Joining a corporation as a shareholder often starts off on the right foot – the venture appears lucrative, and you are excited to work with the friends, family or business partners you have elected to start your business with. However, it is not uncommon for things to turn sour. Perhaps the other shareholders are locking you out, or conducting business that you know is hurting the company’s bottom line. If any of this sounds familiar, you should be aware of your rights as a shareholder and the avenues for legal remedies.
For provincially incorporated businesses, the Ontario Business Corporations Act (OBCA) provides a framework to protect the rights of shareholders and ensure fair treatment, even of minority shareholders. These rights include, but are not limited to:
The OBCA directly offers distinct remedies to protect the interests of a shareholder whose rights have been violated. These include, without limitation:
The court has broad powers where it determines that there has been oppressive behaviour.
The OBCA also contains remedies for shareholders to act on their rights to call shareholders meetings and to be paid the fair value of their shares when they dissent from certain corporate actions such as mergers or amendments to articles.
In addition to the statutory protections provided under the OBCA, shareholders can enter into shareholder agreements to further safeguard their interests. Shareholder agreements are private contracts that define the rights, obligations, and relationships between shareholders. These agreements can address matters such as defining what matters may required shareholder approval, share transfers, buyback provisions, dispute resolution mechanisms, and pre-emptive rights for a shareholder to purchase newly issued shares before it is offered to other persons. By establishing clear guidelines, shareholder agreements provide additional protection and prevent conflicts among shareholders.
Shareholders should consider seeking legal advice when facing situations that may impact their rights. Lawyers with expertise in corporate law can provide guidance on interpreting the OBCA, assessing potential remedies, and navigating the legal process.
Understanding the rights and remedies available under the OBCA is crucial for shareholders to protect their investments and participate in corporate decision-making. By knowing their rights, shareholders can take appropriate action if their interests are compromised. The OBCA's legal framework, coupled with shareholder agreements and legal advice, empowers shareholders to ensure fair treatment and accountability within the corporate landscape.
The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.