In Binscarth Holdings LP v. Anthony, 2024 ONCA 522, the Ontario Court of Appeal confirmed that, in some circumstances, a limited partner may obtain leave to commence a common law derivative action in the name of a limited partnership. Derivative actions are typically actions brought on behalf of a corporation for wrongs that are done to it. The action has common law origins and was created to counteract the rule in the seminal case of Foss v. Harbottle that, as a separate legal entity from its shareholders, only a corporation itself possesses a cause of action for wrongs done to it. The derivative action allows a person to bring an action in the name of a corporation against its management for harm they have caused to the company. In modern Canadian corporate law, the derivative action has been codified under Ontario’s Business Corporations Act, R.S.O. 1990, c. B.16, and the Canada … Read More
Limitation Period Considerations in Derivative Proceedings
Under modern business corporation legislation, a claim for wrongdoing against a corporation can only be brought by the corporation itself, or by way of a derivative action for which leave from the court is required. In Ontario, there is a standard two-year limitation period that applies to the commencement of most lawsuits, including derivative claims on behalf of a corporation. When wrongs done to a corporation are alleged to have been done by a director or directors who exercise control and decision-making on behalf of the corporation, it is unlikely that those same directors will agree to commence a claim on behalf of the corporation for those wrongs. It is then up to other interested stakeholders, such as shareholders, to seek leave to commence a derivative claim on behalf of the corporation for the wrongs done to the corporation. Until the release of a 2015 Supreme Court of Canada ruling … Read More