26th September 2011
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A Shareholder ‘Divorce’ Part 2: Dissolution Remedy by Stephen C. Mogdan

In my last blog article I focused on the ‘oppression’ remedies of section 242 of the Alberta Business Corporations Act(“ABCA”). Where a shareholder or director is the victim of ‘oppressive’ conduct by other shareholders or directors of the corporation, the Court can provide certain remedies to settle the dispute.

In some cases, a shareholder can find themselves in a situation where the conduct complained of falls short of the definition of ‘oppressive’, but the corporation still cannot continue to function as it should. In this situation, the Court can use the provisions of section 215 of the ABCA to order the liquidation of the corporation’s assets and its dissolution. If the Court cannot find ‘oppressive’ conduct in the matter, it is still able to find the winding up of the corporation to be the ‘just and equitable’ result.

Such a result is not automatic, however, and while the provisions of the ABCA may allow the Court to view the corporation’s dissolution as being ‘just and equitable’ – it also allows the Court to fashion a remedy that keeps the corporation in existence. In this scenario, the remedy will be similar to one of the oppression remedies, e.g., ordering a shareholder to sell their shares back to the company or to another shareholder, or to prohibit the conduct lying at the heart of the dispute, and so on.

As with a request for an ‘oppression remedy’, the Court will take all of the circumstances into account, including the conduct of the parties, the corporation’s history and prospective future, the nature of its business, and so on. By looking at all these factors, the Court can determine an equitable remedy.

Because the facts – and how they may be viewed by the Court – are so critical in these situations, you need someone not only to guide you through the process but also to help you present the facts in the most favourable light and to give you sound advice on what you can expect and what your options are. At Stringam Denecky LLP, we have extensive experience in shareholder disputes and advising business clients on how to avoid them – including how to navigate through them when they arise.

Call Stephen Mogdan to discuss your situation and to find out your rights in your ‘shareholder divorce’.

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Written by Stephen Mogdan