| Small & micro cap project
Enzo Biochem: AGM announced just two hours before the meeting date!!
In September 2019, Harbert nominated two director candidates.
All three proxy advisory firms supported Harbert’s nominees. A few days before the AGM, two of Harbert’s nominees garnered 80% and 61% respectively of the shares then voted.
It was clear that the two incumbent directors were going to lose.
On January 28, 2020, i.e. three days before the AGM, the company announced that the AGM was delayed until February 25, 2020, so that shareholders could vote on a proposed bylaw amendment to expand the board from five to up to seven members.
Game plan #1: AGM announced with just two hours’ notice
Contrary to the press release, on January 31, 2019, the company filed an SEC filing at 7:07 a.m. announcing that the annual meeting would be convened, as originally scheduled, less than two hours later at 9:00 a.m. The purpose of the AGM was to reschedule the meeting to February 25, 2020.
You may be puzzled why the company would do such a thing, considering there was no election. You may also be wondering what the big deal was in announcing the AGM just two hours before, considering that it was going to be adjourned?
It’s all due to legal ploys.
Under New York law, the power of adjournment lies with the holders of a majority of the shares present in person, or by proxy, at a meeting—not the company. Under the company’s bylaws, only in the event that all shareholders entitled to vote are absent, does an officer of the company have the ability to adjourn the annual meeting.
So, if shareholders are present at the AGM, the company would not be able to postpone the AGM without a shareholder proposal (which the company may not be able to get). Not only that, the two incumbent directors would lose the election.
Game plan #2: Proposal to amend bylaw and increase the board size
The drama did not stop there.
The company’s proxy statement filed on January 31, 2020, revealed another plan – increasing the company’s board size from five to seven members and to add at least one seat, with that seat belonging to Barry Weiner (an incumbent director), who otherwise would have been voted off the board. Moreover, the director candidates nominated by Harbert Discovery will now run unopposed as candidates for election as Class II directors.
Interestingly, the company’s bylaw requires super-majority votes to amend the bylaw to increase the board seats. Frankly, it is very hard to reach this hurdle rate given the company’s voting history.
Well, the company has an answer for this.
The company argued that the amendments to change the size of the board was “inadvertently” added to the wrong section of the bylaw. As such, the super-majority requirement does not apply to increase the size of the board.
This is one stunning explanation.
Moving a sentence in a bylaw from one section to another is as easy as moving furniture from one room to another! All you need to say is it was “accidentally” put there… we are going to change it. Very simple!
Why is the company so desperate?
He is the founder of the company and he is currently the company’s president. He served as the company’s CFO until December 2019.
Given the current scenario, he is most likely to lose his position as a director. So, the company is desperately taking all steps to keep him on the board.
Anyway, Harbert Discovery Fund has filed a lawsuit and we are yet to know the outcome of this.
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