Joseph Shugrue Mr. Shugrue has been our Vice President, Claims since December 31, 2010. Mr. Shugrue previously held various senior management positions with American Service Insurance Company, which became a subsidiary of the Corporation on December 31, 2010, and KAI, beginning in March 2004. Prior to that time, he held positions with other specialized insurance businesses beginning in October 1986.Chief Operating Officer
EXECUTIVE COMPENSATION
Advisory vote on the approval of the Corporation's approach to executive compensation as discussed
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and Section 14A of the Securities Exchange Act of 1934 (the "Exchange Act") entitle Shareholders to have the opportunity to cast a non-binding advisory vote regarding the Corporation's approach to executive compensation as described in the Proxy Statement. The Corporation has disclosed compensation pursuant to rules adopted by the Securities and Exchange Commission ("SEC").
The Corporation believes that its executive compensation programs are designed to (1) motivate and retain executive officers, (2) reward the achievement of the Corporation's short-term and long-term performance goals, (3) establish an appropriate relationship between executive pay and short-term and long-term performance, and (4) align executive officers' interests with those of the Shareholders. Under these programs, the Corporation's executive officers are rewarded for the achievement of goals established by the Compensation Committee and the realization of increased Shareholder value. The Compensation Committee is responsible for reviewing the compensation programs for Atlas' executive officers to ensure they achieve the desired goals of aligning Atlas' executive compensation structure with Shareholders' interests and current market practices.
The Corporation is asking Shareholders to indicate their support for the compensation of the Corporation's Named Executive Officers as disclosed herein. This proposal, commonly known as a "say-on-pay" proposal, gives Shareholders the opportunity to express their views on the Corporation's approach to executive compensation. This vote is not intended to address any specific item of compensation, but rather the overall philosophy, policies and practices of the Corporation's approach to executive compensation as described in the Proxy Statement.
Shareholders will be asked to approve the following non-binding advisory resolution:
BE IT RESOLVED THAT the Corporation's approach to executive compensation as described in the
Corporation's Proxy Statement for the 2016 Annual General Meeting of Shareholders pursuant to
applicable SEC regulations, including the compensation table, other executive compensation tables
and related narrative disclosures, is hereby approved.
The say-on-pay vote is advisory, and therefore not binding on the Corporation, the Compensation Committee or the Board of Directors. The Board of Directors and Compensation Committee value the opinions of Shareholders, and to the extent there is any significant vote against the Corporation's approach to executive compensation as described in this Proxy Statement, the Corporation will consider Shareholders' concerns, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
The current frequency of this advisory vote is every three years, thus the next such vote shall occur at the Corporation's 2019 annual meeting.
Executive Compensation
Compensation for executive officers is reviewed annually by the Compensation Committee. Current compensation was set based on the following criteria: (i) our size and scale; (ii) nature of our strategic objectives; and (iii) each executive’s role and responsibility. Industry data (such as surveys compiled by Towers Watson and the Property and Casualty Insurers Association for the property & casualty insurance industry), paid consultant reports, as well as the potential for incentive compensation are taken into consideration in the regular evaluation of base salary.
Employment agreements were executed with our executives in 2011 with an initial effective term of January 1, 2011 through December 31, 2012 and subsequent annual terms commencing January 1, 2013. These agreements provide for compensation based on a combination of base salary and incentive compensation. Incentive compensation for 2014 and 2015 was based primarily on our achieving certain financial and operational objectives, such as the successful expansion into new states and the establishment of significant new agent relationships (“cornerstone agents”). Amounts paid in 2014 and 2015 are shown in the Summary Compensation Table under the heading “Bonus.” Incentive compensation in subsequent years will be based on a combination of financial results and the achievement of strategic objectives, as determined by the Compensation
Committee of the Board. Final determination of incentive compensation is subject to approval by the Board. Return on equity is a primary metric utilized in evaluating such results. See also “Employment Agreements with Named Executive Officers” below.
Employment Agreements with Named Executive Officers
Employment agreements were executed in 2011 with our Named Executive Officers with an initial effective term of January 1, 2011 through December 31, 2012 and subsequent annual terms commencing January 1, 2013. The key terms of such employment agreements include:
| 2020 | $ | 354,263 | | $ | 92,925 | | $ | 18,637 | | | $ | 8,391 | | $ | 474,216 | | | 2019 | $ | 228,894 | | $ | — | | $ | — | | | $ | 11,149 | | $ | 240,043 | | (a) | employment being “at-will” and, subject to the severance and post-termination obligations described below, the employment agreement being terminable by either party at any time; |
| | (b) | an annual base salary as set out in the table under the heading “Summary Compensation Table”; |
| | (c) | the executive being entitled to participate in such employee benefit plans as we shall approve, including retirement plans, paid vacation and sick days/paid time off, disability plans, our Stock Option Plan, our Equity Incentive Plan, or such other plans as may be offered from time to time; and |
| | (d) | severance payments and post-termination obligations as further described below under “Termination and Change of Control Benefits”. |
Summary Compensation Table
1The Bonus and Stock Awards for 2020 are pursuant to the near term executive compensation plan described under “Employment Agreements with Named Executive Officers” Stock Awards were issued on January 10, 2020, July 10, 2020, and November 11, 2020 at $0.55, $0.62, and $0.062 per share, respectively. 2Includes company contributions to 401(k) plan, employee stock purchase plan and annual car allowance. Stock Option Plan On January 3, 2011, we adopted a 10% rolling stock option plan (“Stock Option Plan”) in order to advance our interests by providing certain “Eligible Persons” (any employee, officer, director, or consultant who is approved for participation in the Stock Option Plan by the Compensation Committee) with incentives. In connection with completion of the offering of our common shares in February 2013, the Compensation Committee of the Board performed a review of our executive and director compensation, including our Stock Option Plan. This review included, among other considerations, comparisons to industry data, including the executive and director compensation programs of other publicly traded property and casualty insurance companies. As a result, our executive compensation and director compensation was increased to bring us in line with other public companies in our industry. These changes included a new Equity Incentive Plan. See the “Equity Incentive Plan” section below. Prior to the adoption of the Equity Incentive Plan, the Stock Option Plan provided for the granting of options to purchase common shares to Eligible Persons. Options were granted at the discretion of the Compensation Committee in such number determined at the time of grant, subject to the limits set out in the Stock Option Plan. The number of common shares issuable under the Stock Option Plan was limited to not more than 10% of the number of common shares that were issued and outstanding as of the date of the grant of an option. Any increase in the issued and outstanding common shares would have resulted in an increase in the available number of common shares issuable under the Stock Option Plan, and any exercises of options or expirations or terminations of options would make new grants available under the Stock Option Plan. The exercise price of all options was established by the Compensation Committee at the time of grant, provided that the exercise price would not be less than the market price of the common shares on the date of grant. Under the Stock Option Plan, market price was equal to the volume weighted average trading price of the common shares on the NASDAQ (the principal stock exchange on which the common shares were listed for trading) for the five trading days immediately preceding the date on which the option is granted. The expiry of options was also established by the Compensation Committee at the time of the grant, provided that the options have a maximum term of ten years. The Compensation Committee determined when any option will become exercisable and whether the option will be exercisable in installments or pursuant to a vesting schedule. In the event of a change of control, vesting may be accelerated. As of the May 14, 2021, we had 1,197,500 outstanding options at an average exercise price of $2.63 per Voting Share. Atlas Financial Holdings, Inc.17 The following table sets forth information concerning the total compensation for each of the Named Executive Officers during each of the last two fiscal years.
| | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | All Other Compensation ($)(4) | Total Compensation ($) | Scott Wollney (1) Chief Executive Officer and Director | 2015 | $ | 350,360 |
| $ | 300,000 |
| $ | 1,799,000 |
| $ | 761,000 |
| $ | 25,250 |
| $ | 3,235,610 |
| | 2014 | $ | 350,000 |
| $ | — |
| $ | 591,094 |
| $ | 383,244 |
| $ | 25,250 |
| $ | 1,349,588 |
| Paul A. Romano Vice President and Chief Financial Officer | 2015 | $ | 260,168 |
| $ | 180,000 |
| $ | 449,750 |
| $ | 190,250 |
| $ | 23,075 |
| $ | 1,103,243 |
| | 2014 | $ | 259,616 |
| $ | — |
| $ | 99,450 |
| $ | 246,120 |
| $ | 20,912 |
| $ | 626,098 |
| Leslie DiMaggio Vice President, Operations & IT | 2015 | $ | 228,822 |
| $ | 175,000 |
| $ | 449,750 |
| $ | 190,250 |
| $ | 12,550 |
| $ | 1,056,372 |
| | 2014 | $ | 231,539 |
| $ | — |
| $ | 86,190 |
| $ | 200,412 |
| $ | 11,035 |
| $ | 529,176 |
|
Notes:
(1) Mr. Wollney's Stock Awards for 2014 includes $451,864 of awards pursuant to the Director Stock Matching Program described under "Director Compensation" as compensation for his services as a director, and awards of $1,799,000 and $139,230 pursuant to the Equity Incentive Plan as executive incentive compensation in 2015 and 2014, respectively.
(2) 2015 Stock Awards were granted on March 12, 2015 and vest annually based on financial performance restrictions.
| | (3) | The amounts shown in this column are based on the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation. The 2015 Option Awards used the Monte-Carlo simulation model to estimate their fair value as a result of the performance based component of these grants. The 2014 Option Awards used the Black-Scholes option pricing model to estimate their fair value and used the following assumptions:
|
| | | | 2014 | Risk-free rate | 1.88% | Dividend yield | —% | Expected volatility | 38.0% | Expected life in years | 10 |
Equity Incentive Plan In the second quarter of 2013, a new Equity Incentive Plan was approved by shareholders at our annual general meeting. As of such date, Atlas ceased to grant new stock options under the existing Stock Option Plan discussed above. The Equity Incentive Plan is a new securities based compensation plan pursuant to which Atlas may issue restricted shares, restricted units, stock options and other forms of equity incentives to eligible persons as part of their compensation. The Equity Incentive Plan is considered an amendment and restatement of the Stock Option Plan, although outstanding stock options issued pursuant to the Stock Option Plan will be governed by the terms of the Stock Option Plan. On March 12, 2015, Atlas granted 200,000 restricted Ordinary shares and options to purchase 200,000 common shares under the Equity Incentive Plan, all of which were granted to the Corporation’s officers. The awards vest in five equal annual installments of 20%, provided that an installment shall not vest unless an annual performance target based on book value growth equal to an annual 15% return on average equity is attained. In the event the performance target is not met in any year, the 20% installment for such year shall not vest, but such unvested installment shall carry forward and can vest in future years (up to the fifth year from the date of grant), subject to achievement in a future year of the applicable cumulative performance target expected through such year. The options have an exercise price of $20.29 per share and expire on March 12, 2025. In the event of a change of control, vesting may be accelerated. On December 31, 2018, Atlas granted 17,524 restricted stock units under the Equity Incentive Plan, all of which were granted to the Corporation's independent directors. The awards vest in three equal installments on January 1 of each of the next three years, beginning on January 1, 2019. The restricted stock units were approved by the Board of Directors during March 2018. On April 22, 2021, the Corporation granted an aggregate of 1,016,000 options with an exercise price of $0.49 per common share to directors and managers, including each of Scott Wollney, Paul Romano and Joseph Shugrue, the Corporation’s Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, respectively. This exercise price is the average of the high bid and low asked prices on the date of the grant quoted on the OTC Bulletin Board Service. Outstanding Equity Awards at 2020 Fiscal Year End The following table sets forth all equity awards held by the Named Executive Officers that were outstanding at the end of the most recently completed fiscal year. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | Stock Awards | | Name and Principal Position | Grant date | Number of securities underlying unexercised options
(#) exercisable 1 | Number of securities underlying unexercised options
(#) unexercisable 1 | Option exercise
price ($) | Option expiration date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($) | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($) | Scott Wollney
Chairman, President and Chief Executive Officer | March 6, 2014 | 54,500 | — | $13.26 | March 6, 2024 | — | — | — | — | | March 12, 2015 | — | 20,000 | $20.29 | March 12, 2025 | — | — | 80,000 | $9,600 | Paul A. Romano Vice President and Chief Financial Officer | March 6, 2014 | 35,000 | — | $13.26 | March 6, 2024 | — | — | — | — | | March 12, 2015 | — | 5,000 | $20.29 | March 12, 2025 | — | — | 20,000 | $2,400 | Joseph Shugrue Vice President, Chief Operating Officer | March 6, 2014 | 28,500 | — | $13.26 | March 6, 2024 | — | — | — | — | | March 12, 2015 | — | 5,000 | $20.29 | March 12, 2025 | — | — | 20,000 | $2,400 |
1The March 6, 2014 grants vest equally on the first, second and third anniversary dates of the grant date. The March 12, 2015 grants vest 20% equally on the first, second, third, fourth and fifth anniversary pending a return on equity as described in the “Equity Incentive Plan” section of this Proxy Statement. Pension Plan Benefits We do not currently maintain any pension or retirement plans that provide for payments or benefits at, following or in connection with retirement.
2021 Proxy Statement
The individuals noted in the above Summary Compensation Table received the following in the aggregate:
| | | | | | 2015 | 2014 | | Options to purchase ordinary shares | 200,000 | 118,000 | | Exercise price | $20.29 | $13.26 | | Expiration | March 12, 2025 | March 6, 2024 |
(4) Includes company contributions to 401(k) plan, employee stock purchase plan and annual car allowance.
Stock Option Plan
On January 3, 2011, we adopted a 10% rolling stock option plan ("Stock Option Plan") in order to advance our interests by providing certain “Eligible Persons” (any employee, officer, director, or consultant who is approved for participation in the Stock Option Plan by the Compensation Committee) with incentives. In connection with completion of the offering of our Ordinary Shares in February 2013, the Compensation Committee of the Board performed a review of our executive and director compensation, including our Stock Option Plan. This review included, among other considerations, comparisons to industry data, including the executive and director compensation programs of other publicly traded property and casualty insurance companies. As a result, our executive compensation and director compensation was increased to bring us in line with other public companies in our industry. These changes included a new Equity Incentive Plan. See “Equity Incentive Plan” below.
Prior to the adoption of the Equity Incentive Plan, the Stock Option Plan provided for the granting of options to purchase ordinary shares to Eligible Persons. Options were granted at the discretion of the Compensation Committee in such number determined at the time of grant, subject to the limits set out in the Stock Option Plan. The number of Ordinary Shares issuable under the Stock Option Plan was limited to not more than 10% of the number of Ordinary Shares that were issued and outstanding as of the date of the grant of an option. Any increase in the issued and outstanding Ordinary Shares would have resulted in an increase in the available number of Ordinary Shares issuable under the Stock Option Plan, and any exercises of options or expirations or terminations of options would make new grants available under the Stock Option Plan.
The exercise price of all options was established by the Compensation Committee at the time of grant, provided that the exercise price would not be less than the market price of the Ordinary Shares on the date of grant. Under the Stock Option Plan, market price was equal to the volume weighted average trading price of the Ordinary Shares on the NASDAQ (the principal stock exchange on which the Ordinary Shares are listed for trading) for the five trading days immediately preceding the date on which the option is granted. The expiry of options was also established by the Compensation Committee at the time of the grant, provided that the options have a maximum term of ten years. The Compensation Committee determined when any option will become exercisable and whether the option will be exercisable in installments or pursuant to a vesting schedule. In the event of a change of control, vesting may be accelerated.
As of the date of this Proxy Statement, we had 187,728 outstanding options, at an average exercise price of C$6.22 per Ordinary Share, and 375,000 outstanding options, at an average exercise price of $17.01 per Ordinary Share.
Equity Incentive Plan
In the second quarter of 2013, a new Equity Incentive Plan was approved by Shareholders at our annual general meeting. As of such date, Atlas ceased to grant new stock options under the existing Stock Option Plan, discussed above. The Equity Incentive Plan is a new securities based compensation plan pursuant to which Atlas may issue restricted shares, restricted units, stock options and other forms of equity incentives to eligible persons as part of their compensation. The Equity Incentive Plan is considered an amendment and restatement of the Stock Option Plan, although outstanding stock options issued pursuant to the Stock Option Plan will continue to be governed by the terms of the Stock Option Plan.
On March 12, 2015, Atlas granted 200,000 restricted Ordinary Shares and options to purchase 200,000 Ordinary Shares under the Equity Incentive Plan, all of which were granted to the Corporation’s officers. The awards vest in five equal annual installments of 20%, provided that
an installment shall not vest unless an annual performance target based on book value growth equal to an annual 15% return on average equity is attained. In the event the performance target is not met in any year, the 20% installment for such year shall not vest, but such unvested installment shall carry forward and can vest in future years (up to the fifth year from the date of grant), subject to achievement in a future year of the applicable cumulative performance target expected through such year. The options have an exercise price of $20.29 per share and expire on March 12, 2025. In the event of a change of control, vesting may be accelerated.
Outstanding Equity Awards at 2015 Fiscal Year End
The following table sets forth all equity awards held by the Named Executive Officers that were outstanding at the end of the most recently completed fiscal year. | | | | | | | | | | Outstanding Equity Awards as at December 31, 2015 | | | | Option Awards | Stock Awards | | Name | Grant date | Number of securities underlying unexercised options
(#) exercisable (1) | Number of securities underlying unexercised options
(#) unexercisable (1) | Option exercise
price ($) | Option expiration date | Number of shares or units of stock that have not vested (#) (2) | Market value of shares or units of stock that have not vested | Scott Wollney
Chief Executive Officer and Director | January 18, 2011 | 8,334 | — | C$6.00 | January 18, 2021 | | | | | January 11, 2013 | 18,890 | 9,444 | C$6.45 | January 11, 2023 | | | | | February 28, 2014 | | | | | 29,631 | $589,657 | | | March 6, 2014 | 18,167 | 36,333 | $13.26 | March 6, 2024 | | | | | March 12, 2015 | — | 100,000 | $20.29 | March 12, 2025 | 100,000 | $1,990,000 | Paul A. Romano
Vice President and Chief Financial Officer | January 18, 2011 | 8,334 | — | C$6.00 | January 18, 2021 | | | | | January 11, 2013 | 12,223 | 6,111 | C$6.45 | January 11, 2023 | | | | | March 6, 2014 | 11,667 | 23,333 | $13.26 | March 6, 2024 | | | | | March 12, 2015 | — | 25,000 | $20.29 | March 12, 2025 | 25,000 | $497,500 | Leslie DiMaggio
Vice President, Operations | January 18, 2011 | 8,334 | — | C$6.00 | January 18, 2021 | | | | | January 11, 2013 | 10,000 | 5,000 | C$6.45 | January 11, 2023 | | | | | March 6, 2014 | 9,500 | 19,000 | $13.26 | March 6, 2024 | | | | | March 12, 2015 | — | 25,000 | $20.29 | March 12, 2025 | 25,000 | $497,500 |
| | (1) | The January 18, 2011 grants vest 25% on the date of the grant and 25% on each of the next three anniversary dates of the grant date, and the January 18, 2013 and the March 6, 2014 grants vest equally on the first, second and third anniversary dates of the grant date. The March 12, 2015 grants vest 20% equally on the first, second, third, fourth, and fifth anniversary pending a return on equity as described in the Equity Incentive Plan section of this Proxy Statement. |
(2) The February 28, 2014 Stock Awards vest 20% on each anniversary of the grant date. The March 12, 2015 Stock Awards vest 20% equally on the first, second, third, fourth, and fifth anniversary pending a return on equity as described in the Equity Incentive Plan section of this Proxy Statement.
Pension Plan Benefits
We do not currently maintain any pension or retirement plans that provide for payments or benefits at, following, or in connection with retirement.
Termination and Change of Control Benefits We are party to employment agreements effective January 1, 2011 with the Named Executive Officers pursuant to which, if we terminate the executive without Cause (as defined in the employment agreement), or the executive’s employment is terminated in connection with a Change of Control (as defined in the employment agreement), the executive will be entitled to certain payments and benefits as set out below. | | | | | | | | | | | | | If terminated without Cause: | Continuation of base salary for: 1 | Lump-sum payment equal to: | Continuation of employee health benefits covered under COBRA for: 1, 2 | | | | | If terminated without Cause: | Continuation of base salary for: (1)
| Lump-sum payment equal to: | Continuation of employee health benefits covered under COBRA for: (1) (2)
| 2015 | | 2020 | 12 months | Most recently awarded bonus | 12 months | | 2019 | 12 months | Most recently awarded bonus | 12 months | 2014 | 12 months | Most recently awarded bonus | 12 months |
Notes:
| | (1) | The continuation of base salary and COBRA benefits will cease on the first of the month immediately following the date on which the executive becomes employed by a subsequent employer. |
| | (2) | Continuation coverage will continue for the period set forth in this column, or the maximum period of time allowed by law, if shorter. |
If, after a Change of Control (as defined in the employment agreement), the executive maintains employment with us (or our successor) for at least 180 days, the executive may terminate his employment at will and will be entitled to certain severance payments and post-termination benefits. Such payments and benefits shall mirror the payments and benefits that would have been in effect had we terminated the executive’s employment without Cause on such date.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND DIRECTORS & EXECUTIVE OFFICERS
The following table sets forth information concerning the beneficial ownership of the Ordinary Shares and Restricted Voting Shares held on March 28, 2016 by (i) each person known to us to own beneficially more than 5% of the total issued and outstanding Ordinary Shares or Restricted Voting Shares, (ii) each of our directors and director nominees, (iii) each of our named executive officers, and (iv) all directors and executive officers as a group.
The options included in the below beneficial ownership table are exercisable within 60 days of March 28, 2016. Unless otherwise indicated, each person has sole voting and investment power over the shares listed.
| | | | | | | | | Name and Address of Beneficial Owner | Number of Ordinary Shares Owned (1)(2) | Number of Restricted Voting Shares Owned (1) | Percentage of Class of Shares (1)(2) | Percentage of Total Outstanding Voting Shares (1)(2) | | 5% Beneficial Owners | Blackrock Inc. (3) 55 East 52nd Street New York, NY 10055 | 687,560 |
| — | 5.8% | 5.7% | American Century Investment Management, Inc. (4) 4500 Main Street, 9th Floor Kansas City, Missouri 64111 | 612,147 |
| — | 5.2% | 5.1% | Kingsway America Inc.(5) 150 Pierce Road, 6th Floor Itasca, IL 60143 | — | 132,863 |
| 100.0% | 1.1% | | Executive Officers and Directors | Gordon Pratt (6) | 463,333 |
| — | 3.9% | 3.9% | Scott Wollney (7) | 408,153 |
| — | 3.4% | 3.4% | | Jordan Kupinsky | 39,129 |
| — | 0.3% | 0.3% | | Larry Swets, Jr. | 74,272 |
| — | 0.6% | 0.6% | | John T. Fitzgerald | 48,354 |
| — | 0.4% | 0.4% | Paul Romano (7) | 124,550 |
| — | 1.1% | 1.0% | Leslie DiMaggio (7) | 117,563 |
| — | 1.0% | 1.0% | | All Directors and Executive Officers as a Group (9 individuals) | 1,505,156 |
| — | 12.7% | 12.5% |
Notes:1The continuation of base salary and COBRA benefits will cease on the first of the month immediately following the date on which the executive becomes employed by a subsequent employer. | | (1) | As of March 28, 2016, there were 11,890,432 Ordinary Shares and 132,863 Restricted Voting Shares outstanding. Included in the shares above are the following convertible securities, exercisable within 60 days of March 28, 2016, that are deemed to be beneficially owned by the persons holding them for the purpose of computing that person’s percentage ownership: Gordon Pratt (managed through Atlas Investors LLC, see (5) below) holds 27,195 options; Scott Wollney holds 73,002 options; Jordan Kupinsky holds 0 options and 22,224 restricted stock units; Larry Swets, Jr. holds 27,195 options; Paul Romano holds 50,001 options; and Leslie DiMaggio holds 42,334 options. The shares underlying these convertible securities are not treated as outstanding for the purpose of computing the percentage beneficial ownership of any other person. |
| | (2) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of a vested option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such |
person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares outstanding on the Record Date.2Continuation coverage will continue for the period set forth in this column, or the maximum period of time allowed by law, if shorter. | | (3) | The Schedule 13G filed by Blackrock, Inc., a parent holding company, on January 28, 2016 states that as of December 31, 2015, it has sole power to vote 678,394 Ordinary Shares and sole power to dispose of 687,560 Ordinary Shares. Such schedule also identifies Blackrock Advisors, LLC; BlackRock Fund Advisors; Blackrock Institutional Trust Company, N.A.; and Blackrock Investment Management, LLC as subsidiaries which acquired the security being reported on by the parent holding company. |
(4) The Schedule 13G filed by American Century Investment Management, Inc. an investment adviser, on February 11, 2016 states that as of December 31, 2015, it has sole power to vote 577,166 Ordinary Shares and sole power to dispose of 612,147 Ordinary Shares. Such schedule shows that American Century Investment Management, Inc. is wholly-owned by American Century Companies, Inc., which has sole power to vote 577,166 Ordinary Shares and sole power to dispose of 612,147 Ordinary Shares. Such schedule also shows that American Century Companies, Inc. is controlled by the Stowers Institute for Medical Research, which has sole power to vote 577,166 Ordinary Shares and sole power to dispose of 612,147 Ordinary Shares.If, after a Change of Control (as defined in the employment agreement), the executive maintains employment with us (or our successor) for at least 180 days, the executive may terminate his employment at will and will be entitled to certain severance payments and post-termination benefits. Such payments and benefits shall mirror the payments and benefits that would have been in effect had we terminated the executive’s employment without Cause on such date. | | (5) | 132,863 Restricted Voting Shares are held by Mendota Insurance Company, a wholly-owned subsidiary of KAI. |
| | (6) | 399,100 Ordinary Shares are held through Atlas Investors LLC, of which Mr. Pratt is a Managing Member. |
| | (7) | As of March 28, 2016 Scott Wollney had 52,001 Ordinary Shares, Paul Romano had 9,802 Ordinary Shares and Leslie DiMaggio had 9,801 Ordinary Shares pledged as security for personal loans. |
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
The Board is submitting the selection of BDO USA, LLP ("BDO") as our independent auditor for the fiscal year ended December 31, 2016 to the Shareholders for ratification. Although Shareholder action on this matter is not required, the Board believes it is good corporate practice to seek shareholder ratification of its selection. If the selection is not ratified, the Audit Committee will consider whether it is appropriate (without obligation) to select another public accounting firm. A representative of BDO will attend the Meeting telephonically, may make a statement if he or she so desires, and will be available to respond to appropriate questions from shareholders.
Fees
The aggregate fees billed by the Corporation’s external auditors for the financial years ending December 31, 2015 and December 31, 2014,Atlas Financial Holdings, Inc.19
Security Ownership of Certain Beneficial Owners and Directors & Executive Officers The following table sets forth information concerning the beneficial ownership of the Voting Shares held on May 14, 2021 by (i) each person known to us to own beneficially more than 5% of the total issued and outstanding Voting Shares, (ii) each of our directors and director nominees, (iii) each of our named executive officers, and (iv) all directors and executive officers as a group. The options included in the below beneficial ownership table are exercisable within 60 days of May 14, 2021. Unless otherwise indicated, each person has sole voting and investment power over the shares listed. | | | | | | | | | | Name and Address of Beneficial Owner | Number of Voting Shares Owned 1, 2 | Percentage of Total Outstanding Voting Shares 1, 2 | | 5% Beneficial Owners | American Financial Group, Inc. 3 Great American Insurance Group Tower 301 East Fourth Street Cincinnati, OH 45202 | 2,387,368 | | 19.8 | % | Baleen Capital Management 4 811 SW 6th Ave, Suite 1000 Portland, OR 97204 | 614,354 | | 5.1 | % | | Executive Officers and Directors | | Scott Wollney | 574,913 | | 4.8 | % | | Jordan Kupinsky | 150,162 | | 1.2 | % | | Walter Walker | 477,003 | | 4.0 | % | | Ronald E. Konezny | 87,284 | | * | | Paul Romano | 188,675 | | 1.6 | % | | Joseph Shugrue | 133,193 | | 1.1 | % | | All Directors and Executive Officers as a Group (7 individuals) | 1,736,161 | | 14.4 | % |
* Indicates that ownership is less than 1% 1As of May 14, 2021, there were 12,047,334 common shares outstanding. Included in the shares above are the following convertible securities, exercisable within 60 days of May 14, 2021, that are deemed to be beneficially owned by the persons holding them for the purpose of computing that person’s percentage ownership: Jordan Kupinsky, Walter Walker, and Ronald Konezny each hold 85,000 options; Scott Wollney holds 74,500 options; Paul Romano holds 35,000 options; and Joseph Shugrue holds 28,500 options. The shares underlying these convertible securities are not treated as outstanding for the purpose of computing the percentage beneficial ownership of any other person. 2Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and/or (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire beneficial ownership of the shares (for example, upon exercise of a vested option) within 60 days of the date as of which the information is provided. Any securities not outstanding which are subject to such acquisition rights shall be deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person but shall not be deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares outstanding. 3The Schedule 13G/A filed by American Financial Group, Inc., a parent holding company, on February 2, 2021 states that as of December 31, 2020 it has sole power to vote and sole power to dispose of 2,387,368 common shares. These shares represent warrants to purchase 2,387,368 common shares until June 10, 2024, under a Warrant Agreement dated June 10, 2019 (the “Warrant Agreement”), at an initial exercise price of $0.69 per share, with both the number of common shares subject to the Warrant Agreement and the exercise price subject to adjustment as set forth in the Warrant Agreement. Such schedule also identifies Great American Insurance Company, an insurance company, as the subsidiary which acquired the security being reported on by the parent holding company. 4The Schedule 13G filed by Baleen Capital Management LLC, an investment adviser, on February 3, 2021 states that as of November 24, 2020, has sole power to vote and sole power to dispose of 614,354 common shares.
Audit Committee Matters The Board is submitting the selection of Baker Tilly US, LLP ("Baker Tilly") as our independent auditor for the fiscal year ended December 31, 2021 to the Shareholders for ratification. Although Shareholder action on this matter is not required, the Board believes it is good corporate practice to seek shareholder ratification of its selection. If the selection is not ratified, the Audit Committee will consider whether it is appropriate (without obligation) to select another public accounting firm. A representative of Baker Tilly will not be attending the Meeting. Audit and Non-Audit Fees The aggregate fees billed by the Corporation’s external auditor for the financial years ending December 31, 2020 and December 31, 2019, are set out in the table below. | | | | | | | | | | | | | | | | | | | (US$) | Year | Audit Fees1 | Audit-Related Fees2 | | | | | | | Financial Year Ending | Audit Fees
(US$)
| Audit-Related Fees (US$) | Tax Fees
(US$)
| All Other Fees
(US$)
| December 31, 2015 | $486,118Tax Fees3 | All Other Fees4 | | Auditor | | Baker Tilly US, LLP | December 31, 2020 | $522,335 | Nil | Nil | Nil | | Baker Tilly US, LLP | December 31, 2019 | $669,806 | Nil | Nil | Nil | December 31, 2014 | $339,892 | Nil | Nil | Nil |
1Fees related to our annual audit, review of our quarterly reports on Form 10-Q and review of documents filed with the SEC. 2Fees related to procedures associated with the adoption of the new accounting standards and acquisitions. 3Fees related to tax compliance services and tax preparation services. 4Fees for other incidental expenses. Pre-Approval Policies and Procedures The Audit Committee has adopted specific policies and procedures for the engagement of non-audit services as described in its charter which is available on the Corporation's website at www.atlas-fin.com under the “Corporate Governance” section. The Audit Committee shall approve all audit engagements and pre-approve the provision by the external auditors of all non-audit services, including fees and terms for all audit engagements and non-audit engagements, and in such regard the Audit Committee may establish the types of non-audit services the external auditors shall be prohibited from providing and shall establish the types of audit, audit related and non-audit services for which the Audit Committee will retain the external auditors. The Audit Committee may delegate to one or more of its members the authority to pre-approve non-audit services, provided that any such delegated pre-approval shall be exercised in accordance with the types of particular non-audit services authorized by the Audit Committee to be provided by the external auditor and the exercise of such delegated pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting following such pre-approval. The Audit Committee has reviewed and approved the occurrence of all of the fees described above for 2020 and 2019. Effective October 31, 2019, the Audit Committee engaged the firm of Baker Tilly Virchow Krause, LLP (“Baker Tilly”) as the Corporation’s independent registered public accounting firm to audit the Corporation’s financial statements commencing with the fiscal year ended December 31, 2018. During the fiscal years ended December 31, 2016 and December 31, 2017, and the subsequent interim period through October 31, 2019, neither the Corporation nor anyone acting on its behalf consulted with Baker Tilly regarding (1) either the application of accounting principles to any specific completed or proposed transaction, or the type of audit opinion that might be rendered on the Corporation’s financial statements, nor did Baker Tilly provide a written report or oral advice to the Corporation that Baker Tilly concluded was an important factor considered by the Corporation in reaching a decision as to the accounting, auditing or financial reporting issue; or (2) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the instructions related to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K). Atlas Financial Holdings, Inc.21
Audit Committee Report The Audit Committee reviews the Corporation’s annual and quarterly financial statements, oversees the annual audit process, and internal accounting controls, and the resolution of issues identified by the Corporation’s auditors and recommends to the Board the firm of independent auditors to be appointed and ratified by the Shareholders at the next annual general meeting of Shareholders. Management is responsible for the Corporation’s financial statements and reporting process, including the Corporation’s system of internal controls. The independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Corporation’s audited financial statements with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The Audit Committee reports as follows: •The Audit Committee reviewed and discussed with management the Corporation’s 2020 audited financial statements; •The Audit Committee discussed with the Corporation’s independent registered public accounting firm, Baker Tilly, the matters required to be discussed by the Statement on Auditing Standards No. 61, Communicating with Audit Committees, as amended, which include matters related to the conduct of the audit of the Corporation’s financial statements; •The Audit Committee has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding its communications with the Audit Committee concerning independence, and the Audit Committee has discussed with the independent registered public accounting firm its independence from the Corporation; and •Based on the reviews and discussions described above, the Audit Committee recommended to the Board that the Corporation’s 2020 audited financial statements, including management’s discussion and analysis of the Corporation’s financial condition and results of operations, be included in the 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The Audit Committee | | | | | | | | | | Jordan Kupinsky | Walter Walker | Ronald Konezny |
Matters for Shareholder Voting | | | | | | | | | | | | | | | | Proposal 1 | Election of Directors | | þ | The Board recommends a vote FOR each director nominee. | |
The Board is asking shareholders to elect four directors, and the Board has nominated all of the Corporation's current directors: Scott D. Wollney, Jordan Kupinsky, Walter Walker, and Ronald Konezny. Each director nominee has broad leadership experience and an established record of accomplishment with relevant skills and expertise for overseeing our business. Biographies of each of our directors, which include a brief discussion of the specific experience, qualifications, attributes, and skills that led to the Board's conclusion that such individual should serve as a director set forth above in "Corporate Governance". Vote Required The election of each director will require the affirmative vote of the holders of a majority of the votes cast by the holders of Voting Shares. The Corporation does not contemplate that any of such nominees will be unable to serve as directors; however, if for any reason any of the proposed nominees does not stand for election or is unable to serve as such, proxies held by the persons designated as proxyholders in the proxy card will be voted for another nominee in their discretion unless the Shareholder has specified in his, her or its proxy that his, her or its Voting Shares are to be withheld from voting in the election of directors.
| | | | | | | | | | | | | | | | Proposal 2 | Advisory Vote to Approve the Compensation of the Named Executive Officers | | | þ | The Board recommends a vote FOR this item. |
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”) entitle Shareholders to have the opportunity to cast a non-binding advisory vote regarding the Corporation's executive compensation as described in the Proxy Statement. The Corporation has disclosed compensation pursuant to rules adopted by the Securities and Exchange Commission (“SEC”). The Corporation believes that its executive compensation programs are designed to (1) motivate and retain executive officers, (2) reward the achievement of the Corporation's short-term and long-term performance goals, (3) establish an appropriate relationship between executive pay and short-term and long-term performance, and (4) align executive officers' interests with those of the Shareholders. Under these programs, the Corporation's executive officers are rewarded for the achievement of goals established by the Compensation Committee and the realization of increased Shareholder value. The Compensation Committee is responsible for reviewing the compensation programs for Atlas' executive officers to ensure they achieve the desired goals of aligning Atlas' executive compensation structure with Shareholders' interests and current market practices. The Corporation is asking Shareholders to indicate their support for the compensation of the Corporation's Named Executive Officers as disclosed herein. This proposal, commonly known as a “say-on-pay” proposal, gives Shareholders the opportunity to express their views on the Corporation's approach to executive compensation. This vote is not intended to address any specific item of compensation, but rather the overall philosophy, policies and practices of the Corporation's approach to executive compensation as described in the Proxy Statement. Shareholders will be asked to approve the following non-binding advisory resolution: BE IT RESOLVED THAT the Corporation's executive compensation as described in the Corporation's Proxy Statement for the 2021 Annual General Meeting of Shareholders pursuant to applicable SEC regulations, including the compensation table, other executive compensation tables and related narrative disclosures, is hereby approved. The say-on-pay vote is advisory, and therefore not binding on the Corporation, the Compensation Committee or the Board of Directors. The Board of Directors and Compensation Committee value the opinions of Shareholders, and to the extent there is any significant vote against the Corporation's approach to executive compensation as described in this Proxy Statement, the Corporation will consider Shareholders' concerns, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns. Vote Required The affirmative vote of holders of a majority of the issued and outstanding ordinary shares present and entitled to vote at the Meeting is required for the approval of this advisory resolution. Although the vote on this advisory proposal is non-binding, the Compensation Committee and the Board value the opinion of Shareholders and will take into account the outcome of the vote when considering future executive compensation decisions. Atlas Financial Holdings, Inc.23
| | | | | | | | | | | | | | | | Proposal 3 | Advisory Vote on the Corporation's website at www.atlas-fin.comFrequency of Holding an Advisory Vote on Executive Compensation | | | þ | The Board recommends a vote for every year. |
The Dodd-Frank Act also entitles Shareholders to have the opportunity to cast a non-binding advisory vote regarding how frequently the Corporation should seek from its Shareholders a non-binding advisory vote (similar to Proposal 2 above) on the Corporation's approach to executive compensation. The Corporation has included this proposal among the items to be considered at the Meeting pursuant to the requirements of Section 14A of the Exchange Act. By voting on this frequency proposal, Shareholders may indicate whether they would prefer that the advisory vote on the Corporation's approach to executive compensation occur every one, two or three years. Shareholders may also abstain from voting on the proposal. Vote Required The option of every year, every two years or every three years that receives the highest number of votes cast by holders of the issued and outstanding ordinary shares present and entitled to vote at the Meeting will reflect the frequency for future say-on-pay votes that has been selected by Shareholders. Although the vote on this advisory proposal is non-binding, the Compensation Committee and the Board value the opinion of Shareholders and will take into account the outcome of the vote when considering the frequency of future votes on our executive compensation. | | | | | | | | | | | | | | | | Proposal 4 | Ratification of Baker Tilly US, LLP as Independent Registered Public Accountant for 2021 | | | þ | The Board recommends a vote FOR this item. |
The Board is submitting the selection of Baker Tilly US, LLP (“Baker Tilly”) as our independent auditor for the fiscal year ended December 31, 2021 to the Shareholders for ratification. Although Shareholder action on this matter is not required, the Board believes it is good corporate practice to seek shareholder ratification of its selection. If the selection is not ratified, the Audit Committee will consider whether it is appropriate (without obligation) to select another public accounting firm. Vote Required The ratification of the selection of Baker Tilly as the Corporation’s independent auditor will require the affirmative vote of the holders of a majority of the issued and outstanding ordinary shares present and entitled to vote at the Meeting. The persons designated as proxyholders in the proxy card (absent contrary directions) intend to vote for the ratification of the selection of Baker Tilly as the auditor of the Corporation, unless the Shareholder has specified in the proxy card that Voting Shares represented by such proxy are to be withheld from voting in respect thereof. | | | | | | | | | | | | | | | | Proposal 5 | Approval to Increase Authorized Shares | | | þ | The Board recommends a vote FOR this item. |
General The Board is recommending that our shareholders pass a special resolution to amend Article SIX of the Corporation's Memorandum of Association to increase the number of authorized ordinary shares from 266,666,667 to 800,000,001. Text of Proposed Amendment The text of the proposed Authorized Share Increase Amendment is set forth in Appendix 1 to this Proxy Statement. If and when effected by our Board, the Authorized Share Increase Amendment will become effective upon its filing with the Registrar of Companies in the Cayman Islands.
Purpose of the Authorized Increase Amendment Proposal The Board believes, based on the Corporation's current share price, it is in the best interest of the Corporation and its shareholders to increase the number of authorized ordinary shares from 266,666,667 to 800,000,001 to provide the Corporation with flexibility to issue additional ordinary shares for general corporate purposes, which could include strategic investments, strategic partnership arrangements, awards or grants under employee equity incentive plans, or equity based financing to support execution of the Corporation’s business strategy. Increasing the authorized shares could also provide flexibility in connection with a potential reverse stock split or share consolidation which may be contemplated for, among other potential reasons, the purpose of meeting the listing requirements of a national securities exchange in the future. The availability of additional authorized shares of ordinary shares would allow the Corporation to execute any of these transactions in the future without additional shareholder approval, except as may be required in particular cases by the Corporation’s Articles of Association, applicable law or the rules of any stock exchange or other system on which the Corporation’s securities may then be listed. The following marked language shows the proposed change to the capital of the Corporation by adding the bolded, italicized, and underlined language and deleting the stricken language. This summary is qualified by reference to the complete text of the amendment to the Memorandum of Association, a copy of which is attached to this proxy statement as Appendix 1. All shareholders are encouraged to read the proposed amendment in its entirety for a more complete description of its terms. “The capital of the Corporation is US$2,600,000 divided into 800,000,001 ordinary shares of par value US$0.003 each, 100,000,000 preferred shares of par value US$0.001 each, and 33,333,334 restricted voting common shares of par value US$0.003 each” We do not have any arrangements, commitments or understandings to issue any shares of our capital except in connection with the stock options issued pursuant to the Corporation's Equity Incentive Plan and our currently outstanding warrants. Effects of the Increase in Authorized Common Shares Approving the increase in the authorized number of shares of the Corporation’s ordinary shares will not result in any dilution to current shareholders unless and until the Corporation issues such additional shares in the future. The Board selected the size of the proposed increase to provide the Corporation with sufficient authorized shares for use for any of the purposes described above, including any necessary financing transactions, as well as to provide it the ability to take advantage of other opportunities that may be available to it that would require the use of shares of ordinary shares without the cost and time that would be needed to seek further amendments to its Memorandum of Association. If this proposal is approved, the newly authorized shares of ordinary shares would have the same rights as the presently authorized shares and will rank pari passu with the current ordinary shares on issue including the right to cast one vote per ordinary share. Although the authorization of additional shares would not, in itself, have any effect on the rights of any holder of the Corporation’s ordinary shares, the future issuance of additional ordinary shares (other than a share split or dividend) may have the effect of diluting the voting rights and could have the effect of diluting earnings per share and book value per share of existing shareholders. Potential Anti-takeover Effects of Increase in Authorized Ordinary Shares The authorized but unissued Ordinary Shares, Restricted Shares, and Preferred Shares will be available for issuance at such times and for such purposes as our Board may deem advisable without further action by our shareholders, except as required by applicable laws and regulations. Authorized but unissued Ordinary Shares, Restricted Shares, and Preferred Shares may be used for various purposes, including, without limitation, raising capital, providing equity incentives to employees, officers or directors, effecting share dividends, establishing strategic relationships with other companies and expanding our business through the acquisition of other businesses or products. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, the Corporation currently has $25 million of Senior Unsecured Notes maturing in April 2022, and there is substantial doubt about whether the Corporation will have sufficient capital to operate through or beyond April 2022 unless the Corporation is successful in taking mitigating action. Our future plans to address this and other capital or liquidity needs may potentially include, without limitation, one or more of the following: (1) securing incremental capital with the objective of potentially repurchasing some or all of the Senior Unsecured Notes at a discount to par, in the open market or otherwise, (2) securing equity or debt capital in private or public transactions, or (3) offering to exchange some or all of the Senior Unsecured Notes for debt, equity and/or other securities or other consideration, through privately negotiated transactions or otherwise. Notwithstanding the above, at this time the Corporation has no definitive plan to proceed with any such transaction. The Board believes that the number of Ordinary Shares, Restricted Shares, and Preferred Shares available for issuance, assuming the approval of Proposal 5, will be sufficient to support our projected need for additional equity capital. Atlas Financial Holdings, Inc.25
The Ordinary Shares, Restricted Shares, and Preferred Shares that are authorized but unissued provide our Board with flexibility to effect, among other transactions, public or private refinancings, acquisitions, share dividends, share splits and the granting of equity incentive awards. While these authorized but unissued shares may also be used by our Board, consistent with and subject to its fiduciary duties, to deter future attempts to gain control of us or cause a significant change in ownership or make such actions more expensive and less desirable, the increase in authorized Ordinary Shares is not being recommended in response to any specific effort of which we are aware to obtain control of us or cause a significant change in ownership, nor does our Board have any present intent to use the authorized but unissued Ordinary Shares or Restricted Shares to impede a takeover attempt. There are no plans or proposals to adopt other provisions or enter into any arrangements that have material anti-takeover effects, although the Corporation reserves its right to take such actions if the Board determines it is in the best interest of the Corporation, which may include preserving tax assets. RISK FACTOR ASSOCIATED WITH INCREASE IN AUTHORIZED SHARES We believe that we will need to raise additional capital to fund our operations beyond 2021. If additional capital is not available, we may have to delay, reduce or cease operations. The increase in authorized Ordinary Shares could result in significant dilution to our shareholders. We believe that we will need to raise additional capital to fund our operations beyond 2021.As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, there is substantial doubt about whether the Corporation will have sufficient capital to operate through or beyond April 2022 unless the Corporation is successful in taking mitigating action. Changing circumstances may cause us to consume capital significantly faster than we currently anticipate and could adversely affect our ability to raise additional capital. Additional financing may not be available when we need it or may not be available on terms that are favorable to us. In addition, the risk that we may not be able to continue as a going concern may make it more difficult to obtain necessary additional funding on terms favorable to us, or at all. If we raise additional funding through the issuance of equity securities, our shareholders will suffer dilution and our ability to use our net operating losses to offset future income may be limited, and the increase in authorized Ordinary Shares would allow on increased number of Ordinary Shares to be issued, thereby increasing dilution. If we raise additional funding through debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, require us to use our cash to make payments under such indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions. If we are unable to secure additional funding, our resources would be limited, our relationships with our customers and partners may be harmed, and we may not be able to continue our operations. Vote Required Approval of the Authorized Share Increase Proposal requires the affirmative vote of not less than two-thirds of the issued and outstanding ordinary shares present and entitled to vote at the Meeting. | | | | | | | | | | | | | | | | Proposal 6 | Approval of a Special Resolution Authorizing the Corporate Governance section under Investor Relations. The Audit Committee shall approve all audit engagements and pre-approve the provision by the external auditors of all non-audit services, including fees and terms for all audit engagements and non-audit engagements, and in such regard the Audit Committee may establish the types of non-audit services the external auditors shall be prohibited from providing and shall establish the types of audit, audit related and non-audit services for which the Audit Committee will retain the external auditors. The Audit Committee may delegateBoard to one or more of its members the authority to pre-approve non-audit services, provided that any such delegated pre-approval shall be exercised in accordance with the types of particular non-audit services authorized by the Audit Committee to be provided by the external auditor and the exercise of such delegated pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting following such pre-approval. The Audit Committee has reviewed and approved the incurrence of allEffect a Share Consolidation of the fees described above for 2015 and 2014.Corporation's Ordinary Shares | | | þ | The Board recommends a vote FOR this item. |
General The Board is recommending that our shareholders pass a special resolution to authorize the Board, in its discretion, to effect a share consolidation or reverse split of the Corporation’s authorized shares of ordinary shares, par value $.003 per share (the “Ordinary Shares”), and restricted voting common shares, par value $.003 per share (the “Restricted Shares”), at an exchange ratio of not less than 1-for-10 and not more than 1-for-50 at any time prior to our 2022 Annual General Meeting of Shareholders such that the number of the Corporation's authorized Ordinary Shares and Restricted Shares is decreased and the par value of each Ordinary Share and Restricted Share is increased by that ratio (the “Reverse Split” and the proposal the “Reverse Split Proposal”), with such Reverse Split to be effected at such time and date (the "Effective Time"), if at all, as determined by our Board in its sole discretion, and such special resolution shall become effective at the Effective Time. The Board believes that providing the flexibility for the Board to choose an exact split ratio and to effect such Reverse Split at any time prior to our 2022 Annual General Meeting of Shareholders will enable the Board to act in the best interests of the Corporation and our shareholders.
If this proposal is approved, the Board will have the authority, but not the obligation, in its sole discretion and without any further action on the part of the shareholders, to effect the Reverse Split, at any time it believes to be most advantageous to the Corporation and our shareholders. This proposal would give the Board the authority to implement one, but not more than one, reverse share split and to determine, as it deems to be in the best interest of the Corporation’s shareholders, the specific ratio to be used within the range described above and the timing of the reverse share split, which may occur any time prior to the 2022 Annual General Meeting of Shareholders. A Reverse Split would be effected by the Board adopting a resolution approving the effectuation of the Reverse Split at a specified ratio within the range approved pursuant to this proposal, a copy of which would be filed with the Registrar of Companies of the Cayman Islands. The Board will retain the authority not to effect the Reverse Split even if we receive shareholder approval of this proposal. Thus, subject to shareholder approval, the Board, at its discretion, may effect the Reverse Split or abandon it and effect no Reverse Split if it determines that such action is not in the best interests of the Corporation and our shareholders. By voting in favor of the Reverse Split, you are expressly authorizing the Board to determine not to proceed with, and abandon, the Reverse Split if it should so decide. In the event a Reverse Split is effectuated by the Board, the Corporation anticipates that the shareholders will be asked to approve an amendment to the Corporation’s Memorandum of Association at the 2022 Annual General Meeting of Shareholders reflecting the Reverse Split. The intention of the Board in effecting the Reverse Split is to increase the share price of our Ordinary Shares currently trading on the OTC Markets system, which we believe may enhance the acceptability and marketability of our Ordinary Shares and potentially facilitate the relisting of our Ordinary Shares on the Nasdaq Capital Market or listing on another national securities exchange. While the purpose of the Reverse Split is to affect solely the Ordinary Shares, our Articles of Association provide that no subdivision or consolidation of the Ordinary Shares or Restricted Shares may occur unless, simultaneously, the Ordinary Shares and the Restricted Shares are subdivided or consolidated in the same manner, so as to maintain and preserve the respective rights of the holders of the Voting Shares, which includes both Ordinary Shares and Restricted Shares (“Voting Shares”). Additionally, our Articles of Association provide that the conversion rights of our preferred shares, par value $0.001 per share (the “Preferred Shares”), shall be equitably adjusted to provide for the issuance (upon subsequent conversion) of an equal amount of additional Ordinary Shares or Restricted Shares or other assets, rights, warrants or other securities as if the Preferred Shares had been converted at that time. There are currently no outstanding Restricted Shares or Preferred Shares, but in the event that any Restricted Shares or Preferred Shares are outstanding at the Effective Time, such outstanding shares would be affected as described above. One principal effect of the Reverse Split would be to decrease the number of outstanding Ordinary Shares. Except for de minimis adjustments that may result from the treatment of fractional shares as described below, the Reverse Split will not have any dilutive effect on our shareholders since each shareholder would hold the same percentage of our Ordinary Shares outstanding immediately following the Reverse Split as such shareholder held immediately prior to the Reverse Split. The relative voting and other rights that accompany the shares of Voting Shares would not be affected by the Reverse Split. In addition, the proportion of shares owned by our shareholders relative to the number of shares authorized for issuance will remain the same because the authorized number of our Ordinary Shares will be decreased in proportion to the Reverse Split at the Effective Time. The Reverse Split is not part of a broader plan to take us private. Reasons for the Reverse Split Proposal The reasons for the Reverse Split Proposal are generally to enable the Board to increase the per share market price of our Ordinary Shares and to reduce the number of shares outstanding, which we believe will have several benefits to us and our shareholders, including to raise the per share trading price of our Ordinary Shares, which are currently trading only on the OTC Markets system, to enhance the marketability of our Ordinary Shares and also to potentially allow for a relisting of our Ordinary Shares on the Nasdaq Capital Market or another national securities exchange if the other listing criteria can be met. Our Board has confidence that the Reverse Split and any resulting increase in the per share price of our Ordinary Shares should enhance the acceptability and marketability of our Ordinary Shares to the financial community and investing public. Many institutional investors have policies prohibiting them from holding lower-priced stocks in their portfolios, which reduces the number of potential buyers of our Ordinary Shares, although we have not been specifically advised that this is a reason for not investing in our Ordinary Shares. Additionally, analysts at many brokerage firms are reluctant to recommend lower-priced stocks to their clients or monitor the activity of lower-priced stocks. Brokerage houses frequently have internal practices and policies that discourage individual brokers from dealing in lower-priced stocks. Further, because brokers' commissions on lower-priced stock generally represent a higher percentage of the stock price than commissions on higher priced stock, investors in lower-priced stocks pay transaction costs that are a higher percentage of their total share value, which may limit the willingness of individual investors and institutions to purchase our Ordinary Shares. We cannot assure you that the Reverse Split will have any of the desired effects described above nor that the Corporation will meet the listing requirements of a national securities exchange. More specifically, we cannot assure you that after the Reverse Atlas Financial Holdings, Inc.27
Split the market price of our Ordinary Shares will increase proportionately to reflect the ratio for the Reverse Split, that the market price of our Ordinary Shares will not decrease to its pre-split level, that our market capitalization will be equal to the market capitalization before the Reverse Split, or that we will be listed on the Nasdaq Capital Market or any other national securities exchange, or once listed, that we will be able to maintain such listing. Potential Disadvantages of the Reverse Split As noted above, the principal purpose of the Reverse Split would be to help increase the per share market price of our Ordinary Shares by up to a factor of 50. We cannot assure you, however, that the Reverse Split will accomplish this objective for any meaningful period of time. While we expect that the reduction in the number of outstanding Ordinary Shares will increase the market price of our Ordinary Shares, we cannot assure you that the Reverse Split will increase the market price of our Ordinary Shares by an equivalent multiple, or result in any permanent increase in the market price of our Ordinary Shares. The price of our Ordinary Shares is dependent upon many factors, including our business and financial performance, general market conditions and prospects for future success. If the per share market price does not increase proportionately as a result of the Reverse Split, then the value of our Corporation as measured by our share capitalization will be reduced, perhaps significantly. The number of shares held by each individual shareholder would be reduced if the Reverse Split is implemented. This will increase the number of shareholders who hold less than a “round lot,” or 100 shares. The transaction costs to shareholders selling “odd lots” are typically higher on a per share basis. Consequently, the Reverse Split could increase the transaction costs to existing shareholders in the event they wish to sell all or a portion of their position. In addition, national securities exchanges have certain requirements with respect to the number of round lot holders, which may be relevant to the extent the Corporation tries to list the Ordinary Shares on a national securities exchange. Although our Board believes that the decrease in the number of our Ordinary Shares outstanding as a consequence of the Reverse Split and the anticipated increase in the market price of our Ordinary Shares could encourage interest in our Ordinary Shares and possibly promote greater liquidity for our shareholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the Reverse Split. Determination of the Reverse Split Ratio In determining the ratio to be used, the Board will consider various factors, including, but not limited to, (i) the potential impact and anticipated benefits to the Corporation and its shareholders, (ii) market conditions and existing and expected market price of the Corporation’s Ordinary Shares at such time, (iii) the number of shares that will be outstanding after the Reverse Split, (iv) the shareholders’ equity (deficit) at such time and (v) the trading volume of the Corporation’s Ordinary Shares at such time. Effecting the Reverse Split If the shareholders approve this proposal, upon the Board's determination to proceed with the Reverse Split and pursuant to Section 62 of the Cayman Islands Companies Act, the Corporation will file the notice of special resolution with the Registrar of Companies of the Cayman Islands. If the Board effectuates the Reverse Split, the Reverse Split will be effective as of the date set forth in the Board resolution approving the effectuation of the Reverse Split and approving the ratio of the Reverse Split (the “Effective Time”). Such Board resolution would also be filed with the Registrar of Companies of the Cayman Islands. After the Effective Time, our Ordinary Shares will have a new CUSIP number, which is a number used to identify our securities, and stock certificates with the old CUSIP number will need to be exchanged for stock certificates with the new CUSIP number using the procedures described below. Effect on Outstanding Shares, Options and Certain Other Securities If the Reverse Split is implemented, the number of our Ordinary Shares and Restricted Shares, if any, owned by each shareholder will be reduced in the same proportion as the reduction in the total number of shares outstanding, such that the percentage of our Ordinary Shares and Restricted Shares, if any, owned by each shareholder will remain unchanged except for any de minimis change resulting from rounding up to the nearest number of whole shares so that we are not obligated to issue cash in lieu of any fractional shares that such shareholder would have received as a result of the Reverse Split. The number of our Ordinary Shares that may be purchased upon exercise of outstanding options or other securities convertible into, or exercisable or exchangeable for, shares of our Ordinary Shares (no such options or other convertible securities exist for our Restricted Shares or Preferred Shares), and the exercise or conversion prices for these securities, will also be ratably adjusted in accordance with their terms as of the Effective Time.
The following tables show the number of shares of Ordinary Shares that would be (1) issued and outstanding (2) issuable upon the exercise of outstanding stock options, restricted stock units, and warrants and (3) authorized, in each case upon the implementation of the Reverse Split at certain possible exchange ratios1 from 1-for-10 to 1-for-50 based on share information as of May 14, 2021, at which time 0 Restricted Shares and 0 Preferred Shares were outstanding and no further awards were issuable under the Corporation’s equity incentive plan: | | | | | | | | | | | | | | | | | | | | | | Assuming the Approval of Proposal 5 such that the Authorized Shares Increase Pre-Reverse Split | Reverse Split Ratio 1 | Pre-split | 1-for-10 | 1-for-20 | 1-for-30 | 1-for-40 | 1-for-50 | | Ordinary Shares Issued and Outstanding | 12,302,839 | | 1,230,284 | | 615,142 | | 410,095 | | 307,571 | | 246,057 | | | Ordinary Shares Authorized | 800,000,001 | | 80,000,000 | | 40,000,000 | | 26,666,667 | | 20,000,000 | | 16,000,000 | | | Restricted Shares Authorized | 33,333,334 | | 3,333,333 | | 1,666,667 | | 1,111,111 | | 833,333 | | 666,667 | | Ordinary Shares issuable upon exercise of outstanding stock options, restricted stock units, and warrants 2 | 3,584,868 | | 358,487 | | 179,244 | | 119,496 | | 89,622 | | 71,698 | |
| | | | | | | | | | | | | | | | | | | | | | Assuming Proposal 5 to Increase the Authorized Shares is not Approved by the Shareholders | Reverse Split Ratio 1 | Pre-split | 1-for-10 | 1-for-20 | 1-for-30 | 1-for-40 | 1-for-50 | | Ordinary Shares Issued and Outstanding | 12,302,839 | | 1,230,284 | | 615,142 | | 410,095 | | 307,571 | | 246,057 | | | Ordinary Shares Authorized | 266,666,667 | | 26,666,667 | | 13,333,334 | | 8,888,889 | | 6,666,667 | | 5,333,334 | | | Restricted Shares Authorized | 33,333,334 | | 3,333,333 | | 1,666,667 | | 1,111,111 | | 833,333 | | 666,667 | | Ordinary Shares issuable upon exercise of outstanding stock options, restricted stock units, and warrants 2 | 3,584,868 | | 358,487 | | 179,244 | | 119,496 | | 89,622 | | 71,698 | |
1 The Board may select an exchange ratio anywhere from 1-for-10 to 1-for-50. 2 Assumes no additional issuances of options or warrants between May 14, 2021 and the Effective Time. As of May 14, 2021, there are no further awards available under the Corporation’s current equity incentive plan. Fractional Shares; Exchange of Stock Certificates Our Board does not currently intend to issue fractional shares in connection with the Reverse Split. Therefore, we do not expect to issue certificates representing fractional shares. In lieu of any fractional shares, we will issue to shareholders who would otherwise hold a fractional share because the number of shares of Ordinary Shares (or Restricted Shares, if any) they hold before the Reverse Split is not evenly divisible by the Reverse Split ratio that number of Ordinary Shares (or Restricted Shares, if any), as rounded up to the nearest whole share. For example, if a shareholder would hold 150.75 Ordinary Shares following the Reverse Split, that shareholder would receive 151 Ordinary Shares. No shareholders will receive cash in lieu of fractional shares.As of May 14, 2021, we had 2,252 holders of record of our Ordinary Shares (although we have significantly more beneficial holders), 0 holders of record of our Restricted Shares, and 0 holders of record of our Preferred Shares. We do not expect the Reverse Split and the rounding up of fractional shares to whole shares to result in a significant reduction in the number of record holders. We presently do not intend to seek any change in its status as a reporting company for federal securities law purposes, either before or after the Reverse Split. If the Reverse Split is authorized by the shareholders, and the Board elects to implement the Reverse Split, shareholders will be notified as soon as practicable after the Effective Time that the Reverse Split has been effected. The Corporation’s transfer agent will act as “exchange agent” for purposes of implementing the exchange of stock certificates. Holders of pre-Reverse Split shares will be asked to surrender to the exchange agent certificates representing pre-Reverse Split shares in exchange for post-Reverse Split shares, including whole shares to be issued in lieu of fractional shares (if any) in accordance with the procedures to be set forth in a letter of transmittal to be sent by the Corporation. Until surrender, each certificate representing shares before the Reverse Split would continue to be valid and would represent the adjusted number of shares based on the exchange ratio of the Reverse Split rounded up to the nearest whole share. No new post-Reverse Split share certificates, including those representing whole shares to be issued in lieu of fractional shares will be issued to a shareholder until such shareholder has surrendered such shareholder’s outstanding certificate(s) together with the properly completed and executed letter of transmittal to the exchange agent. SHAREHOLDERS SHOULD NOT DESTROY ANY PRE-REVERSE SPLIT STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL THEY ARE REQUESTED TO DO SO. Atlas Financial Holdings, Inc.29
Certain of our registered holders of Ordinary Shares hold some or all of their shares electronically in book-entry form with our transfer agent. These shareholders do not have stock certificates evidencing their ownership of our Ordinary Shares. They are, however, provided with a statement reflecting the number of shares registered in their accounts. If a shareholder holds registered shares in book-entry form with our transfer agent, the shareholder will need to return a properly executed and completed letter of transmittal. Shareholders who hold shares in street name through a nominee (such as a bank or broker) will be treated in the same manner as shareholders whose shares are registered in their names, and nominees will be instructed to effect the Reverse Split for their beneficial holders. However, nominees may have different procedures and shareholders holding shares in street name should contact their nominees. Shareholders will not have to pay any service charges in connection with the exchange of their certificates. Authorized Shares Provided the Reverse Split Proposal is approved, the authorized number of our Ordinary Shares and Restricted Shares will be decreased in proportion to the Reverse Split at the Effective Time. As a result, the proportion of shares owned by our shareholders relative to the number of shares authorized for issuance will remain unchanged.However, please see Proposal 5, which, if approved, will increase the number of authorized shares prior to the effectuation of the Reverse Split. The authorized but unissued Ordinary Shares, Restricted Shares, and Preferred Shares will be available for issuance at such times and for such purposes as our Board may deem advisable without further action by our shareholders, except as required by applicable laws and regulations. Authorized but unissued Ordinary Shares, Restricted Shares, and Preferred Shares may be used for various purposes, including, without limitation, raising capital, providing equity incentives to employees, officers or directors, effecting share dividends, establishing strategic relationships with other companies and expanding our business through the acquisition of other businesses or products. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, the Corporation currently has $25 million of Senior Unsecured Notes maturing in April 2022, and there is substantial doubt about whether the Corporation will have sufficient capital to operate through or beyond April 2022 unless the Corporation is successful in taking mitigating action. Our future plans to address this and other capital or liquidity needs may potentially include, without limitation, one or more of the following: (1) securing incremental capital with the objective of potentially repurchasing some or all of the Senior Unsecured Notes at a discount to par, in the open market or otherwise, (2) securing equity or debt capital in private or public transactions, or (3) offering to exchange some or all of the Senior Unsecured Notes for debt, equity and/or other securities or other consideration, through privately negotiated transactions or otherwise. Notwithstanding the above, at this time the Corporation has no definitive plan to proceed with any such transaction. The Board believes that the number of Ordinary Shares, Restricted Shares, and Preferred Shares available for issuance following the Reverse Split, assuming the approval of Proposal 5, will be sufficient to support our projected need for additional equity capital. In accordance with our Memorandum of Association and Cayman Islands law, our shareholders do not have any preemptive rights to purchase or subscribe for any of our unissued or treasury shares. Anti-Takeover and Dilutive Effects We are not effectuating this Reverse Split to establish any barriers to a change of control or acquisition of our Corporation. The Ordinary Shares, Restricted Shares, and Preferred Shares that are authorized but unissued provide our Board with flexibility to effect, among other transactions, public or private refinancings, acquisitions, share dividends, share splits and the granting of equity incentive awards. While these authorized but unissued shares may also be used by our Board, consistent with and subject to its fiduciary duties, to deter future attempts to gain control of us or cause a significant change in ownership or make such actions more expensive and less desirable, the Reverse Split does not affect our Board’s authority to issue additional shares from time to time without delay or further action by the shareholders except as may be required by applicable law. The Reverse Split is not being recommended in response to any specific effort of which we are aware to obtain control of us or cause a significant change in ownership, nor does our Board have any present intent to use the authorized but unissued Ordinary Shares or Restricted Shares to impede a takeover attempt. There are no plans or proposals to adopt other provisions or enter into any arrangements that have material anti-takeover effects, although the Corporation reserves its right to take such actions if the Board determines it is in the best interest of the Corporation, which may include preserving tax assets. In addition, the issuance of additional Ordinary Shares, Restricted Shares, and Preferred Shares for any of the corporate purposes listed above could have a dilutive effect on earnings per share and the book or market value of our outstanding Ordinary Shares, Restricted Shares, and Preferred Shares, if any, and, depending on the circumstances, and would likely dilute a shareholder's percentage voting power in us.
Accounting Consequences The Reverse Split will not have an effect on the stated capital attributable to Ordinary Shares (or Restricted Shares, if any) on our balance sheet because the par value of each of the Ordinary Shares or Restricted Shares will be increased by the same ratio as the ratio contemplated by the Reverse Split. Reported net income or loss per common share and book value per common share will be higher because there will be fewer Ordinary Shares (or Restricted Shares, if applicable). For purposes of this “Accounting Consequences” section, references to “common shares” refer to both the Ordinary Shares and Restricted Shares. Certain Risk Factors Associated with the Reverse Split A reverse share split may negatively impact the market for our Ordinary Shares. Factors such as our financial results, market conditions and the market perception of our business may adversely affect the market price of our Ordinary Shares. As a result, there can be no assurance that the total market capitalization of our Ordinary Shares after the proposed Reverse Split will be equal to or greater than the total market capitalization before the proposed Reverse Split or that the per share market price of our Ordinary Shares following the Reverse Split will increase in proportion to the reduction in the number of Ordinary Shares outstanding before the Reverse Split. A decline in the market price of our Ordinary Shares after the Reverse Split may result in a greater percentage decline than would occur in the absence of a Reverse Split, and the liquidity of our Ordinary Shares could be adversely affected following such a Reverse Split. In addition, the Reverse Split may increase the number of shareholders who own odd lots (less than 100 shares). Any shareholder who owns fewer than 1,000 to 5,000 Ordinary Shares, depending on the final ratio, prior to the Reverse Split will own fewer than 100 Ordinary Shares following the Reverse Split. Shareholders who hold odd lots typically experience an increase in the cost of selling their shares and may have greater difficulty in effecting sales. We believe that we will need to raise additional capital to fund our operations beyond 2021. If additional capital is not available, we may have to delay, reduce or cease operations. We believe that we will need to raise additional capital to fund our operations beyond 2021.As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, there is substantial doubt about whether the Corporation will have sufficient capital to operate through or beyond April 2022 unless the Corporation is successful in taking mitigating action. Changing circumstances may cause us to consume capital significantly faster than we currently anticipate and could adversely affect our ability to raise additional capital. Additional financing may not be available when we need it or may not be available on terms that are favorable to us. In addition, the risk that we may not be able to continue as a going concern may make it more difficult to obtain necessary additional funding on terms favorable to us, or at all. If we raise additional funding through the issuance of equity securities, our shareholders may suffer dilution and our ability to use our net operating losses to offset future income may be limited. If we raise additional funding through debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, require us to use our cash to make payments under such indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions. If we are unable to secure additional funding, our resources would be limited, our relationships with our customers and partners may be harmed, and we may not be able to continue our operations. United States Federal Income Tax Consequences The following summary describes certain material U.S. federal income tax consequences of the Reverse Split to U.S. holders (as defined below). As used herein, the term “U.S. holder” means a beneficial owner of our Ordinary Shares that is for U.S. federal income tax purposes: (i) a citizen or individual resident of the United States, (ii) a corporation organized in or under the laws of the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust (A) if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more “U.S. persons” have the authority to control all substantial decisions of the trust or (B) that has a valid election in effect to be treated as a U.S. person. This discussion is for general information purposes only and does not purport to address all aspects of U.S. federal income tax law that may be relevant to U.S. holders in light of their particular circumstances. This summary also does not address the tax consequences to persons that may be subject to special treatment under U.S. federal income tax law or persons that do not hold our Ordinary Shares as “capital assets” (generally, property held for investment). This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, U.S. Treasury regulations, administrative rulings and judicial authority, all as in effect as of the date hereof. Subsequent developments in U.S. federal income tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material effect on the U.S. federal income tax consequences of the Reverse Split. We have not sought and will not seek any rulings from the Internal Revenue Service (the “IRS”) or an opinion of counsel regarding the matters discussed below. There can be no assurance that the IRS or a court will not take a contrary position to those discussed below regarding the tax consequences to U.S. holders of the Reverse Split.
Atlas Financial Holdings, Inc.31
If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our Ordinary Shares, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships that hold our Ordinary Shares, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal income tax consequences of the Reverse Split.
We intend to take the position that the Reverse Split constitutes a recapitalization for U.S. federal income tax purposes. Assuming the Reverse Split so qualifies, a U.S. holder will not recognize gain or loss on the Reverse Split (except with respect to the rounding up of any fractional share), the aggregate tax basis of the Ordinary Shares received by a U.S. holder in the Reverse Split will be equal to the aggregate tax basis of the Ordinary Shares exchanged therefor (less any portion of such basis allocable to a fractional share), and the holding period for the Ordinary Shares received by a U.S. holder in the Reverse Split will include the holding period of the shares exchanged therefor. However, even assuming that the Reverse Split qualifies as a recapitalization, U.S. holders whose fractional shares resulting from the Reverse Split are rounded up to the nearest whole share may recognize gain for U.S. federal income tax purposes equal to the value of the additional fractional share. If any such gain were recognized, we believe that the gain would not be material. U.S. Holders should consult their own tax advisors regarding the tax consequences of the Reverse Split for U.S. federal income tax purposes. A U.S. holder that acquired Ordinary Shares on different dates and at different prices should consult their tax advisors regarding allocating the tax basis and holding period from the Ordinary Shares surrendered in the Reverse Split to the Ordinary Shares received in the Reverse Split. To the extent that any Restricted Shares are outstanding at the time of the Reverse Split, we anticipate the foregoing tax considerations to apply equally to such Restricted Shares. Each shareholder should consult his, her or its own tax advisor regarding the U.S. federal, state, local and foreign income and other tax consequences of the Reverse Split. Vote Required Approval of the Reverse Split Proposal requires the affirmative vote of not less than two-thirds of the issued and outstanding ordinary shares present and entitled to vote at the Meeting.
ANNUAL REPORT
All Shareholders | | | | | | | | | | | | | | | | Proposal 7 | Adoption of record on the Record Date are concurrently being sent a copy of Atlas’ 2015 Annual Report, which contains Atlas’ audited financial statements for the fiscal year ended December 31, 2015. Additional information relatingan Amendment to the Corporation is available on EDGAR at www.sec.gov.Any person who was a Shareholder of Atlas at the close of business on the Record Date may obtain copies of Atlas’ 2015 Annual Report on Form 10-K as filed with the SEC, without charge, via the Corporation’s website at www.atlas-fin.com or by written request to Atlas at 150 Northwest Point Boulevard, Elk Grove Village, Illinois 60007, Attention: Scott Wollney.
HOUSEHOLDING
The SEC permits companies and intermediaries such as brokers to satisfy the delivery requirements for proxy statements or annual reports with respect to two or more Shareholders sharing the same address by delivering a single copyarticle 24 of the proxy statement or annual report, as applicable, addressedCorporation's Articles of Association to those Shareholders. This process, which is commonly referred to as “householding”Require an Ordinary Resolution in Lieu of a Special Resolution for Capital Consolidations, Divisions, and Increases of Share Capital
| | | þ | The Board recommends a vote FOR this item. |
The Board is asking shareholders to consider and vote upon a special resolution to amend article 24 of the Corporation's Articles of Association to permit the consolidation or division of share capital, the subdivision of existing shares, and the increase of share capital by an Ordinary Resolution in lieu of a Special Resolution (the “Alteration of Share Capital Amendment” and the proposal the “Alteration of Share Capital Amendment Proposal”). General The Board is recommending that our shareholders pass a special resolution to amend article 24 of the Corporation's Articles of Association to permit the consolidation or division of share capital, the subdivision of existing shares, and the increase of share capital by an Ordinary Resolution in lieu of a Special Resolution. Text of Proposed Amendment The text of the proposed Alteration of Share Capital Amendment is set forth in Appendix 2 to this Proxy Statement. If and when effected by our Board, the Alteration of Share Capital Amendment will become effective upon its filing with the Registrar of Companies in the Cayman Islands.
Purpose of the Proposal The Board believes it is in the best interests of the Corporation and our shareholders to amend article 24 of the Articles of Association in order to provide additional flexibility for the Board to effectuate certain of the transactions specified therein with the approval of a simple majority of shareholders that, being entitled to do so, vote in person or by proxy at a meeting, as opposed to requiring the approval of two-thirds of such shareholders.The Corporation has no current intention to ask the shareholders to approve any such actions other than the proposals set forth in this proxy statement, but we believe this additional flexibility is appropriate in light of the current challenges and changing environment in which the Corporation operates. The following marked language shows the proposed change to article 24 by adding the bolded, italicized, and underlined language and deleting the stricken language. This summary is qualified by reference to the complete text of the amendment to the Articles of Association, a copy of which is attached to this proxy statement as Appendix 2. All shareholders are encouraged to read the proposed amendment in its entirety for a more complete description of its terms. The Corporation may: a.by Ordinary Resolution consolidate and divide all or any of its share capital into Shares of a larger amount than its existing Shares; b.by Ordinary Resolution subdivide its existing Shares, or any of them, into Shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced Share shall be the same as it was in case of the Share from which the reduced Share is derived; c.by Special Resolution reduce its share capital and any capital redemption reserve in any manner authorized by law; and d.by Ordinary Resolution increase the share capital by such sum, to be divided into Shares of such Classes and amount, as the resolution shall prescribe. Vote Required Approval of the Alteration of Share Capital Amendment Proposal requires the affirmative vote of not less than two-thirds of the issued and outstanding ordinary shares present and entitled to vote at the Meeting. Annual Report All Shareholders of record on the Record Date are currently being sent a copy of Atlas’ 2020 Annual Report, which contains Atlas’ audited financial statements for the fiscal year ended December 31, 2020. Additional information relating to the Corporation is available on EDGAR at www.sec.gov. Any person who was a Shareholder of Atlas at the close of business on the Record Date may obtain copies of Atlas’ 2020 Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”), without charge, via the Corporation’s website at www.atlas-fin.com or by written request to Atlas at 953 American Lane, 3rd Floor, Schaumburg, Illinois 60173, Attention: Scott Wollney. Householding The SEC permits companies and intermediaries such as brokers to satisfy the delivery requirements for proxy statements or annual reports with respect to two or more Shareholders sharing the same address by delivering a single copy of the proxy statement or annual report as applicable, addressed to those Shareholders. This process, which is commonly referred to as “householding,” potentially provides extra conveniences for Shareholders and cost savings for companies. Although we do not intend to household for our Shareholders of record, some brokers household our proxy materials and annual reports delivering a single copy of the proxy statement or annual report to multiple Shareholders sharing an address unless contrary instructions have been received from the affected Shareholders. Once you have received notice from your broker that it will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of the proxy statement or annual report, or if you are receiving multiple copies of any such document and wish to receive only one, please notify your broker. Shareholders who currently receive multiple copies of the proxy statement or annual report at their address from their brokers and would like to request householding of their communications should contact their brokers. Shareholders of record may request householding, or to discontinue householding and receive a separate copy, which will be promptly sent at no cost, of our proxy materials and annual reports by contacting the Corporation at Atlas Atlas Financial Holdings, Inc.33
Financial Holdings, Inc., 953 American Lane, 3rd Floor, Schaumburg, Illinois 60173, Attention: Investor Relations, or by telephone at (847)700-8600. Related Person Transactions We have established procedures for reviewing transactions between us and our directors and executive officers, their immediate family members and entities with which they have a position or relationship. These procedures help us evaluate whether any such related party transaction could impair the independence of a director or present a conflict of interest on the part of a director or executive officer. Directors are considered independent if they are not an executive officer or employee of the Corporation and have no relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. There are four directors on the Board, of which three are independent directors as defined by Nasdaq Rules. Scott Wollney is not independent, as he is a member of our management. A majority of the Board is independent. Mr. Pratt and Mr. Fitzgerald who resigned from the Board effective August 1, 2020 and September 16, 2020, respectively, were also independent directors. Our Audit Committee charter specifically requires the Audit Committee to review and approve all related party transactions that are required to be disclosed under Item 404 of Regulation S-K. In addition, our Code of Business Conduct and Ethics requires our directors, executive officers and all employees to provide full disclosure of the circumstances surrounding any potential conflict of interest and refrain from any related decision making process. Directors and officers must provide this full disclosure to our senior executives and our Audit Committee. To capture all relevant information with respect to such transactions, we annually require each of our directors and executive officers to complete a Code of Business Conduct and Ethics as well as a Director and Officer Questionnaire that, among other things, elicits information about related party transactions. Our senior executives review the information disclosed in these documents, and review any unique circumstances potentially involving a related party transaction with our Chief Financial Officer, other members of management and the Audit Committee, as warranted. The Audit Committee, and possibly the full Board, would review any specific fact patterns as required. As further described below, the Corporation has participated in certain investments with Kingsway America, Inc., some of which involve participation by former Corporation director John T. Fitzgerald. The aggregate value of the investment described below, which is held by Global Liberty Insurance Corporation of New York ("Global Liberty"), makes up approximately 22.5% of the Corporation’s investment portfolio as of December 31, 2020 and is included in assets held for sale on the Consolidated Statements of Financial Position. The related party transaction described below is consistent with the Corporation’s current investment guidelines and has been reviewed and approved by both the Investment Committee of the Corporation’s Board of Directors as well as the Audit Committee pursuant to the Corporation’s policy on related party transactions described above. Real Estate Investment Global Liberty and Kingsway America, Inc. have participated in the following transaction involving the acquisition and management of revenue producing real estate. As of December 31, 2020, the Corporation, Kingsway America Inc. and a third party real estate manager have investments in a venture with the purpose of acquiring, improving and managing underutilized retail real estate. Total aggregate investment in this venture by the three parties is approximately $2.4 million, with Global Liberty and Kingsway America Inc. investing approximately $1.3 million and $656,000, respectively. The outstanding third party debt as of December 31, 2020 totaled $3.4 million. Principal and interest paid totaled $67,700 and $147,800 during the year ended December 31, 2020. Shareholder Proposals Shareholder proposals submitted pursuant to Exchange Act Rule 14a-8 for inclusion in the Corporation's proxy statement and form of proxy for the 2022 annual general meeting of Shareholders must be received by the Corporation by February16, 2022. Such a proposal must also comply with the requirements as to form and substance established by the SEC for such a proposal to be included in the proxy statement and form of proxy. In addition, if a Shareholder intends to present a proposal at Atlas’ 2022 annual general meeting of Shareholders without the inclusion of the proposal in the Corporation’s proxy materials (i.e., not pursuant to Rule 14a-8) and written notice of the proposal is not received by the Corporation on or before May2, 2022, proxies solicited by the Board for the 2022 annual general meeting of Shareholders will confer discretionary authority to vote on the proposal if presented at the meeting. Shareholders should submit proposals to Atlas’ executive offices, 953 American Lane, 3rd Floor, Schaumburg, Illinois 60173, Attention: Scott Wollney. Atlas reserves the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
Other Matters As of the date of this Proxy Statement, the Corporation is not aware of any matter other than those described in this Proxy Statement that will be presented for consideration at the Meeting. If any other matter or matters properly come before the Meeting, it is the intention of the persons named in the proxy to vote, or otherwise act, on such matters in accordance with their best judgment. By order of the Board of Directors,  | | | | Scott D. Wollney | Chairman of the proxy statement or annual report to multiple Shareholders sharing an address unless contrary instructions have been received from the affected Shareholders. Once you have received notice from your broker that it will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of the proxy statement or annual report, or if you are receiving multiple copies of any such document and wish to receive only one, please notify your broker. Shareholders who currently receive multiple copies of the proxy statement or annual report at their address from their brokers and would like to request “householding” of their communications should contact their brokers. Shareholders of record may request householding of our proxy materials and annual reports by contacting the Corporation at Atlas Financial Holdings, Inc., 150 Northwest Point Boulevard, Elk Grove Village, Illinois 60007, Attention: Investor Relations, or by telephone at (847)700-8600.SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires Atlas’ officers and directors, and persons who own more than ten percent of a registered class of Atlas’ equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater-than-ten-percent shareholders are required by SEC regulation to furnish the Corporation with copies of all Section 16(a) forms they file. Based solely on Atlas’ review of any such reports furnished to the Corporation, it believes that during the year ended December 31, 2015, all of Atlas’ officers and directors and persons who own more than ten percent of a registered class of Atlas' equity securities timely filed their required Section 16(a) reports.
RELATED PERSON TRANSACTIONS
We have established procedures for reviewing transactions between us and our directors and executive officers, their immediate family members, and entities with which they have a position or relationship. These procedures help us evaluate whether any such related party transaction could impair the independence of a director or present a conflict of interest on the part of a director or executive officer.
Our Audit Committee charter specifically requires the Audit Committee to review and approve all related party transactions that are required to be disclosed under Item 404 of Regulation S-K. In addition, our Code of Business Conduct and Ethics requires our directors, executive officers, and all employees to provide full disclosure of the circumstances surrounding any potential conflict of interest and refrain from any related decision making process. Directors and officers must provide this full disclosure to our senior executives and our Audit Committee.
To capture all relevant information with respect to such transactions, we annually require each of our directors and executive officers to complete a Code of Business Conduct and Ethics as well as a Director and Officer Questionnaire that, among other things, elicits information about related party transactions. Our senior executives review the information disclosed in these documents, and review any unique circumstances potentially involving a related party transaction with our Chief Financial Officer, other members of management, and the Audit Committee, as warranted. The Audit Committee, and possibly the full Board would review any specific fact patterns as required.
SHAREHOLDER PROPOSALS
Shareholder proposals submitted pursuant to Exchange Act Rule 14a-8 for inclusion in the Corporation's proxy statement and form of proxy for the 2017 annual general meeting of Shareholders must be received by the Corporation by December 23, 2016. Such a proposal must also comply with the requirements as to form and substance established by the SEC for such a proposal to be included in the proxy statement and form of proxy. In addition, if a Shareholder intends to present a proposal at Atlas’ 2017 annual general meeting of Shareholders without the inclusion of the proposal in the Corporation’s proxy materials (i.e., not pursuant to Rule 14a-8) and written notice of the proposal is not received by the Corporation on or before March 8, 2017, proxies solicited by the Board for the 2017 annual general meeting of Shareholders will confer discretionary authority to vote on the proposal if presented at the meeting. Shareholders should submit proposals to Atlas’ executive offices, 150 Northwest Point Boulevard, Elk Grove Village, Illinois 60007, Attention: Scott Wollney. Atlas reserves the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
OTHER MATTERS
As of the date of this Proxy Statement, the Corporation is not aware of any matter other than those described in this Proxy Statement that will be presented for consideration at the Meeting. If any other matter or matters properly come before the Meeting, it is the intention of the persons named in the Proxy to vote, or otherwise act, on such matters in accordance with their best judgment.
By order of the Board of Directors
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Atlas Financial Holdings, Inc.35 | | | | | | “Gordon Pratt” | | | Gordon Pratt
Chairman of the Board
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Appendix 1 IT WAS RESOLVED AS A SPECIAL RESOLUTION THAT the Corporation's ordinary shares be increased to 800,000,001 and that clause 6 of the Corporation's Memorandum of Association be and is hereby amended to read as follows: “The capital of the Corporation is US$2,600,000 divided into 800,000,001 ordinary shares of par value US$0.003 each, 100,000 preferred shares of par value US$0.001 each, and 33,333,333 restricted voting common shares of par value US$0.003 each provided always that subject to the Law and the Articles of Association the Corporation shall have power to redeem or purchase any of its shares and to sub-divide or consolidate the said shares or any of them and to issue all or any part of its capital whether original, increased or reduced with or without any preference, priority, special privilege or other rights or subject to any postponement of rights or to any conditions or restrictions whatsoever and so that unless the conditions of issue shall otherwise expressly provide every issue of shares whether stated to be ordinary, preference or otherwise shall be subject to the powers on the part of the Corporation herein before provided”. Appendix 2 IT WAS RESOLVED AS A SPECIAL RESOLUTION THAT article 24 of the Corporation's Articles of Association be and is hereby amended to read as follows: The Corporation may: a.by Ordinary Resolution consolidate and divide all or any of its share capital into Shares of a larger amount than its existing Shares; b.by Ordinary Resolution subdivide its existing Shares, or any of them, into Shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced Share shall be the same as it was in case of the Share from which the reduced Share is derived; c.by Special Resolution reduce its share capital and any capital redemption reserve in any manner authorized by law; and d.by Ordinary Resolution increase the share capital by such sum, to be divided into Shares of such Classes and amount, as the resolution shall prescribe.
Atlas Financial Holdings, Inc.37
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