special Committee on Mutual Membership recommends to the Board of Directors that the membership base be increased from 1,000 to 2,000 within five years.
June 25, 2010: Economical’s CFO Sandeep Uppal meets with Bill Andrus, an Economical mutual policyholder and director of Jevco Insurance, a P&C company acquired by Westaim. Economical says that at that meeting or soon after, Uppal suggested Westaim consider a takeover attempt of Economical.
July 15, 2010: Westaim writes to Economical, requesting a meeting to discuss a potential transaction between the two companies.
October 13, 2010: Westaim meets with Gerald Hooper, Economical’s Chair of the Board of Directors and Noel Walpole, then Economical’s and CEO. Westaim allegedly proposes that Economical demutualize and form an alignment with Westaim.
October 15, 2010: Westaim sends Economical a letter suggesting it had reviewed the company’s bylaws regarding election of directors and might have to engineer a hostile takeover if Economical did not agree to the alignment.
Mid-October, 2010: Retainer between Westaim and Voorheis & Co. (to which VC & Co. is affiliated) is terminated.
November 4, 2010: At a Board meeting, Economical said it considered a “proposal from another company for a transaction” and decided to seek legal advice and establish a “special committee” to “look at alternatives.”
November 5, 2010: Economical sends a notice to all (approximately 2,500) employees of Economical, inviting eligible employees to become mutual policyholders.
November 12, 2010: VC & Co. began running newspaper ads, inviting Economical’s mutual policyholders to talk to the firm about “enhancing the value of their policies.”
November 15, 2010: Economical’s Board of Directors meets. Company imposes moratorium on issuing new mutual policies.
November 23, 2010: Believing there was a leak of company information, Economical orders executives to turn over electronic devices belonging to the company.
November 24, 2010: Economical issues letter to its mutual policyholders, advising them to “not sign away your interest in Economical Mutual”.
December 14, 2010: Economical publically announces that it intends to demutualize. A successful demutualization would make Economical the first Canadian property and casual insurance company to demutualize.
December 30, 2010: VC & Co. announces that the requisite number of policyholder proposals calling for the replacement of Economical’s Board of Directors were submitted to the insurer.
December 31, 2010: Noel Walpole, Economical’s CEO, retires after 15 years at the company. Walpole is replaced by Katherine Mabe.
January 14, 2011: Economical announces that it fired its Chief Financial Officer Sandeep Uppal on January 6, for an alleged misappropriation of $126,000 and breach of fiduciary duty “related to his secret support of, and participation in, an unsolicited approach in October by a competitor, The Westaim Corporation, regarding a sponsored demutualization as well as the activities of VC & Co. Advisory Limited that followed.”
January 24, 2011: Economical fired Yvan Aubin, formerly Vice President of Finance.
March 22, 2011: In the federal budget, Finance Minister Jim Flaherty says a framework is being developed so that P&C mutual insurance companies that choose to demutualize can do so through an “orderly and transparent process and ensure that policyholders are treated fairly and equitably.”
March 22 to 24, 2011: Economical and VC & Co. in court to determine whether VC & Co.’s proposals could be heard at Economical’s Annual Meeting.
April 6, 2011: Ontario Superior Court Justice Cavarzan rules that Economical’s mutual policyholders can vote to replace the Board of Directors. Justice Cavarzan also rules that VC & Co. cannot have access to a contact list of Economical’s mutual policyholders, nor can policyholders vote anonymously.
April 11, 2011: Economical distributes its proxy circular ahead of the Annual and Special Meeting.
May 3, 2011: Ontario Superior Court of Justice rules that Economical must distribute to its policyholders the written communications from VC & Co.
May 4, 2011: VC & Co. and Economical enter into a binding agreement that will allow mutual policyholders to vote by secret ballot at the Annual and Special Meeting.
May 13, 2011: Deadline for proxy votes to be delivered to VC & Co.
May 16, 2011: Deadline for proxy votes to be delivered to Economical.
May 26, 2011: Economical’s Annual and Special Meeting of Mutual Policyholders to take place at Bingemans Marshall Hall in Kitchener, Ontario.