A squeeze-out is rarely one dramatic act. It is a sequence of decisions, each of which has a perfectly reasonable explanation attached to it.
Section 248 of Ontario's Business Corporations Act lets a shareholder, director, officer or other proper complainant ask the Superior Court to intervene where the affairs of a corporation are conducted in a way that is oppressive, unfairly prejudicial, or that unfairly disregards their interests. The court may then make any order it thinks fit.
The critical feature, and the reason the remedy is as useful as it is, is that it protects reasonable expectations rather than strict legal rights. Conduct that breaches no written agreement can still be oppression.
What the pattern looks like
- Financial statements stop arriving, and requests for records go unanswered or are met with delay
- You are removed as a director, an officer, or an employee, often for a stated reason that sounds plausible in isolation
- Dividends stop, while the majority's salaries, bonuses or management fees increase
- Related-party transactions appear on terms no arm's length party would have accepted
- A share issuance you have no realistic ability to fund dilutes your position
Each of those has a defence. Cash flow was tight. The role was restructured. The related party was the only supplier available. Taken one at a time they are business decisions. Taken together, over eighteen months, they are a course of conduct that defeats the expectations you held when you put money or a decade into the company. Building that chronology is most of the work in an oppression file.
What the court can do about it
Considerably more than award damages, which is the point people most often miss:
- Order a buyout of your shares at a fair value the court determines. In the majority of these files this is the actual objective.
- Restore you to a position you were excluded from
- Compel access to corporate records and financial information
- Unwind or correct transactions and governance arrangements
- Wind up the corporation, in exceptional cases
- Order the corporation to fund your costs, which matters enormously when the other side controls the company's bank account and you do not
There is no shareholders agreement. Does that end it?
No, and this is the most common question. Most owner-managed Ontario businesses never sign one, or sign one at incorporation and never look at it again. Because the remedy protects reasonable expectations, those expectations can be established from how the business was actually run, what was said when the parties went in together, the course of dealing between them, and ordinary practice in the industry.
A written agreement makes proof easier. Its absence is frequently the reason the oppression remedy is needed in the first place.
Oppression or derivative action?
An oppression claim addresses a wrong done to you personally. A derivative action is brought on behalf of the corporation for a wrong done to the company itself, such as a diverted corporate opportunity, and it requires leave of the court before it can proceed. The same facts often support both. Characterising it correctly at the outset matters, because a personal claim for what is in substance a corporate loss can be dismissed on that ground alone.
The conversation to have first
These are Superior Court proceedings and they are not cheap. Before anything else it is worth being honest about what the shares are realistically worth, what a workable resolution looks like, and whether the commercial objective can be reached through a negotiated buyout. The large majority of these disputes settle on a number. The litigation is usually the pressure that produces the number rather than the thing that decides it.
More on oppression, deadlock and partnership breakups on the shareholder dispute page.
