When a shareholder’s rights are breached, there are a variety of legal remedies available under the Ontario Business Corporations Act (“OBCA”). For more information on shareholders’ rights, please click here to see part 1 of this post.
It is first important to note that as per the Ontario Court of Appeal decision Maurice v. Alles, the standard two-year limitation period set out in the Limitations Act applies to oppression remedy claims. The “clock starts to run” when the oppressive conduct first began, meaning that individuals must not delay if they wish to pursue an oppression remedy.
The oppression remedy under s. 248 of the OBCA is broad in nature, and there is a large amount of judicial discretion afforded in its application. The oppression remedy can be an especially strong tool in protecting minority shareholders. When the Court determines that there has been oppressive conduct, unfairly prejudicial conduct, or conduct that disregards the interests of any shareholder it may make an order to resolve the matter in a variety of ways.
Examples under s. 248 include: restraining the conduct, appointing a receiver, amending the articles or by-laws, amending a unanimous shareholder agreement, directing an issue or exchange of securities, new director appointments, directing a corporation to purchase securities of a security holder, setting aside a transaction or contract, compensation, rectification of the registers, winding up the corporation, directing an investigation, or requiring a trial.
It is important to note that the oppression remedy only protects shareholders’ legitimate and reasonable expectations.
Under s. 246, a shareholder may commence an action on behalf of the corporation when the corporation refuses to do so. The claim must be framed as being aimed towards remedying wrongs committed against the corporation, and not against the individual shareholder.
Section 106(1) states that if calling a meeting of shareholders is “impracticable”, the Court may order a meeting to be called, held and conducted in such a manner as the Court directs. Beyond Court ordered meetings, there are instances where shareholders are entitled to be paid by the corporation the fair value of their held shares as per s. 185(4). Moreover, as stated in s. 207, in some circumstances the Court may order a winding-up of the corporation. Also, in the case of public companies, securities law remedies may also be available.
The OBCA creates a variety of avenues for relief, which opens the door for creative lawyering and creating adjudicating to uniquely resolve individual grievances in the most appropriate manner. How an issue is framed may dictate the type of relief that is granted, and thus it is important to understand what you are trying to achieve at the early stages of your claim.
For an overview on the types of shareholders’ rights, which when breached, lead to the potential for the application of the above stated remedies, please click here.
If you require legal advice regarding these practice areas, please contact Gilbertson Davis LLP for an initial consultation.