The Ontario Business Corporations Act provides a wide range of remedies to a person affected by the actions of a corporation or its directors that are found to be oppressive, unfairly prejudicial, or unfairly disregard the interests of that person. Most commonly, these remedies are sought by minority shareholders when actions are taken or threatened that would unfairly hurt their interests.
One of those remedies is to direct the corporation, or any other person, to purchase the shares of the complainant. This remedy essentially allows shareholders to be relieved of their shares for a fair price, leaving the corporation and its remaining shareholders to carry on without further complaint from the complainant.
However, this remedy does not create a free-standing right for a shareholder of a privately-held corporation to force the sale of his or her shares for any reason. This principle was recently confirmed in Wilfred v Dare et al. In that case, the complainant sought an order directing the sale of her shares for what she alleged was oppressive conduct against her. However, the court found that there was no oppressive conduct, and the other shareholders’ refusal to buy the complainant’s shares does not, in itself, amount to an act of oppression. Specifically, the court held that:
“…the oppression remedy in s. 248 is not designed to relieve a minority shareholder from the limited liquidity attached to his or her shares or to provide a means of exiting the corporation, in the absence of any oppressive or unfair conduct. … the refusal of the defendants to purchase [the complainant’s] shares is [not] itself a basis for relief under s. 248.”
In some situations, a shareholder can avoid having to seek court assistance by ensuring there is a shareholder agreement that allows for the forced sale of his or her shares (commonly called a “buy-sell clause” or a “shotgun clause”). However, without such a clause, and in the absence of any oppressive conduct by the corporation or its directors, shareholders of a privately-held corporation may not be able to compel the purchase of their shares from the corporation or other shareholders at their convenience.
If you are involved in a shareholder dispute or oppression dispute, please contact us for an initial consultation.
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