Shareholder Remedies Under the Ontario Business Corporations Act (“OBCA”), shareholders of a corporation have a variety of rights. Outlined below are a few rights that all shareholders should be aware they possess. Voting Rights The board of directors, under s. 115 are ultimately responsible for managing or supervising the management of the business and affairs of a corporation. Major business decisions also involve the participation of the board of directors, though sales, leases, or exchanges of all or substantially all the property of the corporation that is not in the ordinary course of business requires the approval of shareholders (s. 184(3)). Shareholders also have voting rights that allow them to control the makeup of the board of directors (s. 119(4)), and also the ability to remove directors under s. 122(1) (though this is subject to exceptions under s. 120(f)). Shareholders have additional voting rights under s. 100(2). Access to Information Rights Under s. 140(1) corporations … Read More
Measures of Last Resort – The Benefits of Exit Provisions in Shareholder’s Agreements
The benefits of a shareholder’s agreement may not be fully considered when parties are intending to go into business together and become joint shareholders in a corporation. Perhaps the mood is optimistic and none of the participants anticipate that things might sour between them down the road. Sometimes corporations are formed absent such an agreement. However, among other benefits, these agreements become particularly useful in managing risk and guiding shareholders through governance issues and disputes that may arise, efficiently so as to minimize disruption to the corporation’s business. Absent a shareholder’s agreement, shareholders in a closely held corporation that cannot see eye-to-eye regarding the operation and path of the corporation, may become stuck in a deadlock where decision-making is effectively stifled due to a stalemate between them. Shareholder’s agreements can serve to provide mechanisms to address deadlock, protect the voice and rights of minority shareholders, provide a road map for … Read More
Shareholders’ Remedies under the OBCA: An Overview (Part 2/2)
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. Oppression Remedy 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. … Read More