If nothing else the outcome of the proxy contest at Ellipsiz Communications shows why the games are played: The result can, at times, be vastly different from what was expected.

Against seemingly all odds, the company — which is listed on the TSX-Venture Exchange and whose main business is providing services to the telecommunications industry in Taiwan — won the battle to get its four director nominees elected.

And in so doing, it managed to defeat the plans of the 42.2 per cent major shareholder, Tat Lee (Michael) Koh. As a result, neither Koh, who was the concerned shareholder in this contest, nor his three nominees, will be directors.

And the Ellipsiz victory was even more dramatic when it is remembered that going into the vote, Koh also had the support of the former chief executive officer (Hans Chang) who had about a five per cent stake. Winning when about 48 per cent of the vote was against the company is remarkable. (The company’s nominees received about 1.3 million more votes than Koh’s team.)

It’s even more remarkable when not all the shares were voted. (But the turnout was impressive: 98.72 per cent of the outstanding shares, held by 116 shareholders, were voted.) The numbers mean that aside from Koh and Chang virtually all of the shareholders supported Ellipsiz.

So why didn’t Koh’s message receive any traction? One reason, according to Ellipsiz’s release is that part of the materials distributed to shareholders “included detailed information concerning alleged serious transgressions of securities laws and regulations, allegedly committed by Koh while serving as a director of public companies in Asia and Canada. Based on discussions with various shareholders it was clear they were deeply concerned by this information.”

Reached Wednesday, Koh, who has called the allegations “unfounded,” said he has “asked counsel to review” the voting at the meeting. In addition he said, “We are investigating certain alleged improper conduct.”

The recent vote — held last Friday with the results released late Tuesday — caps a bitter one-year relationship between the board and the major shareholder. In June 2016, things were good when Ellipsiz — which became public via a reverse takeover — planned its first annual meeting in Canada. A circular was prepared that called for the election of six directors including three relatively new directors. That duly happened though at the annual meeting Koh’s vote was disallowed by the scrutineer.

Two months later Koh requisitioned a shareholder meeting designed to replace the three recently elected directors. “Mr. Koh believes the Board needs to be reconstituted in order to ensure that the Company is put on a path to enhancing shareholder value. Mr. Koh has lost confidence in three directors of the Company and believes their removal is essential in order for the Company to achieve its goals,” said a release at the time.

While that was Koh’s plan, the company declined that request after the largest shareholder also wanted a shareholder list.

Then the courts got involved, siding first the company and on appeal with Koh. After the first court’s ruling, the scheduled Nov. 28 meeting (which was cancelled) became the July 7, 2017 annual meeting following the court order.

So what’s next? With a market cap of $3.2 million, one option would be for the major shareholder to make an offer for the rest of the company.

And based on what Ellipsiz said Tuesday it would like the regulators to get involved. Last December, it brought “the alleged misconduct engaged in by Koh” to the attention of both the OSC and TSX-V. However it added, “to date the Company is unaware of any action being taken by either regulator.”

Financial Post
bcritchley@postmedia.com