When a company’s decisions are unfair or prejudicial to certain shareholders, those shareholders may be able to get relief by using the “oppression” remedies available under the British Columbia Business Corporations Act.
To obtain oppression relief, a shareholder (non-shareholders may also seek relief) must start a court action and prove the company has engaged in conduct which is “oppressive or unfairly prejudicial” to the shareholder, and inconsistent with the shareholder’s reasonable expectations.
There is a wide array of conduct which has been found to cross the “oppressive” or “unfairly prejudicial” threshold. Generally, the shareholder must show the company’s actions amount to treating or impacting them differently than other similarly situated shareholders, in a way that unfairly disregards the shareholder’s interests and causes some sort of actual harm. Some examples: a company issuing shares to turn a majority shareholder into a minority shareholder; providing dividends or payments to some shareholders and not others; or otherwise acting to the benefit of some shareholders and the detriment of others. Claims of oppression are more likely to succeed where there is no feasible business reason for the conduct by the company, as the mere fact of a detrimental effect will not necessarily establish oppressive conduct.
Additionally, the harm alleged must be suffered in the same capacity in which the complainant has standing to seek a remedy, i.e. as a shareholder. For example, a shareholder who is also an employee could not bring an oppression claim solely with regard to the termination of their employment, as that is an employment matter that would be dealt with outside the scope of the Business Corporations Act.
On the other side of the coin, directors and officers of a company must be aware that they can be held personally liable for oppressive corporate conduct that they are found to participate in, regardless of the fact that the conduct is essentially a “corporate act”.
If a finding of oppression is made, the court will ultimately craft a remedy based on the rights of the parties as detailed in the articles of incorporation and any shareholders’ agreement and on the equitable rights and objectively reasonable expectations of the complainant.
The court may make any order it deems appropriate to remedy a finding of oppression. Section 227 of the Business Corporations Act provides the following non-exhaustive list of remedies:
- Directing or prohibiting an act
- Regulating the conduct of the company’s affairs
- Appointing a receiver manager
- Removing any director
- Appointing directors
- Directing the company or a shareholder to purchase the shares of a shareholder
- Varying or setting aside any transaction
- Liquidating the company
Oppression claims are often complicated, fact-based, and dependent on the credibility of various parties. As such, they regularly become costly and complicated pieces of litigation. It is not uncommon for a simple claim that a company has done something unfair to get dragged out for years, with substantial documentary discovery, witness examinations, and numerous court appearances. Accordingly, the costs of proceeding, and the risk of paying the opposing party’s costs if unsuccessful, are a major factor to consider before making a claim.
Accordingly, it is vital to consult with experienced corporate litigation counsel, who can provide representation and guidance on available options and a strategic plan of action for both companies and aggrieved stakeholders.