Shareholder Activism, Meeting Postponements and Proxy Disclosure: Key Takeaways from MILFAM LLC v Morrow, Smith and Scully Royalty Ltd.

Sep 2026

A recent decision by the Grand Court of the Cayman Islands in the case of MILFAM LLC v Morrow, Smith and Scully Royalty Ltd.¹ (“MILFAM v Scully”) addresses several issues of significance for corporate governance, shareholder rights, and the conduct of shareholder meetings under Cayman Islands law. This article explores the decision and offers some takeaways.

Arising from a contested election of directors at the annual general meeting of Scully Royalty Ltd. (“Scully”), the Court found:

• Absent an express power in the articles of association, directors have no power to postpone or abandon a duly convened shareholder meeting; that decision rests with the meeting itself.
• Terms will only be implied into articles of association where necessary, not merely where the articles would be improved by the addition; where shareholders have contracted out of statutory default mechanisms, the Court will not supply a further one.
• Where directors hold the exclusive power to appoint the chair of a general meeting, they owe an active fiduciary duty to exercise that power for a proper purpose so that the meeting can proceed and conduct business.
• Dissident shareholders seeking to replace incumbent directors are subject to the common law duty to make shareholder communications fair and not misleading, including disclosure of the nature and extent of their relationships with their nominees.
• Corrective disclosure by a company shortly before a meeting will not cure a dissident shareholder’s defective proxy materials, but inadequate disclosure may invalidate only the affected resolutions rather than an entire slate.

At Conyers, across our litigation and corporate teams, we are often instructed to assist directors and stakeholders in relation to governance issues.

While the judgment is of particular interest to Cayman Islands companies, directors and shareholders involved in contentious situations, there is also important guidance on general principles and best practice insofar as governance and shareholder meetings are concerned.

What was the background to the dispute in MILFAM v Scully?

The case involved a proxy fight for control of Scully, a Cayman Islands exempted company listed on the NYSE. One of Scully’s largest shareholders (owning at the time approximately 13% of the issued share capital) is a group controlled by the president and manager of MILFAM LLC (“MILFAM”), which had nominated a competing slate of five directors for election at Scully’s annual general meeting scheduled for December 2025 (“AGM”).

Following an earlier judgment in which the Court had ruled that MILFAM’s director nomination notice had been validly delivered, the incumbent Scully directors resolved to postpone the AGM, citing the pending appeal of that earlier Court decision and concerns about shareholder information. MILFAM considered the postponement invalid, and its representatives attended the AGM venue on the scheduled date, where they purported to hold the AGM – in the immediate vicinity of the locked meeting room – and pass resolutions appointing the MILFAM nominees as directors.

The resulting dispute required the Court to consider several issues with respect to the AGM.

Did the Scully directors have the power to postpone the AGM?

The first issue was whether the Scully directors had the power to unilaterally postpone the AGM. The Court reaffirmed the well-established common law principle that, absent an express provision in the articles of association, directors have no power to postpone or abandon a duly convened shareholder meeting. That power rests with the meeting, which can decide whether to resolve to adjourn or go on with the business for which the meeting had been convened.

The defendants argued that broad management powers contained in Scully’s articles of association (the “Scully Articles”), read together with a reference to “postponement” in a procedural provision of the Scully Articles, demonstrated that the Scully Articles conferred on the board a power to postpone. The defendants also relied on the fact that Scully’s AGM notices, proxy cards and proxy materials had for years referred to “adjournment(s) or postponement(s)”, allegedly supporting a shared assumption that such a power existed.

The Court rejected those arguments, holding that the reference to “postponement” in the Scully Articles was merely an administrative provision dealing with the mechanics of serving notices, and did not require that there be a director power to postpone (nor could such a power be implied from the general management provisions). The Court rejected the historical-practice argument on the basis that an erroneous assumption could not justify interpreting the Scully Articles to include a power that is not there.

Could Scully shareholders appoint a chair where no directors attend?

Having established that the AGM postponement was ineffective, the Court turned to the issue of the appointment of the chair at the AGM, ultimately concluding that the chair was not validly appointed. Accordingly, MILFAM’s purported meeting was unable to conduct any business and the resolutions allegedly passed were invalid.

The Scully Articles permit the chair of the board or, failing that, the directors present at the meeting, to appoint the chair of the AGM – giving the directors exclusive power to appoint the chair at general meetings.

MILFAM submitted that the Court should imply a term allowing shareholders to appoint a chair where no directors are in attendance. The Court declined to do so for two principal reasons:

1. 1. Strict interpretation of contractual choice: Applying the test established by the UK Supreme Court in Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd,² Segal J held that the touchstone for implication is necessity, not mere reasonableness.
2. The Court emphasised that the concept of necessity must not be watered down; necessity is not established by showing the contract would be improved by the addition. While the test governing the implication of terms permits the practical workings and effect of the relevant provision to be taken into account, the question is not whether the contract (here, the Scully Articles) would work at all without the implied term but whether, without the implied term, the Scully Articles would work in the way that the document must be understood as meaning, having regard to the way it was drafted.
3. Here, the shareholders had deliberately contracted out of two statutory default mechanisms,³ each of which would have permitted members to appoint a chair in the directors’ absence. To imply the proposed term would effectively introduce a third default mechanism, which the Court was not prepared to do. The Scully Articles, objectively assessed, were therefore construed as containing a complete code for the appointment of the chair at a general meeting.
4. 2. Directors’ fiduciary duties provide an alternative relief mechanism: The Court held that the directors’ exclusive power to appoint the chair carried with it an active fiduciary obligation to exercise that power with proper purpose, and directors must take reasonable and proper steps to exercise their power unless exceptional circumstances justify a different course.

What disclosure obligations apply to dissident shareholders?

General Disclosure Requirements

Although not necessary given his findings on the chair issue, Segal J went on to address in full the (in)adequacy of MILFAM’s disclosure in its director nomination notice and proxy statement. In issue was whether MILFAM’s disclosure was sufficient to satisfy the requirement in the Scully Articles to disclose in respect of each director nominee any other “information relating to the person that would be required to be disclosed in a dissident’s proxy circular in connection with solicitations of proxies for election of Directors pursuant to applicable law.”

The Court held that the common law requires shareholder communications to be “fair and not misleading”, regardless of whether the communications come from directors or shareholders. The relevant standard is not one of exhaustive disclosure. Rather, shareholders must receive information that is reasonably sufficient, and provided adequately in advance, to enable an informed voting decision.

In the context of a proxy contest for board seats, the Court held that a nominating shareholder must disclose, at least in broad terms, the nature and extent of its relationships with its nominees — including governance roles within the nominating shareholder’s structure, directorships of affiliated entities, associated remuneration, and close professional or fiduciary relationships with the nominating shareholder’s principals.

Applying this standard, the Court found that MILFAM did not adequately disclose the significant connections between two of its nominees and MILFAM. Those relationships were capable of influencing how a reasonable shareholder assessed the suitability and independence of the relevant nominees. The onus was on MILFAM to show that a reasonable shareholder, knowing the true facts, could not have voted differently. MILFAM failed to discharge that burden.

Late Corrective Disclosure Did Not Cure a Defective Proxy Statement

MILFAM argued that Scully’s own press release, issued five days before the AGM, had disclosed the very relationships at issue and therefore shareholders could not have been misled. The Court rejected this argument. The press release was issued immediately before the holiday period, and shares were held through chains of custodians and sub-custodians. In those circumstances, shareholders could not be assumed to have had a reasonable opportunity to withdraw their proxies, attend the AGM in person, or otherwise act on the new information. The adequacy of a dissident’s disclosure must be judged by reference to its own materials, not the company’s corrective statements (if any).

So while the Court ultimately held that the AGM was unable to transact business for other reasons, it nevertheless concluded that the resolutions relating to those nominees would have been invalid on inadequate disclosure grounds in any event.

Selective Invalidity of Resolutions

Importantly, the Court held that the inadequate disclosure regarding two of the nominees did not taint the entirety of the proxy statement. The election of those two nominees was invalidated, but the disclosure regarding the remaining nominees was not rendered defective. This confirms that the Court may take a proportionate approach, invalidating specific resolutions (where circumstances dictate) without voiding an entire slate of appointments.

What are the practical implications, and how can Conyers help?

The decision in MILFAM v Scully highlights the importance of carefully drafted constitutional documents, adequate shareholder disclosure, and properly conducted shareholder meeting and proxy processes.

For directors and shareholders alike, the judgment brings to light the value of obtaining sound legal advice at an early stage on corporate mechanics and litigation risks.

Conyers’ corporate and litigation teams routinely work together advising clients on risk advisory mandates, boardroom disputes, contested transactions and general corporate governance. Conyers has vast experience in bringing claims on behalf of stakeholders and successfully defending fiduciaries in analogous scenarios.

To discuss this decision or any of the issues raised, please contact the authors or your usual Conyers contact.

¹MILFAM LLC v Morrow, Smith and Scully Royalty Ltd. [2026] CIGC (FSD) 54.
²Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742.
³Specifically, the shareholders had contracted out of Article 47 of Table A and Section 61 of the Companies Act (As Revised).