Minority Shareholder

As a minority shareholder, the provincial or federal statute that governs your company provides some basic rights to shareholders. These rights include: the right to vote, the right to attend meetings, and the right to have access to certain information. The articles of the company, and by-laws if any, can contain additional rights and obligations for shareholders of that particular company. Finally, any shareholders agreement will contain further rights and obligations among the shareholders.

Voting is the primary mechanism through which shareholders control the makeup of the Board of Directors. The Board of Directors is responsible for the management of the company. Accordingly, the right to vote is the means through which a shareholder exercises influence over a company. Voting takes place at either special or general meetings. Shareholders have a right to be present at these meetings and cannot be arbitrarily excluded from them. Shareholders have a right to certain information regarding the business and affairs of the company. This information allows the shareholders to make informed decisions pertaining to the manner in which the company should be governed.

As a minority shareholder, you may become concerned over the direction the business is headed but have no ability to change that direction yourself. If you are a minority shareholder of a public company, then you can simply sell your shares if you become disenfranchised with the direction the business is headed. The solution is not so easy when you are a minority shareholder of a privately held company.

Absent a shareholders’ agreement, minority shareholders’ rights are protected under the B.C. Business Corporations Act, SBC 2002, c 57 which provides relief where the company is being conducted in a manner oppressive to you as a shareholder, and potentially to other shareholders, or where the company has done, or is threatening to do, an act which is unfairly prejudicial to you, and potentially to other shareholders. Under these circumstances, you can apply to the court seeking an order to provide you with some relief.

The types of orders available in cases of oppressive or unfair conduct are quite broad and include:

  • directing or prohibiting any act;
  • directing the company to purchase some or all of the shares of the shareholder;
  • directing another shareholder to purchase the shares of the shareholder; and
  • directing the company to compensate the aggrieved person, along with a variety of other forms of relief.

The key to obtaining any of this relief is establishing the oppressive or unfairly prejudicial act in relation to minority shareholders.

Some examples of the types of conduct that can be considered oppressive or unfairly prejudicial are:

  • excessive management fees to those in control;
  • the payment of personal expenses to those in control; and
  • a failure or refusal to provide financial information to shareholders.

In order to determine whether your situation is oppressive or unfairly prejudicial you will need to consult with a qualified commercial litigator. If there is no oppression or unfair conduct, you may be stuck with your minority shareholder position and without the leverage needed to make a change unless you can find a buyer for your shares or you have a shareholders agreement with an exit clause. Even when there is no oppression or unfair conduct, the B.C. Business Corporations Act may provide relief if the court determines it is “just and equitable to do so”. A qualified commercial litigator can review your circumstances and determine whether court ordered relief may be available.

For further information about oppression remedies, please consult the Oppression Remedies section of this website.

Please note that minority shareholders in a family business are sometimes treated differently. If you are a shareholder in a family business, then you should read the Family Business section of this website.

If you have questions or require legal counsel, the Business Disputes Team at Alexander Holburn would be happy to help you.