Most businesses begin as closely held operations, with a few principals owning all the shares and holding key positions. Frequently these businesses are established by friends and family, and little thought is given to the prospect that their interests may one day diverge.
When disputes arise, not only do they threaten long-standing relationships, they can undermine the very existence of the business, and achieving a resolution quickly and fairly is paramount.
In some cases, the lawyer who acted for the founders will have prepared a Shareholders’ Agreement, and this may prescribe a mechanism through which the parties can address their dispute. However, where the options set out in the Agreement are not adequate, or where no Agreement exists, an aggrieved shareholder may wish to seek redress through a court proceeding.
In British Columbia, courts have a broad discretion to become involved in corporate disputes. Courts are most likely to intervene in internal corporate matters where a parties’ reasonable expectations are not being met, or where the very basis on which the company was established – for example, as a “quasi-partnership” with equal control – no longer exists. Courts may also become involved where management is deadlocked, or where there is mutual acrimony or loss of confidence and a resulting inability to make collective decisions.
Family-based companies are regarded as a special category, and courts routinely grant a remedy where one member is excluded from the decision-making process.
Each situation is unique, and must be assessed on its own merits, but if you are involved in a business that no longer functions satisfactorily, there is frequently a path to a solution, whether through negotiations or litigation proceedings.
Finally, it is important that you assert your rights without delay, to avoid any suggestion that you have “accepted” the changed circumstances through acquiescence, or otherwise failed to seek redress in a “timely manner”.
If you are involved in a corporate dispute, contact me for a complimentary review of the circumstances and an assessment of the available options.
This article is intended to provide general guidance on the subject matter. Specific advice should be obtained in connection with your particular circumstances.
