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Shareholder and Management Disputes in Ontario Canada

In Canada, shareholders’ rights are outlined and protected under the common law, the applicable Corporations Act as well as in a company’s shareholder agreement.

Well drafted shareholder agreements are designed (or at least intended) to ensure that the company’s officers and directors behave in a way that each shareholder’s earnings are maximized. Because there are usually multiple shareholders involved there can often be questions or disputes that arise during the operation of the business, especially when the shareholders want to pursue different business opportunities and/or pursue different strategic goals. Resolving these disputes can include negotiation, arbitration, mediation, or litigation, and typically requires the legal assistance of a lawyer well versed in corporate law and litigation.

Hamilton and Toronto business lawyer Michael Lesage is experienced in handling shareholder disputes including examining merit, strategizing over the other party’s goals and motives, and determining the best method to resolve the case.

Are you involved in a Shareholder Dispute Case?
Contact Business Lawyer Michael Lesage for Advice

Examples of Common Shareholder Dispute Cases

Shareholder disputes can arise from any number of issues, such as:

  • Violation of shareholder agreement
  • Forced buyout of shares
  • Termination of business relationships
  • Oppression of minority shareholders
  • Share price and valuation disputes
  • Breach of fiduciary duty
  • Business dissolution
  • Fraud
  • Other disagreement between shareholders

Shareholder Dispute Resolutions in Ontario

In Ontario and Canada there are several methods to resolve a shareholder dispute, each with its advantages and disadvantages, depending on the situation.

A)     Negotiation

Often sought as the first method of resolution in shareholder dispute cases in Ontario, negotiation involves both parties sitting down to discuss or negotiate the case in the presence of their legal advisors and business shareholder dispute lawyers. Often the negotiation process can bring resolution to the dispute without further action required. In many cases, this can be the most prudent and least costly way of resolving disputes.

B)      Mediation

Where negotiation is unsuccessful, shareholder dispute mediation brings in a third party professional mediator to address the issues of both parties. Often, the process involves establishing common interests and exploring new perspectives in hopes of reaching a solution that is acceptable to both parties. Where negotiation has been unsuccessful, mediation is often an efficient means to resolve disputes.

C)      Arbitration

Shareholder dispute arbitration (where the parties agree or where provided for in the shareholder’s agreement) involves a third party arbitrator appointed by the courts or by consent of both parties involved in the dispute. All rules for arbitration are set prior to commencement of arbitration and final decisions made by the arbitrator are binding set forth in writing. Many parties prefer commercial arbitration as a way to resolve shareholder disputes because it is more private, faster and often less expensive.

D)     Litigation

In some cases, litigation is the only way to resolve shareholder disputes, when all other attempts at resolution have failed. Significant strategic development, business valuations, and analysis goes into shareholder dispute litigation. Many times legal cases around shareholder disputes attract unwanted media attention. Litigation can also be lengthy and expensive with uncertain outcomes.

Typical Shareholder Dispute Remedies in Ontario

In most cases remedies are determined by looking in detail at various aspects of the corporation including articles of incorporation, by-laws, resolutions of the directors and shareholders, as well as amendments and general business practices.

Oppression Remedy

In the case of minority disputes, the Ontario Business Corporations Act grants minority shareholder to “relief from oppression” if their reasonable legitimate expectations from the majority shareholders are not met.

Contact Michael Lesage to Help Resolve Your Shareholder Dispute

Schedule a consultation to discuss your shareholder dispute options by contacting the business litigation lawyers of Ontario-based Michael’s Law Firm by phone at 647-495-8995 or online.

You can also complete the Case Evaluation online.

Frequently Asked Questions About Shareholder and Management Disputes

In Canada, shareholders have several key rights, including the right to vote at shareholder meetings, receive dividends, access certain corporate documents, share in the distribution of the assets of the corporation upon dissolution, and attend annual and special meetings. Shareholders also have the right to appoint auditors and approve by-laws and changes to them.
A management shareholder dispute occurs when conflicts arise between the shareholders (who own shares in the company and have voting rights) and the company’s management (typically the board of directors and senior officers responsible for the daily operations of the company). These disputes can involve issues related to the direction of the company, financial decisions, breaches of fiduciary duties by directors or officers, or disagreements on company policies and practices.
To prevent shareholder disputes, it’s crucial to have clear and comprehensive shareholder agreements that outline the rights and obligations of shareholders, management roles, and dispute resolution mechanisms. Regular communication and transparency regarding the company’s performance and decisions can also reduce potential conflicts. Establishing clear procedures for decision-making and resolving disagreements, possibly through mediation or arbitration before resorting to litigation, can further mitigate disputes.
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