How David beats Goliath
The powers of minority shareholders under the oppression remedy

Woodbridge corporate and securities lawyer, Joseph Chiummiento, of Core Lawyers, offers insight on how minority shareholders are protected under the oppression remedy.

What is the Oppression Remedy?

The oppression remedy exists to protect the interests of shareholders, and in particular, minority shareholders of a company. It is designed to promote fairness amongst shareholders of a company and balance competing interests, and issues of power and control in fundamental decision making.

While it is often used by minority shareholders many times it is also creditors, directors, and officers who can benefit from the remedy.

How Does the Oppression Remedy Work?

Under section 248(2) the court will look at what is going on in the world of a particular company to determine if the action or inaction “is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation ….”.

In BCE Inc. v. 1976 Debentureholders (2008), the Supreme Court of Canada outlined two factors which a court must take into consideration when assessing a complainant’s oppression claim:

(1) does the evidence (ie. written or documented proof) support the reasonable expectation being claimed by the person being oppressed.

(2) does the evidence support a conclusion that the reasonable expectation of the complainant was violated by conduct that is considered “oppressive,” “unfairly prejudicial,” or “unfairly disregards” the interests of the complainant.

While the oppression remedy rights are set out in law, ultimately a judge’s opinion on the facts of each case is all that matters in the end. It is common for lawyers to use threats of the oppression remedy as a negotiation tool in helping shareholders or stakeholders exit on mutually-agreed-to terms.

Some examples of conduct that may give rise to the oppression remedy include:

• the absence of good faith on the part of the directors of a corporation,
• the failure to disclose material information to minority shareholders

Judge’s will consider the specific circumstances of each case, such as the nature of the relationships between parties, past practices of the corporation, and competing interests between parties.

How to deal with being treated unfairly in a company

The natural inclination of dealing with issues in a company is to seek counsel from friends and family, which may provide good emotional support but not give you the information needed to make a confident decision.

If you are a board member you should be sure your actions do not give rise to a claim for oppression, and if you are an individual shareholder you should have all the information you need to be sure before taking any action as the consequences, win or lose, will change your life.

Contact a lawyer to discuss your options and thoughts, and to get some certainty before taking action.