Shareholder remedies

How BC law treats it

The Business Corporations Act, SBC 2002, c 57 (BCBCA) provides the main remedies. The oppression remedy under s. 227 is the broadest and protects shareholders against conduct that is oppressive or unfairly prejudicial to them. Where the wrong is done to the company itself, such as a director diverting a business opportunity, a shareholder or director can apply for leave under ss. 232 and 233 to bring a derivative action in the company's name. There is no minimum shareholding to apply, but under s. 233 the applicant must show it made reasonable efforts to have the directors bring the proceeding, gave notice of the application to the company, is acting in good faith, and that the proceeding appears to be in the company's best interests. Dissent rights under Division 2 of Part 8 let a shareholder who objects to certain fundamental changes, such as some amalgamations, sales of all or substantially all of the undertaking, or continuations out of BC, be paid the fair value of their shares. The procedure is strict: the shareholder must send a written notice of dissent within the time the Act sets. The court can also order compliance with the Act or the articles, restrain a contravention, order an investigation of the company on the application of holders of at least one fifth of the issued shares, and, where just and equitable, order the company liquidated (ss. 228, 248 and 324). Shareholders also have contractual remedies under any shareholders agreement, and the basic right to inspect company records, which is often the first step in deciding whether a court remedy is worthwhile.

What it means for your business

Knowing the available remedies tells a shareholder how much leverage they actually have in a dispute and tells majority owners and directors where their exposure lies. Choosing the right remedy matters: a personal oppression claim, a derivative action and a dissent each have different requirements, costs and outcomes. Missing a strict dissent deadline, or bringing the wrong type of claim, can waste money and lose the right altogether. Example: A minority shareholder in a Nanaimo marine services company learns a director diverted a major contract to his own firm. She obtains leave to bring a derivative action against the director, and any recovery is paid to the company.

Risks and common mistakes

Suing personally for a loss suffered by the company instead of seeking leave for a derivative action. Missing the deadline to send a written notice of dissent. Assuming a shareholder needs a minimum percentage of shares to bring a derivative action in BC. Skipping a records inspection that could confirm or rule out the claim before litigation. Ignoring a dispute resolution or buyout clause in the shareholders agreement.