Northern Law LLP is frequently retained in complex shareholder disputes. This article explains the legal framework governing oppression claims under the Ontario Business Corporations Act, supported by leading authorities and practical considerations.
A. Overview of the Oppression Remedy
Section 248 of the Ontario Business Corporations Act (“OBCA”) provides the court with broad discretion to rectify conduct that is oppressive, unfairly prejudicial, or unfairly disregards the interests of a stakeholder. The remedy is equitable in nature and focused on protecting fairness in corporate relations rather than strict legal entitlements.
In BCE Inc. v. 1976 Debentureholders, the Supreme Court of Canada confirmed a two-part test: (i) whether the claimant had a reasonable expectation in the circumstances; and (ii) whether that expectation was violated by conduct amounting to oppression, unfair prejudice, or unfair disregard.¹ The conduct in question is assessed contextually with reference to the stakeholder’s role, relationship to the corporation, and the surrounding commercial reality.²
B. Who May Bring a Claim
The definition of “complainant” under the OBCA includes registered and beneficial shareholders, directors, officers, creditors, and any other person the court considers proper.³ Courts have adopted a generous interpretation of this provision. In Di Silvestro v. Di Silvestro, an indirect shareholder in a family business structure was permitted to proceed with an oppression application.⁴ Similarly, creditors have successfully brought claims in appropriate cases.⁵
C. Common Types of Oppressive Conduct
There is no closed category of actionable conduct. Oppression may arise where majority shareholders or directors:
– Exclude a minority shareholder from decision-making;
– Withhold financial information;
– Issue shares to dilute a minority interest;
– Divert corporate assets for personal benefit; or
– Deny dividends while drawing excessive compensation.
Courts focus on the effect of the conduct, not its motive.⁶ Technical compliance with corporate statutes may not be sufficient to avoid liability if reasonable expectations are violated.⁷
D. Oppression vs. Derivative Actions
An oppression claim addresses harm to the individual stakeholder, whereas a derivative action seeks to remedy harm to the corporation. However, the two may overlap in closely held corporations. In Paul Shaughnessy Investments Inc. v. Drain, the court permitted an oppression remedy despite the fact that the wrongdoing also affected the corporation.⁸
E. Director Liability
In Wilson v. Alharayeri, the Supreme Court of Canada confirmed that directors may be personally liable where they are implicated in the oppressive conduct and where a remedy against the corporation alone would be insufficient.⁹ Personal benefit or bad faith is not a prerequisite. Relevant factors include whether the director:
– Derived a personal financial advantage;
– Increased their control over the corporation;
– Breached a personal duty; or
– Misused corporate power.
F. Available Remedies
Section 248(3) of the OBCA permits the court to make any order it considers fit to rectify the oppression. Common remedies include:
– Mandatory buyouts of shares at fair market value;
– Restoration of corporate roles or access;
– Corrective amendments to corporate governance;
– Compensation for personal loss;
– Dissolution or wind-up in exceptional cases.
The remedy must be remedial – not punitive – and tailored to the nature of the breach.¹⁰
G. Deference to Business Judgment
Courts generally defer to decisions made by directors in good faith that fall within a range of reasonable business choices.¹¹ This “business judgment rule” does not apply, however, where the conduct in question violates stakeholder expectations or constitutes self-dealing.
H. Conclusion
Oppression proceedings are a powerful but nuanced remedy. Success depends on a detailed understanding of the factual matrix, including the stakeholder’s expectations and how they were frustrated. Remedies are discretionary, and must be grounded in principles of fairness, equity, and proportionality.
At Northern Law LLP, we act in high-stakes corporate and shareholder disputes across Ontario. Our team can assist in reviewing your position, assessing your legal options, and advancing or defending an oppression application where appropriate. Contact us at 705-222-0111 or info@northernlaw.ca.
1. BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 (CanLII), [2008] 3 S.C.R. 560.
2. Wang v. Ye, 2022 ONSC 4655 (CanLII); 1217174 Ontario Ltd. v. 141608 Canada Inc., 2017 ONSC 7698 (CanLII).
3. OBCA, s. 245.
4. Di Silvestro v. Di Silvestro, 2021 ONSC 6341 (CanLII).
5. The Investment Administration Solutions Inc. v. Pro-Financial Asset Management Inc., 2018 ONSC 1220 (CanLII).
6. Hogan v. Massaro, 2024 ONSC 6581 (CanLII).
7. Estate of John Wood v. Arius3D Corp., 2016 ONSC 36 (CanLII).
8. Paul Shaughnessy Investments Inc. v. Drain, 2018 ONSC 1850 (CanLII).
9. Wilson v. Alharayeri, 2017 SCC 39 (CanLII), [2017] 1 S.C.R. 1037.
10. Naneff v. Con-Crete Holdings Ltd., 1995 CanLII 959 (ON CA).
11. Greenlight Capital, Inc. v. Stronach, 2008 CanLII 34359 (ON SCDC).