When shareholder meetings go wrong

A bizarre proxy fight at US life sciences company CNS Response Inc appears to hinge on the validity of a special meeting, writes Scott Fenn of ProxyGovernance. In one of the stranger US proxy contests witnessed in recent years, Leonard J. Brandt, the co-founder and former CEO of CNS  is claiming victory in the election of a slate of dissident directors at a special meeting held on Sept. 4, 2009, while the company is saying that the meeting was invalid. 

The CNS board dismissed Brandt as CEO in April, although he remains a director. In a press release dated Sept. 4, Brandt claims he and five other new directors were elected with the backing of more than 14 million of the 16 million shares represented at the meeting. “Legal action may be necessary to compel the incumbent directors to respect the will of the stockholders,” his press release states.

 Meanwhile, in its own press release, CNS Response states: “The company does not recognize this meeting. It was not validly called or properly noticed. Any actions purportedly taken at the meeting, therefore, are invalid. Despite what Leonard Brandt may now claim, there has been no change in the Board of Directors of CNS Response, Inc.”  The company also claims that based on the current shares of the company’s stock outstanding, there was not a quorum of current stockholders at the meeting. It says it will hold a valid annual meeting to elect directors on Sept. 29.

 Part of the disagreement over the election results appears to revolve around a private placement that the company closed in the week prior to the disputed special meeting that resulted in the issuance of approximately 6.8 million in new shares and the conversion of three bridge note facilities into another 6.1 million common shares.  The dissidents claim these shares were not eligible to vote at the Sept. 4 special meeting.

To find  out more about this story please contact Scott Fenn at fenns@proxygovernance.com

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