Corporate Governance

Question 1

Protection of Minority Shareholders

Answer 1

• Cannot sell private shares of a company
• Where there is a majority shareholder, often minority shareholders are “frozen out” of the decision making process
• Often they can’t dispose of their shares, so they are “locked-in”

Question 2

How to Protect

Answer 2

• Appraisal Remedy (dissenting right)
• Winding Up
• Opression Remedy
• Derivative Action

Question 3

Appraisal Remedy (dissenting right)

Answer 3

• If there is going to be a major change (aquried by another company)
• The right to have one’s shares bought back by the corporation at a fair price
• Allows a minority SH who dissents on changes to the corporation to have the corporation buy back his/her shares
• Restricted to only certain types of actions
• SH must abide by all the requirements in the act

Question 4

Winding Up

Answer 4

• Rare, high profile, common in family businesses
• Dissolution for liquidation of a corporation (shut the business down)
• Courts are often reluctant to do this if the corporation is viable and of a reasonable size

Question 5

Oppression Remedy

Answer 5

• Most common
• Breach of expectations from the company (told they were investing in one company, and then they changed the idea)
• Statutory procedure allowing individual shareholders to seek a personal remedy if they have been treated unfairly

Question 6

Justify Oppression Remedy

Answer 6

Plaintiff must show that the action complained of:
(a) has been oppressive or unfairly prejudicial
(b) unfairly disregards the interest of the complaints
Remedy is usually to have corporation buy back the complaints shares at a fair market value

Question 7

Derivative Action

Answer 7

• Directors and officers breaching their duty of care to the corporation and as a minority shareholder you cannot sue. Apply to the court for leave (permission) to sue the directors and officers for breaching their duty to the corporation
• Proceedings brought by one or more shareholders in the name of the corporation in respect of a wrong done to the corporation

Question 8

Show derivative Action

Answer 8

• SH must make an application to the court and obtain a leave to bring the action and show:

(a) The directors are unwilling to bring the action
(b) That they are acting in good faith (must be evidence that claim will succeed)
(c) It appears to be in the best interest of the corporation or the shareholders that the action be brought (Prove they are not motivated by self interest)
- Court can order the corporation to pay the costs of the shareholders in bringing the action (have to pay the legal bills)

Question 9

Show derivative Action

Answer 9

• SH must make an application to the court and obtain a leave to bring the action and show:

(a) The directors are unwilling to bring the action
(b) That they are acting in good faith (must be evidence that claim will succeed)
(c) It appears to be in the best interest of the corporation or the shareholders that the action be brought (Prove they are not motivated by self interest)
- Court can order the corporation to pay the costs of the shareholders in bringing the action (have to pay the legal bills)