If the resolution is approved by shareholders at the May 2 meeting, Nortel’s board will have the authority to implement the reverse stock split, the Brampton, Ont. firm said in its preliminary proxy circular filed with the U.S. Securities and Exchange Commission.

“Approval of the special resolution by shareholders would give the board of directors authority to implement the consolidation at any time prior to April 11, 2007,” the document stated.

A range of potential ratios would be approved by shareholders, but the board would have the final say, it said.

The board could also abandon the reverse stock split altogether without notifying or obtaining approval from shareholders.

A reverse stock split allows a set number of shares to be combined, creating fewer shares at a higher price.

Nortel’s board believes it should go ahead with the consolidation of shares for various reasons, the document said. Namely, a higher stock price would allow a wider range of institutional investors and investment funds to buy its shares, which would also improve liquidity.

Nortel’s common shares hit an all-time high of $124.50 Cdn in July 2000, making the telecom equipment company by far the most valuable company in Canada and the most influential stock on the Toronto Stock Exchange.

However, after a series of missed growth targets, tens of thousands of layoffs and a prolonged downturn in the worldwide telecom industry Nortel’s shares fell to 67 cents in October 2002.

Nortel began to recover – announcing its first annual profit in seven years in January 2004 – only to see its fortunes and its stock dashed by revelations in March and April of accounting irregularities.

After Nortel fired CEO Frank Dunn for cause in April 2004, its shares fell 27 per cent in one day to $5.50. Except for a brief rally, Nortel shares have since remained below that price. There are more than 4.3 billion Nortel shares outstanding.

They closed two cents higher Thursday at $3.41 on the Toronto Stock Exchange.