Here we will follow some of the past and present shareholder oppression litigation working it’s way through the courts.

What exactly is shareholder oppression and what legal actions can you take?

What criteria have to be met to meet the legal definition of shareholder oppression ?

Remedy available to oppressed shareholder can consist of one of more of the following:

Purchase of shares at “fair market value” without a minority discount: Wright v. Donald S. M_(Blueline Taxi)

Repayment of

 

Some recent shareholders’ remedies in Canada: ellyn -shareholders remedies in canada

What protection is provided to minority shareholders by the courts in recent case law. Recent_Watershed_Developments_in_Oppression_Remedies_and_Shareholder_Activism

 

Get to know some of the players in this pending case: Maynes v. Allen-Vanguard – 1

This case involves among other things; Shareholder Oppression and Breach of Fiduciary Duty by Corporate officers. Med-Eng a high growth Company terminated some senior employees, then proceeded to exercise the buy back provisions in the shareholder agreement. The value paid for their shares was much less than the actual value, the management refused to provide timely financial updates before forcing through the transaction. I wonder who’s pockets these shares eventually ended up in?

The players:

Plaintiffs (Appellants)

Steve Maynes, 6223087 Canada Inc.

6223362 Canada Inc., Jean Robichaud and Ken Gingrich

 

And in the other corner the Defendants:

Allen-Vanguard Technologies Inc. (formerly Med-Eng Systems Inc.),

Maurice J.M. Baril, Pierre Boivin, Thomas Csathy, Paul Echenberg, Mathieu Gauvin, Cecile Ducharme, Mark Norton, Danny Osadca, Richard L’Abbé

(Collectively, the “Original Defendants”)

• [12]         In summary, the plaintiffs in these two actions seek: a declaration that the Original Defendants breached their fiduciary duties to them; a declaration that Richard L’Abbé breached his duties as trustee under the Voting Trust Agreement; a declaration that the repurchase transactions were invalid and so they continue to be registered shareholders of Med-Eng; and an order directing Med-Eng to pay the plaintiffs all unpaid dividends accruing in respect of their shares. In the alternative, the plaintiffs advance an oppression claim against the Original Defendants pursuant to s. 248 of Ontario’s Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”). They seek as an oppression remedy an order directing Med-Eng, now Allen-Vanguard Technologies Inc., to repurchase their shares at a price equal to fair market value.

 

After my experiences, I would be VERY reluctant to invest in a privately held Company EVER again. There is not enough protection for investors against Corporate fraud and abuse by the officers and board members. The minimalist financial reporting requirements and limited access to Corporate records put you at the complete mercy of the Corporation.

The odds are slanted heavily in their favor. This is why the legal term for this type of Corporate abuse is Oppression. Your money is literally being held hostage by the majority, you have no recourse to get it back if you want out. Any court action is lengthy and expensive. Your rights can easily be thwarted by the oppressive actions of the Company which has much larger resources at it’s disposal.

 

This recent case highlights some of the forms that shareholder oppression can take.

The Vincent Corporation v. Provis Inc.

[22]           As a result, there is strong prima facie evidence on this motion to establish that the reasonable expectations of Vincent, Rudd (and the Ottawa doctors) in this closely held corporation have not been met because of conduct that is oppressive, unfairly prejudicial and unfairly disregards their interests pursuant to s. 248 of the OBCA because:

(a)   The majority partners have usurped Provis’ corporate opportunities and thus unfairly disregarded the interests of Vincent and Rudd (and the Ottawa doctors);

(b)   The majority partners have unilaterally and unfairly diluted the ownership interest of Vincent (through RESI) and Rudd in RSL;

(c)   The majority partners have taken Vincent’s share of profits in PICI as management salaries; and

(d)   The majority partners have failed to disclose financial information to Vincent and Rudd and the Ottawa doctors.

They will waste obscene amounts of Corporate money (your $ as a shareholder) to illegally deny a shareholder something as simple as a valid copy of the shareholder register.

I have even heard of a case where three overpaid lawyers from the same Corporate law firm all tried to pass off an grossly incomplete shareholder register as a “valid Corporate document”, insisting to the oppressed minority shareholder this was a valid shareholder register and they had no obligation to provide one WITH VALID ADDRESSES! They continued this facade for a number of years. Imagine how much shareholder money was wasted to maintain this facade, all to illegally deny the repeated, valid requests from the shareholders.

Why not just provide the documents ?

In cases like this you have to ask Cui Bono ? (to whose benefit?)

The reason is almost always money, less often about power or control. Oppression happens when the people in power make decisions to gain a disproportionate amount of money or control, to the detriment of the weaker party – the oppressed minority shareholder.

It can take many forms.