Imagine a director locking a shareholder out from accessing audited financial records. A majority shareholder might scheme with a director to dissolve the corporation without informing a minority shareholder. Or perhaps a majority shareholder in a family-owned business treats the corporation as a personal piggy bank. If any of this sounds familiar, you may be entitled to enforce your rights and seek justice through the oppression remedy.
Shareholders in corporations governed by Ontario’s Business Corporations Act (OBCA) or the federal Canada Business Corporations Act (CBCA) have access to a variety of legal actions and remedies to protect their interests. One of the most powerful tools available is the oppression remedy.
This article will provide an overview of the oppression remedy and explain how a corporate lawyer can help you maximize your chances of success when making a claim.
What is Shareholder Oppression?
Under the OBCA, the oppression remedy is available to any registered or beneficial owner of a security when:
- Any act or omission of the corporation or its affiliates affects or threatens to affect the interests of a security holder;
- The business or affairs of the corporation or its affiliates are carried out or threatened to be carried out in a manner that is oppressive, unfairly prejudicial, or disregards the interests of a shareholder, creditor, director, or officer.
The courts use the oppression remedy to protect the reasonable expectations of shareholders in various situations. What constitutes reasonable expectations will depend on the specific circumstances. For example, a shareholder in a large corporation with hundreds of investors may have different expectations from a shareholder in a small, family-owned business.
Oppression can range from illegal behaviour to less severe instances of bad faith or dishonesty. As long as the conduct violates a shareholder’s reasonable expectations, the court may determine that oppression has occurred and a remedy is required.
Examples of Shareholder Oppression
Every case of shareholder oppression is different, but some common examples of oppressive conduct include:
- Misusing corporate resources for personal gain;
- Fraudulent dissolution of a corporation or initiation of insolvency proceedings to avoid obligations to shareholders or creditors;
- Excluding a shareholder from corporate management or failing to provide financial disclosures;
- Making decisions that harm individual shareholders, such as paying exorbitant compensation to management;
- Unfair dividend payments that adversely affect certain shareholders.
These are just a few examples, and each situation is unique. To determine if your case qualifies for the oppression remedy, it’s essential to consult with an experienced corporate lawyer.
Remedies Available for Shareholder Oppression
Courts have wide discretion to tailor remedies for cases of shareholder oppression, but the remedy will only go as far as necessary to address the oppression itself. Some of the potential remedies include:
- Restraining the conduct that caused the oppression;
- Appointing a receiver or receiver-manager to take over management of the corporation;
- Amending corporate articles, by-laws, or shareholder agreements;
- Ordering the purchase of securities from a shareholder;
- Compensating an aggrieved shareholder;
- Varying or cancelling contracts that were unfairly entered into;
- Requiring the production of financial statements or records;
- Winding up the corporation.
The specific remedy depends on the circumstances of the case, and courts will focus on restoring the rights of the oppressed shareholder.
How to Make an Oppression Claim
To begin an oppression claim, a shareholder must serve a statement of claim or application on the parties responsible for the oppressive conduct. In some cases, it may be possible to negotiate with the wrongdoers before starting legal proceedings, using alternative dispute resolution methods such as mediation or arbitration.
If negotiation fails, the shareholder can proceed with the legal claim, which may involve a court hearing. A corporate lawyer can assist throughout the entire process, from negotiation to court representation.
The Importance of Legal Representation
Navigating shareholder oppression claims without legal assistance can be risky and costly. If you lose your claim, you may be responsible for paying the other party’s legal costs. Additionally, the legal process can be complex, and making mistakes could jeopardize your chances of success.
A skilled corporate lawyer can help you present a strong case, ensure compliance with all legal requirements, and protect your shareholder rights. With legal guidance, you can maximize your chances of achieving a favourable outcome in your oppression claim.
Conclusion
The oppression remedy is a powerful tool for protecting the reasonable expectations and interests of shareholders. If you believe your shareholder rights have been oppressed, it is crucial to seek legal advice as early as possible to determine the best course of action.
At Achkar Law, our experienced corporate lawyers frequently help clients navigate shareholder oppression claims and are ready to assist you, whether you’re negotiating or preparing for litigation. Reach out today to explore your legal options and protect your shareholder rights.
Contact Achkar Law
If you are a shareholder and want to know more about your rights and the remedies available to you because of a corporate dispute, our team of experienced corporate and commercial litigation lawyers at Achkar Law are here to help.