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Are you an Oppressed Shareholder Spouse?

The Alberta and Canada Business Corporations Acts provide shareholders with certain rights and remedies that are sometimes overlooked in divorce, unjust enrichment, or other family law proceedings. If you and your spouse are shareholders of a corporation, you may be able to access these remedies to help achieve a fair and reasonable settlement in your matrimonial property division, to manage an ongoing corporation in a manner that is fair to all shareholders, or to obtain relief that may not be possible or forthcoming in the matrimonial action.

One such remedy is the Oppression Remedy which is designed to protect reasonable and legitimate shareholder expectations.  In the family law context, examples of potential breaches of reasonable and legitimate shareholder expectations include the situation where there is a family owned business and one spouse/shareholder has or takes control over the corporation and dissipates corporate funds or uses corporate assets for non-corporate purposes, or causes the corporation to enter into transactions which may not be in the best interest of the corporation or which may unfairly disregard the other spouse’s interests.  Shareholders have a reasonable expectation to be treated fairly.  The corporation and shareholders have a right to maximize profits and share value, but not by treating individual shareholders unfairly.

The Supreme Court of Canada established a two part test for oppressive conduct in the case of Re BCE Inc., 2008 SCC 69:

  1. Does the evidence support the reasonable expectation asserted by the claimant; and
  2. Does the evidence establish that the reasonable expectation was violated by conduct falling within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest.

A Court’s powers to award relief, on an interim or final basis, in an oppressive action are quite broad and include the following:

  1. An Order restraining the conduct complained of;
  2. An Order directing a corporation to pay a dividend to its shareholders;
  3. An Order varying or setting aside a transaction or contract to which a corporation is a party and compensating the corporation or any other party to the transaction or contract;
  4. An Order requiring a corporation to produce financial statements in a specified form or an accounting and any other form the Court may determine;
  5. An Order compensating an aggrieved person; and
  6. An Order for the liquidation and dissolution of the corporation.

The spouse applying for the Oppression Remedy would have to prove damages or losses sustained.  A cost/benefit analysis would have to be undertaken to determine whether it would be worthwhile to pursue a separate Oppression Remedy action in addition to the matrimonial action.  In any case, the rights and remedies offered by the Business Corporations Act may form a persuasive argument for a Court to Order relief in the matrimonial proceeding to a shareholder spouse who is being unfairly treated, locked out of a family corporation or is being denied basic shareholder rights such as financial disclosure or access to corporate documents.

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