Shareholder Remedies

AuthorJ. Anthony VanDuzer
In previous chapters we have disc ussed various rights th at shareholders
have that are based on statute, common law, the corporation’s articles
and by-laws, directors’ and shareholders’ resolutions, and unanimous
shareholders’ agreements. These rights def‌ine the entitlements that
shareholders have in relation to the corporation and its directors, of-
f‌icers, and other shareholders. The shareholder remedies described in
this chapter are mechanisms in corporate statutes to ensure that share-
holders receive the benef‌it of those entitlements. These mechan isms
are important for shareholders because, un like some other corporate
stakeholders, such as creditors, shareholders do not have contractual
rights against t he corporation or its directors or off‌icers.1 Shareholder
remedies, however, have a broader scope than contractual rig hts. Share-
holder remedies do not just protect legal rights; they can provide relief
where shareholders’ economic and other interests have been affected
or shareholders have been treated unfa irly. In this regard, shareholder
remedies complement other procedural protections for shareholders’
interests discussed elsewhere in this book, like their ability to vote for
1 As discu ssed in Chapter 3, under corporat e statutes based on the Engl ish Com-
panies Act, s 14, shareholders can s ue for breach of contract where provision s of
the article s or memorandum of associat ion have been breached. This is st ill pos-
sible under the Nova Scot ia Companies Act, RSNS 1989, c 81 [NSCA], s 24(1) and
the British C olumbia Business Corporations Act, SBC 20 02, c 57 [BCBCA], s 19(3).
Shareholder Remedies 441
the election of directors and to put matters on the agenda for discu ssion
at shareholder meetings through shareholder proposals.
Much of the initial focus of thi s chapter is on the procedures avail-
able to shareholders to assert claims, rather than the subst antive bases
for those claims, which, in large part, are the subject of the previous
chapters of this book. The two main procedures through which a
shareholder may assert a claim for relief are the derivative action, under
which a shareholder may seek the court’s permi ssion to initiate a law-
suit on behalf of the corporation, and t he oppression action, which al-
lows shareholders to seek relief where actions of the corporation or its
directors oppress the shareholder’s interest s. In addition to these rights,
there are some corporate law rights that belong to shareholders person-
ally. These may be enforced by shareholders through an ordinar y civil
suit. As discus sed below, before the enactment of the CBCA, share-
holder remedies were limited. The derivative action and the person al
action were subject to certain restr ictions, and there was no oppression
remedy available in most Canadi an jurisdictions.2 One of the major
objectives of the CBCA was to provide gre ater access to more effective
remedies for minority shareholders.3
The oppression remedy, however, is much more than just a pro-
cedure for making a claim. The oppression remedy, to which we have
referred extensively throughout the book, represent s a substantive
standard of behav iour that complements and overlaps with the duties
imposed on directors and off‌icers described in Chapter 9. Increasingly,
the oppression remedy is the operative measure against which all cor-
porate activities must be judged. In part, this is due to the procedural
advantages of bringing a n oppression claim. It also result s from the
very broad range of circumstances in which oppression may be found.
Following a discussion of the se general remedies, we will di scuss
brief‌ly the various more specif‌ic remed ies found in the CBCA and stat-
utes modelled after it, including the following:
2 The oppression remedy wa s f‌irst introduced in Can ada in 1960 in the British
Columbia Compa nies Act, RSBC 1960, c 67. It was interpreted narrowly u ntil it
was amended, to add “ unfair prejudice” to “oppression” as a ground for rel ief
in 1973 (SBC 1973, c 18). Both grounds are now prov ided for in the BCBCA, s
227(2)( b). The Canada Business Corporatio ns Act, RSC 1985, c C-44 [CBCA], sets
a broader stand ard, providing that relie f can be sought in relation to an act ion
of the corporation or it s directors that is “oppres sive or unfairly prejudicial to or
that unfa irly disregards” the intere sts protected under the stat ute (s 241(2)).
3 RVW Dickerson, John L How ard, & Leon Getz, Proposals for a New Busine ss
Corporations Law for Can ada, vol 1 (Ottawa: Information Ca nada, 1971) at
158 –63 [D icker son e t al].
orders directing compliance with the Act, a corporation’s articles
or a unanimous shareholders’ agreement, and orders to re strain a
breach of these requirements (CBCA, s 247);
orders requiring the rect if‌ication of corporate records (CBCA, s 243);
orders to investigate the affairs of the corporation (CBCA, ss 229–37);
the right of a shareholder to dissent from certain proposed funda-
mental changes to the corporation and to have their shares bought
by the corporation for “fair value” (CBCA, s 190); and
termination of the corporation’s existence (CBCA, s 214).
Owning a share carries with it certain rights t hat are personal to the
holder of the shares, such as the right to vote, the right to timely and
informative notice of meetings, and the r ight to inspect the books and
records of the corporation. These personal rights may derive from the
governing corporate statute, the art icles and by-laws of the corporation,
the common l aw,4 or a shareholders’ agreement. The major limitation on
a personal action to enforce shareholder rights i s that the most import-
ant legal constraints on di rectors and off‌icers, the f‌iduciary duty and
the duty of care,5 are not obligations owed to and enforceable directly
by shareholders. As a result, breaches of t hese duties cannot be the
basis of a personal act ion by a shareholder.
As discussed in the next section, in some circum stances, a share-
holder may commence a derivative action on behalf of the corporation
for breach of these duties or for any other obligation to the corporation,
where the corporation is not taking act ion to pursue its own rights. Th is
is not an uncommon situation since, in many cas es, the same people
who have allegedly breached their duties, the d irectors and senior of-
f‌icers, are the people who must decide whether to cause the corpora-
tion to sue. In such a case, the directors m ay well have a different view
of whether their conduct constitutes a breach of duty. Traditionally, a
shareholder was allowed to pursue a claim on beh alf of a corporation
in very limited ci rcumstances and only with leave of the court. In the se
cases, the corporation is the plaintiff. Consequently, in order to properly
4 For example, Liu v Sung (1991), 13 CBR (3d) 285 (BCCA), where shareholders
were permitte d to sue directors in tort for conspir acy to injure.
5 As discus sed in Chapter 9, the Supreme Court of Cana da suggested that the
statutory duty of c are could inform the stand ard of care owed to shareholders
in BCE Inc v 1976 Debenture Holders, [2008] 3 SCR 560 [BCE].

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