The range of remedies available to an aggrieved shareholder are virtually unlimited. The BC Business Corporations Act contains an extensive list that includes:
- Directing or prohibiting any act,
- Regulating the conduct of the company’s affairs,
- Removing a director,
- Requiring the company to purchase a shareholder’s interest,
- Setting aside a resolution or transaction,
- Compensating an aggrieved party, and
- Directing an investigation of the company’s affairs.
In addition, a court may appoint a receiver, or even direct that the company be liquidated and dissolved.
In most cases, courts will adopt a remedy that is both the least intrusive and adequate to redress the matter complained of. However, where the issue is one of foundational importance to the business – for example, the inability of management in a closely held company to work cooperatively – it is not unusual for the court to order that one shareholder buy out the other.
The liquidation of a closely held company is considered the “nuclear option”, and relatively rare, but I have been involved in two recent cases where that was the final result. In one case, the court concluded that liquidation would proceed only if the shareholders (all family members) could not agree on a mutually acceptable resolution by a fixed date. Despite months of negotiations, the shareholders were unable to find a solution they all could accept, and the company’s assets were sold through a liquidator, with significant tax consequences.
This could have been avoided through the adoption of a Shareholders’ Agreement with a standard “buy-sell” provision, but by the time the case came to me, any hope of negotiating a mechanism that all shareholders found acceptable had passed. A bit of preventative work at the outset would have saved millions in tax liabilities, not to mention significant legal expenses and the rupture of long-standing relationships.
This article is intended to provide general guidance on the subject matter. Specific advice should be obtained in connection with your particular circumstances.
