Earlier this year, the Supreme Court of Canada (SCC) revisited the oppression remedy for the first time in almost ten years, confirming that it is only available where a corporation has been unfairly prejudicial or oppressive to the interests of a shareholder, director, creditor or other minority stakeholder.
What is the oppression remedy?
Both the Ontario Business Corporations Act and the Canada Business Corporations Act (CBCA) include sections that establish an oppression remedy. This is a mechanism that protects individual stakeholders from acts of the corporation that are unfairly prejudicial or oppressive, whether those acts are undertaken by the board of directors, majority shareholders, or another affiliate acting on behalf of the corporation. Potential claimants in an oppression remedy action include individual shareholders and groups of minority shareholders, creditors and investors, individual board members or officers of the corporation, or any other entity with a demonstrable interest in the corporation.
Menillo v. Intramodal Inc.
In the case at issue, the SCC refused to grant an oppression remedy to the claimant. The dispute arose out of a small business owned by two individual shareholders, with a history of poor record keeping and little adherence to the formalities required under the CBCA. When the claimant was no longer willing to guarantee the debts of the corporation, he was removed as a minority shareholder. He claimed this was unfairly prejudicial, and sought an oppression remedy. In order to be granted a remedy, the minority shareholder was required to prove two things. First, he had to establish his own expectations vis-a-vis the corporation and the conduct of majority shareholders. Next, he had to show how the corporation’s conduct unfairly disregarded his interests, or was otherwise oppressive. In this case, the claimant could not prove his expectation to remain a shareholder. Furthermore, the only evidence of improper conduct by the corporation was failure to adhere to the technical formalities under the CBCA, and this was not conduct that qualified as unfair disregard for minority interests, or unfairly prejudicial.
Insightful advice for corporate stakeholders about the oppression remedy
The oppression remedy exists to protect minority interests, but the court will consider each case in context and look at the actions of all parties before making a decision. Financial Litigation has successfully argued oppression remedy cases, and knows how to marshal evidence to build a strong claim. As a boutique firm focusing on financial and commercial matters, we regularly act on behalf of individual stakeholders and businesses of all sizes. To discuss a potential oppression claim with our team, contact us online or call 416 769 4107 x1.