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Oppression Remedy in Corporate Law
Bryan G. Embree
Bryan G. Embree

There are two statutes that govern corporate activities in Ontario; the Canada Business Corporations Act (CBCA) and the Ontario Business Corporations Act (OBCA). A corporation has the capacity and the rights, powers and privileges of a natural person. They are inanimate, legal entities that are given their character and behaviour by the human actors within the corporation and, as such, corporations become reflections of the personalities within a corporation who operate it. The directors, officers and members of boards of directors all help shape the "corporate personality." As with individual persons, corporations do not always act appropriately. One way in which a corporation might not act appropriately is with regard to dealing with minority shareholders who have, in a practical sense, little or nothing to say about the day-to-day operations of the corporation in which they have invested. Understandably, majority shareholders will tend to exercise their power within the corporation regarding the day-to-day operations, but corporate statutes such as the CBCA and OBCA state that majority shareholders cannot run rough-shod over minority shareholders without regard to minority shareholders' rights. Both the CBCA and the OBCA (and other provincial corporate statutes) contain an "oppression remedy" (section 248 in the OBCA). The Act states that a complainant may apply to the court for a remedy where the court is satisfied that the corporation or any of its affiliates threatens to effect a result that is oppressive or unfairly prejudicial or unfairly disregards the interests of any security holder, creditor, director or officer of a corporation and that the court may make an Order to rectify the complaints. The discretion for a remedy under this section for a court is very broad including, for example, making an Order restraining the conduct complained of, an Order to regulate the corporation by amending its Articles of Incorporation, the forced amending of unanimous shareholder agreements in the corporation, or financial compensation for an aggrieved person. The Court can even go so far as to order that the corporation be "wound up," meaning forced to cease operations. Here is an example of how the oppression remedy was successfully used by a complainant against a corporation carrying on business as a marina in the Toronto area. The complainant had invested monies into the marina in 1987. She was one of a number of common shareholders and original investors. The agreement at the time of her investment was that she would receive special shares in the corporation in exchange for her investment, which she never received. No shareholders meetings were held after 1995 and the flow of information stopped leaving the investor with no knowledge about the disposition of, or value of, her shares. The investor made a demand of the corporation that it disclose to her the value of her shares and that it redeem her shares and return her investment monies, presumably with a profit attached. The corporation never responded to her requests which drove the investor to make an application under the oppression remedy. The Trial Judge ordered that the corporation prepare and produce, within three months of the date of the hearing, audited financial statements for several years, that the corporation hold a shareholders' meeting within 60 days, and that the corporation pay the costs of the complainant's application in the amount of $10,000.00. While the final disposition of this matter was not described in the case (it was an interim order in the matter), what is clear is that the oppression remedy can be used by "the little guy" against "the big guy" in a corporate setting to provide a remedy for a vulnerable person. Legal protection against unjust and unfair bullying by the strong against the weak is a cornerstone and necessary component of a free and democratic society, whether in the civil or corporate world.

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