There is a common misconception that minority shareholders are always bound by the will of the majority. Although this was the rule under the common law, legislation now protects the minority shareholder from being abusedby the majority in certain specific cases.
Major re-organizations: A minority shareholder has the right to dissent to a) the amendment of the corporate articles to alter the provisions relating to the issuance or transfer of shares, or to change or remove any restriction on the business the corporation may carry on; b) the amalgamation of the corporation with a corporation that is not a subsidiary or parent; c) the continuance of the corporation in another jurisdiction; or d) the corporation selling, leasing or exchanging all or substantially all of its property. Providedthe dissenting shareholder has followedthe proper procedures, he or she is entitledto force the corporation to purchase his or her shares for a value as determinedby the Court.
Derivative actions: If the directors refuse to enforce the rights of the corporation against any officer, director or employee, a shareholder (as well as creditors) may apply to the Court for leave to carry out such a law suit in the name of the corporation. This is often usedwhere the directors have not actedin the best interests of the corporation and thus may have incurreda personal liability to the corporation, where the directors have appropriatedto themselves some benefit which belongs to the corporation, or where the majority shareholder has takenfunds from the corporation for his/her own personal benefit.
Oppressive actions: If a minority shareholder feels that the business of the corporation has been carriedon with intent to defraud any person, or the powers of the directors have been exercisedin a manner that is oppressive, unfairly prejudicial, or that unfairly disregards the minority shareholder’s interest, he/she may apply to the Court for an appropriate remedy. In such cases, the Court has extensive powers to correct the wrong, including:
- restraining the conduct complained of
- appointing a receiver-manager
- amending the articles or bylaws of the corporation (even if such amendments would contravene the provisions of a unanimous shareholder’s agreement)
- directing an issueor exchange of shares
- pointing or replacing directors
- directing the corporation or any other person to purchase the complainants shares
- directing the corporation or any other person to pay to the complainant any part of the moneys paid by the complainant for his shares
- directing the corporation to pay dividends to its shareholders or a class of shareholders
- varying or setting aside a transaction or contract to which the corporation is a party
- requiring the corporation to produce financial statements or an accounting, xi) compensating the aggrievedperson
- directing rectification of the corporation’s records
- liquidating and dissolving the corporation
- directing an investigation of the affairs of the corporation.
Applications to the Court in oppression actions can be made not only by existing shareholders, but also by: a) former shareholders of the corporation or any of its affiliates, b) a director or officer or former director or officer of the corporation or any of its affiliates, c) any registeredor beneficial owner of any other security, and d) such other person as the Court finds to be a proper person to make such an application.
The majority shareholders cannot ignore the rights of the minority!