SHAREHOLDER'S RIGHTSWITHOUT OBLIGATIONS

These materials were prepared by William Hood of Priel Stevenson Hood & Thornton, Saskatoon, Sask.for the Saskatchewan Legal Education Society Inc. seminar, Corporate Organization, April 1998

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TABLE OF CONTENTS

I.INTRODUCTION 1

II. SPECIFIC RIGHTS 3

A. THE "BLOCKING" RIGHT 3

B. THE DISSENT RIGHT 5

C. THE FIDUCIARY OBLIGATION OF THE DIRECTORS AND OFFICERS 7

D. FIDUCIARY DUTY OF THE SHAREHOLDER 9

E. PROHIBITED CORPORATE ACTIONS 11

F. DERIVATIVE ACTION 11

G. CONFLICT OF INTEREST 12

H. LIQUIDATION AND DISSOLUTION (SECTION 207) 14

III. THE OPPRESSION REMEDY 16

A. OVERVIEW 16

B. OPPRESSIVE CONDUCT - GENERAL RULES 171. Identify the Specific Conduct 182. Explain Why the Impugned Conduct is Oppression and Should Be Remedied 193. The Oppression Legislation is to be Broadly Interpreted 204. "Oppressive" Means "Burdensome, Harsh and Wrongful" 205. "Unfairly Prejudicial" or "Unfairly Disregards" is Conduct Which is Not "Just and Equitable" 216. Disjunctive, Not Conjunctive 227. The Impugned Conduct Must Affect the Complainant's Interest as a Shareholder 238. Frustrated Shareholders' Expectations 239. It is the Cumulative Affect of the Conduct which Determines Oppression 2410. Bad Faith is Not a Prerequisite to Oppression 2511. Oppression Can Occur Even if the Directors are Not in Breach ofTheir Fiduciary Duty 26

C. SPECIFIC CONDUCT GIVING RISE TO OPPRESSION 271. Failure to Keep Any or Proper Financial Records 292. Failure to Provide Relevant Financial Information 303. Failure to Call a Shareholders' Meeting as Required by the Act 314. Failure to Deliver Promised Financial Information 315. "Cooking the Books" 336. Conduct Prohibited Under the Act 347. Lack ofPrior Disclosure of Interest in Contracts 358. Self-Dealing 369. Mismanagement 3910. Removal of Shareholder From Management 4011. Misconduct Does Not Necessarily Disentitle a Minority Shareholder to Relief 4312. Breach ofFiduciary Duty 4413. Failure to Pay Dividends 4614. Failure to Secure Investments 4615. Conduct Amounting to Oppression is Not Restricted to Closely Held Corporations 4716. Misrepresentation -- Oppression or Not? 49

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D. OVERVIEW OF REMEDIES, 50

E. GENERAL RULES FOR OPPRESSION REMEDIES 51, 1. The Remedy Should be Consistent with the Reasonable Expectations of the Shareholders 52

2. Minimal Intrusion in Corporate Affairs 543. Shareholders' Expectations are Not Static 544. The Remedy is not Punitive 555. The Remedy Should Be Sensitive to the Interests ofThird Parties 566. Conduct to be Rectified 57

F. SPECIFIC REMEDIES 571. Removing and Appointing Directors 572. Amendment ofUnanimous Shareholder Agreement 583. Amendment to Articles 594. Setting Aside or Varying Contracts 595. Compensation 606. Interest on Monetary Judgment 637. Refund Monies to Shareholder 638. Purchase of Shares 649. Trial ofAny Issues 6610. Injunctive Relief 6811. Costs 7012. Appointment ofReceiver Manager 7113. Production ofFinancial Statements or Accounting 7214. Liquidation or Dissolution 7215. Investigation 72

G. PROCEDURAL ISSUES 731. Onus and Standard ofProof 732. Commencement ofProceedings 733. Right to Appeal 744. No Security for Costs 745. Splitting the Case 746. Trial of the Issue 75

APPENDIX A 76

APPENDIXB 96

APPENDIXC 103

SHAREHOLDER RIGHTS WITHOUT OBLIGATIONS

I. INTRODUCTION

... cOIporate statutes are designed to give the collective group of shareholders amajor say, indeed in theory the final say, however indirectly, in how the businessis to be run ... Attaining the status of shareholder invests a person with a packageof statute-based powers ...

(Welling, Bruce L. Corporate Law in Canada (2d ed.) (Toronto: Butterworths,1991) at pp. 456-457).

It is beyond dispute that shareholders have rights. Indeed, those rights, particularly when held by

minority shareholders, are among the most jealously guarded by the courts. Despite their array

of rights and powers, however, shareholders owe no obligations to the cOIporation. In the

commercial context, the possession of rights, absent any corresponding obligations, is quite

umque.

Shareholders do not have a fiduciary obligation to the cOIporation or to other shareholders. They

need not be concerned with the interests of others when they exercise their rights as shareholders.

They can and do act in their own self interest which is not always in the best interests of the

cOIporation. In Welling's Corporate Law in Canada (2d ed.) (Toronto: Butterworths, 1991) the

learned author states at p. 483:

... shareholders as such do not owe fiduciary obligations to the cOIporation and arethus not required to vote in what they perceive to be the best interests of thecOIporation ... (emphasis in original)

Further to this point, in Brant Investments Ltd. et ai. v. KeepRite Inc. et ai. 1, the Ontario Court of

Appeal held majority shareholders owe no fiduciary duty to minority shareholders.

Illustrative of the fact that shareholders enjoy various rights with no fear of responsibility for

their exercise, is the fact that shareholders have limited liability in respect of the acts of a

(1991),3 O.R. (3d) (Ont. C.A.) 289.

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corporation. The limited liability concept is enshrined in subsection 43(1) of The Business

Corporations Act (Saskatchewan) (the "Act") which states:

43(1) The shareholders of a corporation are not, as shareholders, liable for anyliability, act or default of the corporation except under subsection 36(4),subsection 140(4) or subsection 2l9(5)?

Shareholders' obligations only arise by virtue of contracts which they freely enter into. Their

obligations do not arise independent of such contracts. One contract which can give rise to such

obligations and liabilities is a unanimous shareholder agreement ("USA"). While the purpose of

this paper is to focus on shareholders' rights and remedies, I will review the onerous fiduciary

obligations of a shareholder which result from a true USA when the authority of the directors is

usurped. The USA not only imposes obligations, but restricts the rights a shareholder would

otherwise possess.

The rights of a majority shareholder are obvious. The majority shareholder elects and removes

directors, who control the business and affairs of the corporation by exercising their direction and

control over management and the officers. If a shareholder controls a majority of the votes, it is

the master of its own rights and remedies.

The rights of majority shareholders stand in stark contrast to those possessed by minority

shareholders. This paper will focus on the rights of the minority shareholder and the remedies

available to such a shareholder should these rights be trampled upon by the corporation and those

in control. In the course of this review, this paper will address the oppression remedy, which is

the minority shareholders' most powerful right. However, before embarking upon such a review,

it is appropriate to address the specific rights and remedies which can either stand on their own

or be used in conjunction with the oppression remedy to protect the interest of the minority

shareholder.

2 Subsection 36(4) is concerned with a reduction in stated capital. Subsection 219(5) is concerned withproperty received by a shareholder upon dissolution of the corporation. Subsection 140(4)· is concernedwith a unanimous shareholder agreement.

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II. SPECIFIC RIGHTS

A. THE "BLOCKING" RIGHT

Certain corporate activity, even if determined by the directors to be in the best interests of the

corporation, can only be effected if approved by a special resolution of the shareholders.

Minority shareholders, acting solely in their best interests and without regard for the best

interests of the corporation, can defeat such resolution and block the corporation from pursuing

such action.

A special resolution is a resolution which, in order to be effected, requires two-thirds ofthe votes

cast by shareholders who voted in respect of the resolution. More particularly, a special

resolution is defined in section 2(ft) of the Act as follows:

2(ft) "special resolution" means a resolution passed by a majority ofnot less thantwo-thirds of the votes cast by the shareholders who voted in respect of thatresolution or signed by all the shareholders entitled to vote on that resolution.

It should be noted that a special resolution is distinct from a resolution passed at a special

meeting of shareholders. A special meeting of shareholders is simply a meeting other than an

annual meeting. The special resolution, on the other hand, elevates control from a majority of

shareholders to two-thirds of the shareholders.

It is also important to note that in certain circumstances the Act requires the special resolution of

not just the voting shareholders in aggregate, but from each class of shares, whether or not they

are otherwise entitled to vote.

Strategic corporate action which first requires the consent of a special resolution can leave a

corporation vulnerable. For example, a blocked resolution can thwart the restructuring plans of a

growing corporation. In the interests of avoiding the impasses which may result from failure to

pass a special resolution, a majority shareholder would be well advised in the early stages of a

corporation's life to negotiate an option to acquire the interest of minority shareholders. Such

option would be triggered should the minority shareholder block action which is strategically

important to the corporation.

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By virtue ofthe Act, the following actions require a special resolution in order to be effective:

(a) changes to share numbers, i.e. a share split or consolidation (section 25.1);

(b) certain additions to the stated capital account (subsection 26(1.4));

(c) reduction in share capital (section 36);

(d) any amendment to the articles of a corporation set out in subsection 167(1);

(e) an amendment to constrain or to change or remove any constraint on the issue,

transfer or ownership of shares of a corporation whose issued shares are or were a

part of a distribution to the public (subsections 168(1) and 168(4));

(f) any amalgamation of two or more corporations (section 177);

(g) the continuance ofthe corporation in another jurisdiction (subsection 182(5));

(h) the sale, lease or exchange of all or substantially all the property of a corporation

other than the ordinary course ofbusiness ofthe corporation (section 183);

(i) dissolution of the corporation (sections 203 and 204).

(The full text of each of the sections is in Appendix A.)

Further, in many cases, the special resolution required is a class vote. A two-thirds majority of

each class must be obtained in order that the resolution pass, whether or not the shares of that

class otherwise carry the right to vote. A special resolution by class vote is required in order to

effect the following changes to corporate structure:

(a) the articles of amendment to the extent that they are referred to again In

subsection 170(1);

(b) changes to share numbers, i.e. share split or consolidation (section 25.1);

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(c) the constraint on the issue, transfer or ownership of the shares of such class or

change or remove such constraints (section 168);

(d) amalgamations (subsection 177(5));

(e) dissolution (subsections 203(2) and 204(3)).

In the case of the sale of all or substantially all of the property of the corporation, each share of

the corporation carries the right to vote whether or not it otherwise carries that right. However,

in the event of a sale of this nature, a class vote is to take place only if such class is affected in a

manner differently from the shares ofanother class (subsections 183(5), (6), and (7)).

In respect of continuance outside of Saskatchewan, each share of the corporation has the right to

vote in respect of the continuance, whether or not it otherwise carries the right to vote

(subsection 182(4)).

With respect to additions to or reductions in stated capital, such changes will only be effected if

passed by a special resolution ofthe class ofshares affected by those additions or reductions.

B. THE DISSENT RIGHT

Minority shareholders who do not have sufficient votes to block strategic action which requires a

special resolution may, in certain circumstances, exercise the dissent right. The corporate action

which gives rise to the dissent right is set out in subsection 184(1), which is appended hereto in

AppendixA.

The minority shareholder has the right to dissent and put its shares to the corporation if:

(a) the special resolution which is passed falls within one of the above categories;

(b) the shareholder dissents to the resolution;

(c) the directors do not repeal the resolution; and

(d) the shareholder complies with the technical procedures in section 184.

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In the event that criteria (a) through (d) above are fulfilled, the corporation is obligated to pay

"fair value" to acquire the shares of the dissenting shareholder. An examination of the full scope

of "fair value" and the dissent right is beyond the focus of this paper, but is an important issue

which the reader is urged to examine.

The articles of incorporation or the USA can increase the threshold number of votes required for

a special resolution, but it appears the threshold cannot be decreased to below two-thirds (see

subsection 6(3) of the Act). It should be noted that a shareholder can contract out of and

abrogate such dissent rights.3

It is important when drafting the USA to bear in mind that dissent rights can be unintentionally

lost if care is not exercised. For illustration purposes, consider the following provision:

No amendment of the articles of this corporation shall be effective unless suchamendment is approved by a majority of not less than three-quarters of the votesof each and every class of shares entitled to vote in respect of such amendment,where upon such amendment shall be reduced to writing and executed by allshareholders. For the purpose of executing any amendment to this agreement,approved as hereinbefore described, each shareholder irrevocably appoints anydirector of the corporation as its attorney to execute such amendment.

I am of the opinion that the shareholder to this USA has waived its dissent right if it is a member

of the 25% ofthe shares in a class which did not approve such amendment.

The dissent right and the oppression remedy can co-exist. The Act provides that a shareholder is

entitled to exercise the right to dissent "in addition to any other remedy he may have".4 The

action giving rise to the passing of the special resolution can trigger a cause of action under the

oppression remedy, should such action be held to be conduct amounting to oppression. The

dissent remedy, should a shareholder opt to invoke it, allows a shareholder to exit the

corporation. It requires no unfairness. The oppression remedy, however, is not optional, but is

triggered by unfair conduct.

MICA Management Centre Inc. v. Lockett (1986),37 B.L.R. 209 (Ont. H.C.J.).

4 Subsection 184(3).

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The calculation of the damages under the dissent right may be different than under the

oppression remedy. The dissent right requires a valuation of the shares the day before the

resolution was adopted.5 Oppression is not so restricted and calculates value as it unfolds with

the benefit of hindsight. In Arthur v. Signum Communications Ltd. 6, the Ontario Divisional

Court held as following (at para. 10):

There is no double compensation or other error in principle in awarding thedissent/appraisal remedy which reflects future participation prospects as they areseen on the day before the impugned conduct, and also the oppression remedywhich reflects the loss actually suffered by Arthur by reason of being wrongfullydeprived of the right to participate in the corporation's fortunes as they actuallyunfolded.

In this case, the compensation for oppression was the difference between the fair value pursuant

to the dissent right, and the price which the shareholder would have received for the shares at the

time a consensual transaction would have taken place.

C. THE FIDUCIARY OBLIGATION OF THE DIRECTORS AND OFFICERS

Directors and officers have a fiduciary obligation to the corporation. The fiduciary obligation is

codified in subsection 117(1), a copy ofwhich is appended in Appendix A. Essentially, directors

and officers must discharge their responsibilities in accordance with the dual obligations of

loyalty and care.

The fiduciary duty of loyalty requires directors to act solely in the interests of the corporation as

distinct from their own interests or in the interests of a particular shareholder. The duty of care

requires directors to exercise the diligence and skill of a reasonably prudent person having regard

to the present circumstances. The test to detennine whether this duty has been exercised is

objective, not subjective. It is not sufficient to have acted to the utmost of their care and ability if

it falls short of the care reasonably expected of the person who should have the necessary

qualifications for such position.

Subsection 184(3); 85956 Holdings Ltd. v. Fayerman Brothers Limited (1987),57 Sask. R. 141 (Q.B.).

6 [1992] 0.1. No. 86 (Gen. Div.), aff'd on appeal, [1993] 0.1. No. 1928 (Div. Ct.).

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Corporate activity which falls short of loyalty and care is actionable. A breach of fiduciary duty

by a director is not only evidence of oppressive conduct, but in and of itself can satisfy the test

for oppression in a section 234 application.?

Breach of fiduciary duty by directors or officers is an independent cause of action. The fiduciary

duty of the directors is owed to the corporation, not to the shareholders or any group of

shareholders. A shareholder can pursue this independent claim on behalf of the corporation by

way of the derivative action claiming against those directors who are in breach of such

obligation. This right belongs to the shareholder, but the remedy, in this case~ is to the

corporation.

Acting in the best interests of the corporation can, in some circumstances, require that a director

or officer act other than in the best interests of any particular shareholder or a group of

shareholders. The director can, on one hand, have a defence to a claim for breach of fiduciary

duty and still be exposed for an oppression remedy claim by that group of shareholders who

found the action not to be in their best interests (see Brant Investments Ltd. et al. v. KeepRite Inc.8et al. ).

The courts have long recognized that a nominee director owes the same fiduciary duty to the

corporation as any other director. This duty does not change because of the shareholder who has

caused the appointment. The nominee director cannot subvert the interests of the corporation to

the shareholder nominating him.9 A director may find that he has conflicting loyalties as in the

case of PWA Corp. v. Gemini Group Automated Distribution Systems Inc. lO In this case there

was a partnership that included Canadian Airlines and Air Canada who were fierce competitors

in the airline industry. At issue in the case was whether the nominee directors of Canadian

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Calmont Leasing Ltd. v. Kredl, [1993] 7 W.W.R. (Alta. Q.B.) 428, aff'd [1995] 8 W.W.R. 179 (Alta. C.A.).

(1991),3 O.R. (3d) (ant. C.A.) 289 at p. 301.

See Regal (Hastings) Ltd. v. Gulliver, [1942] 1 All E.R. 378 (H.L.).

(1993), 8 B.L.R. (2d) 221 (ant. Gen. Div.), aff'd 10 B.L.R. (2d) 109 (Ont. C.A.), leave to appeal refused,10 B.L.R. (2d) 244 (S.C.C.).

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Airlines had a fiduciary obligation to the board to disclose infonnation belonging to their

nominator, if the infonnation had an impact on the vital aspects of the business of the corporation

ofwhich they were directors, The directors did not disclose this infonnation, and were found to

have breached their fiduciary duty to the board.

A director can easily find himself in an untenable position. The shareholder that nominated him

might forbid him to disclose infonnation that he is otherwise obliged to disclose. Such a director

may have no choice but to resign. This was colorfully illustrated by Farley, J. in 820099 Ontario

Inc. v. Harold E. Ballard Ltd. 11 , at p. 171:

It may well be that the corporate life of a nominee director who votes against theinterest ofhis "appointing" shareholder will be neither happy nor long.

D. FIDUCIARY DUTY OF THE SHAREHOLDER

As was stated above, it is my opinion that shareholders do not owe a fiduciary duty to the

corporation. There is one exception to this. If, through the USA, shareholders usurp rights,

powers and duties from directors, then the shareholders, including minority shareholders, incur

all of the liabilities of a director. The limited liability of a shareholder referred to in subsection

43(1) above excludes the liabilities incurred under subsection 140(4) which states:

140(4) A shareholder who is a party to a unanimous shareholder agreement has allthe rights, powers and duties and incurs all the liabilities of a director of thecorporation to which the agreement relates to the extent that the agreementrestricts the discretion or powers of the directors to manage the business andaffairs of the corporation, and the directors are thereby relieved of their duties andliabilities, including any liabilities under section 114, to the same extent.

To the extent that such directors' duties have been usurped, the shareholder incurs the fiduciary

duty of loyalty and care of the director under subsection 117(1). The shareholder can no longer

vote in self interest, but must vote selflessly, and in the best interests of the corporation.

Shareholders will be liable to the corporation if they do not exercise this contractually acquired

duty with requisite care and skill.

11 (1991),3 B.L.R. (2d) 113 (Ont. Gen. Div.).

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Directors are only released from their duty to act in accordance with the Act and the fiduciary

obligation under section 117 if the exercise of their discretion and powers has been restricted

pursuant to a USA. Subsection 117(3) provides:

117(3) Subject to subsection (4) of section 140, no provision in a contract, thearticles, the bylaws or a resolution relieves a director or officer from the duty toact in accordance with this Act or the regulations or relieves him from liability fora breach thereof.

Directors and officers of the corporation are obligated to comply with any USA. Subsection

117(2) states:

117(2) Every director and officer of a corporation shall comply with this Act, theregulations, articles, bylaws and any unanimous shareholder agreement.

Therefore, rights which, in the nonnal course, a shareholder would have against a director or

officer of the corporation for breach of fiduciary duty are lost when these duties have been

usurped by the USA.

In a carefully drafted USA a minority shareholder can have his cake and eat it too. That is, he

can exercise greater rights without incurring liabilities or giving up any rights against the

directors. The USA could be drafted in the following manner:

(a) Instead of requiring the approval of the shareholders for specified corporate

activity, the shareholders can have a right to veto such actions. The action would

first be approved by the directors in accordance with their fiduciary obligations.

If the shareholders do not veto the action, the shareholders arguably incur no

fiduciary obligation. It is only if the shareholders exercise such veto and usurp

the directors' authority that the fiduciary obligation is transferred from the

directors to the shareholders.

(b) A second, and arguably preferable method, requires a "super majority" approval

by the directors before specified corporate activity is implemented. Consider a

provision in the articles or USA to the effect that "no action shall be taken by the

corporation with respect to any of the following matters without the prior

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approval in the fonn of a resolution approved by at least 75% of the members of

its board". Such a provision leaves the fiduciary obligation with the directors.

This method is of value if the minority shareholder, either through a pooling

agreement or articles providing for cumulative voting for directors,can ensure

adequate representation on the board ofdirectors.

Often an agreement allows a minority shareholder to elect directors to the board who are in a

minority position. One's first impression may be that such a right is not of much value. To the

contrary, a right to representation on the board, even if it is not enough in number to control the

outcome of the board resolutions, it is still a useful tool to protect minority shareholder rights.

Discussion and debate at the director's level is foreign to a shareholder. Without the benefit of

such knowledge, it is difficult to prove that any given corporate activity did not comply with the

fiduciary obligation to the corporation or was oppressive to the shareholder's interest. A director

appointed by a majority can not only suppress wrongdoing before it is too late, he is able to

disclose such wrongdoing which may otherwise have gone undetected.

)E. PROHIBITED CORPORATE ACTIONS

Certain corporate conduct is prohibited by statute. Directors who wrongfully approve such

prohibited action are personally responsible to make the corporation whole. Such prohibited

action is evidence ofconduct amounting to oppression. A shareholder also has the right to bring

a derivative action on behalfof the corporation to rectify the wrongdoing.

Conduct for which the directors have joint and several liability is set out in section 113 of the

Act. Section 118 of the Act provides a defence for directors who have either dissented to the

resolution approving such conduct or relied on professional reports. The full text of each of

these sections is in Appendix A.

F. DERIVATIVE ACTION

In certain circumstances a shareholder can commence a derivative action on behalf of the

corporation. This right is found in the same division in the Act as the oppression action.

) However, it is a distinct right with a different remedy. A derivative action claims a remedy for

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the corporation. The oppression action claims a remedy for the oppressed shareholder. The right

to bring a derivative action is found in subsection 232(1). It is subject to certain conditions

precedent found in subsection 232(2). The court has broad powers to make "any order it thinks

fit" in connection with a derivative action, including an order requiring the corporation to pay the

reasonable legal fees incurred by the shareholder in connection with such action. This power is

spelled out in section 233. A full text of Division :xvrn entitled "Remedies, Offences and

Penalties" is in Appendix B.

One of the conditions precedent to the commencement of such action requires the court be

satisfied. that it is in the interests of the corporation to bring the action. In most cases, if the

corporation does not do so, the directors will have not discharged their fiduciary duty pursuant to

subsection 117(1)(a), which would amount to a breach of that subsection. Such breach, as

discussed above, is both evidence of oppressive conduct and is evidence of oppression under

section 234.

G. CONFLICT OF INTEREST

Conflict of interest on behalf of a director, coupled with inadequate disclosure, gives rise to a

specific remedy under section 115 of the Act. Conflict of interest and inadequate disclosure is

also conduct which gives rise to the oppression remedy under section 234. Many successful

minority shareholder oppression claims involve some form of allegation of conflict of interest or

inadequate disclosure of self-dealing by the controlling shareholder. The full text of Section 115

is in Appendix A.

The rules with respect to disclosure and avoidance of conflict of interest may be summarized as

follows:

(a) the directors and officers are to provide timely, written and full disclosure of

material contracts in which they are either parties to or have a material interest in;

(b) generally, such director or officer is required to abstain from voting on such

contracts;

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(c) the contract must be fair and reasonable to the corporation at the time it was

approved;

(d) ifdisclosure is not made, the contract may be set aside by the court.

Most controlling shareholders' objectives are accomplished without fear of a shareholders'

claim, if done the right way. The same objective pursued in the wrong manner leads to a

shareholder's claim. Often it is not so much what is done that is problematic, but how it was or

was not done.

Avoidance of breach of disclosure rules is a good example. Directors who disclose to the

shareholders contentious contracts typically get the necessary approval and are later often beyond

challenge, even if the contracts do not turn out as advantageous as expected. On the other hand,

a contract which at the time is reasonable and fair to the corporation, but is not properly disclosed

to the shareholders later takes on an air of deceit and wrongdoing, especially if it turns out

improvident and the corporation has suffered irreparable financial harm. Prior knowledge and

acquiescence is a good defence to most shareholder claims for wrongdoing.

Unique to Saskatchewan are subsections 115(9) and (10). By virtue of these provisions, the

shareholder, by unanimous shareholder agreement, can exclude from application the provisions

of section 115. If the shareholders do so, not only are the disclosure provisions in section 115

waived, but also the rules ofcommon law and equity do not apply to disclosure of interest in, and

voting on those contracts. This waiver provision of section 115, insofar as I am aware, has not

been considered by the Saskatchewan courts. However, it is unlikely in an oppression action that

consensual waiver of the rules of disclosure and abstention from voting, would permit the party

in the conflict of interest to unfairly confer a benefit upon himself.

If all of the directors have a conflict of interest, the contract is to be approved by unanimous

resolution passed at a shareholders' meeting held for that purpose (subsection 115(8.1)).

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H. LIQUIDATION AND DISSOLUTION (SECTION 207)

A shareholder can pursue an application under section 207 for liquidation and dissolution of the

corporation distinct from an oppression action. Also, subsection 234(7) specifically authorizes

an applicant in an oppression application to apply in the alternative for an order under section

207. The full text of Division XVI - Liquidation and Dissolution, containing sections 201 to

221, is in Appendix C.

Subsection 207(1)(a) contains the same test as that specified in section 234. Subsection

207(1)(b) includes a different test, specifically, the remedy will be granted if it is just and

equitable that the corporation should be liquidated or dissolved.

If either of these grounds are satisfied, it appears the court is not restricted to make an order for

liquidation and dissolution, but may, pursuant to subsection 207(2), "make such order under this

section or section 234 as it thinks fit". Because 'just and equitable" adds another dimension to

minority shareholder relief, oppression actions are usually accompanied by liquidation and

dissolution applications.

Typically, a remedy pursuant to a winding up application was restricted to categories involving

deadlock, loss of substratum of the company, quasi partnership and justifiable lack of confidence

in the management of the company.

Liquidation is a drastic remedy and the 'just and equitable" provisions will not be lightly

invoked as stated in Re Graham and Technequip12, at p. 311:

Winding-up under s. 217(d) is a discretion to be exercised by the Court. Since itis a drastic procedure, it should not be granted lightly. Accordingly, a heavyburden is upon the applicant to prove that it is "just and equitable" that a winding­up order be made. This burden ofproof is sharply accentuated when it involves awell-operated profitable business employing a relatively large work force inaddition to management and executive personnel.

12 (1981),32 O.R. (2d) 297 (H.C.J.).

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Certain factors which militate against liquidation include:

(a) corporations which are operating profitably, are not candidates for dissolution;

(b) situations where the shareholders would be worse off if the corporation was

wound up than they would be if the corporation were permitted to carry on in

business.

Essentially, it is not just and equitable to liquidate thriving corporations. Also, courts should not

consider it just and equitable to liquidate in the following circumstances:

(a) the shareholder is merely attempting to extricate himself from a bad investment;

or

(b) the mere inability of the shareholders to work together in the future.

(See Re Chetal Enterprises Ltd. 13 ; Re Jordan and McKenzie14.)

In Safarik v. Ocean Fisheries Ltd. 15 , the British Columbia Court ofAppeal found that it was just

and equitable to wind up a family company in which oppression was not proved when one of the

family, after many years of service, was no longer permitted to participate in the business. The

Court ofAppeal in its decision reported at (1996), 17 B.C.L.R. (3d) 354 (C.A.), after finding that

it was just and equitable to wind up the company ordered a rather innovative remedy under the

equivalent of our section 234. Instead of requiring either the corporation or any of the other

shareholders to buy the shares ofthe applicant, a court imposed shotgun mechanism was ordered.

Under this buy sell or shotgun mechanism, the shareholders, other than the applicant, established

a price per share for the shares, and the applicant had the option to either sell his shares at the

price or buy the shares from the other shareholders at the same price.

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14

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(1973),39 D.L.R. (3d) 116 (Sask. Q.B.) at p. 123.

(1980),117 D.L.R. (3d)751 (Ont. H.C.J.) atp. 760.

(1995), 12 B.C.L.R. (3d) 342.

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It may be that Saskatchewan courts also are not inclined to hold shareholders together, especially

in closely held businesses if there are irreconcilable differences. However, it is submitted that if

')ust and equitable" is so loosely interpreted as to allow disgruntled shareholders to exit the

corporation absent any justifiable lack of confidence in management or corporate wrongdoing, it

is the equivalent of the court amending the share rights and providing each shareholder with a

right of retraction. Shareholders do not have a legal right to compel the purchase of their shares

unless the articles so provide. If the ')ust and equitable" finding can be invoked at will, based

only on dissatisfaction, it is no different·than providing all shareholders with such right, whether

expressed in the articles or not. A change in shareholders' expectations or intentions without any

justifiable lack of confidence in the conduct of management should not be actionable.

Otherwise, corporate law and family law are guided by the same principles. Irreconcilable

differences without fault allow for divorce.

III. THE OPPRESSION REMEDY

A. OVERVIEW

The oppression remedy found in section 234 of the Act is without doubt the most powerful right

a shareholder has to protect minority interests. Corporate conduct which is "oppressive or

unfairly prejudicial to, or that unfairly disregards the interests" of a shareholder gives rise to a

statutory cause of action.

The right of action is derived from the legislation of the incorporating jurisdiction of the

corporation. Most jurisdictions in Canada, including the federal legislation, provide for an

oppression remedy like section 234 of the Act. The oppression application is to be made in the

court referred to in the particular corporation act under which the corporation is incorporated. It

is only that court which is competent to dispose of the issues. Such applications cannot be made

in a jurisdiction in which the corporation is not incorporated. A corporation can be incorporated

in one province, and have all its assets and business in another province in which it is extra­

provincially registered, but it is only the court and the law of the incorporating jurisdiction, not

the jurisdiction where the corporation is extra-provincially registered, which are competent and

applicable. It is for this reason that shareholders should be particularly concerned when a special

17

resolution is sought to continue the corporation in another jurisdiction if such jurisdiction does

not have legislation as attractive to shareholder rights as the present jurisdiction. However, be

sure to check the relevant legislation before commencing the oppression application.

Subsection 234(2) pennits a "complainant" to commence an oppression action. Subsection

234(1) defines complainant to include a shareholder. Upon proof of conduct amounting to

oppression, the court may, pursuant to subsection 234(3), make any "interim or final order it

thinks fit" "to rectify the matters complained of" The full text of this section is found in

Appendix C.

The oppression legislation is to be interpreted broadly to carry out its purpose of protecting

minority interests. In Eiserman v. Ara Farms Ltd. 16 , Mr. Justice Sherstobitoff approved the

comments of Brook, J.A. in Re Ferguson and Imax Systems Corp. 17 , wherein he declared that

the "section should be interpreted broadly to carry out its purpose." Again, Mr. Justice

Sherstobitoff in 347883 Alberta Ltd. v. Producers Pipelines Inc. 18 , stated:

The legislation is remedial and is to be given a broad interpretation. Each caseturns on its own facts: what may be oppressive or unfairly prejudicial in one casemay not necessarily be so in a different setting."

An oppression action, like most actions, has two main issues. First, the court must detennine if

liability exists. Secondly, ifliability exists, the court must detennine the proper remedy.

B. OPPRESSIVE CONDUCT - GENERAL RULES

General principles and proof of conduct amounting to oppression have been developed from the

case law. The following is by no means exhaustive, and if anything, is an over simplification

which touches on only the most basic of these rules. The general rules are the following:

(a) identify specific conduct complained of -- do not generalize;

16

17

18

(1988),52 D.L.R. (4th) 498 (Sask. C.A.).

(1983), 150 D.L.R. (3d) 718 (Ont. c.A.).

[1991] 4 W.W.R. 577 (Sask. e.A.) atp. 601.

18

(b) explain why the impugned conduct is "oppression" and should be remedied;

(c) the oppression legislation is to be broadly interpreted;

(d) "oppressive" means "burdensome, harsh and wrongful";

(e) "unfairly-prejudicial" or "unfairly disregards" is conduct which is not 'just and

equitabIe";

(f) the test is disjunctive, not conjunctive;

(g) the impugned conduct must affect the complainant's interest as a shareholder;

(h) frustrated shareholders' expectations are at the root of what is "oppressive,

unfairly prejudicial, or unfairly disregards" the interests of the shareholder;

(i) it is the cumulative affect of the conduct which determines oppression;

(j) bad faith is not a prerequisite to oppression;

(k) oppression can occur even if the directors are not in breach oftheir fiduciary duty.

1. Identify the ~pecific Conduct

The material presented to the court must identify specific:

(a) corporate acts or omissions,

(b) conduct ofcorporate business or affairs, or

(c) exercise ofdirectors' powers,

which results in the oppression.

Essentially, what did the corporation do that is wrong? Specific particulars and not broad

generalizations need be proved if the shareholder is to succeed, especially if it wishes to succeed

summarily.

19

2. Explain Why the Impugned Conduct is Oppression and Should Be Remedied

Essentially, why is the conduct unfair to the shareholder? It is not enough to prove the conduct

disregards the shareholder's interest. The conduct must amount to oppression within the

meaning ofthe Act. In WaterGroup Co. et al. v. Stevens et al. 19, Matheson, J. at p. 254 stated:

Simply because a shareholder's interest has been disregarded, or his legitimateexpectations thwarted, does not necessarily mean the shareholder is entitled torelief The interest must have been unfairly disregarded and some injury therebyensued.

The legislation itself provides no guidance as to the threshold required to be met before conduct

amounts to oppression and allows the courts to enter the corporation's board rooms and assume

control. The words "oppressive" or "unfairly prejudicial to" or "that unfairly disregards the

interests of' a shareholder, in and of themselves, are general concepts not capable of precise

definition, but ones which are totally dependent upon the particular facts to which they are

applied.

A backdrop to the oppression remedy is that conduct which deviates from "fair dealing" and "fair

play" gives rise to oppression.

In Eiserman v. Ara Farms Ltd.20 , the court cited with approval the statement made by the

Alberta Court ofAppeal in Re Keho Holdings Ltd. et al. and Nobel et al. 21 which stated:

In preparing proposals for the present legislation both the federal and provinciallaw reform agencies refer to and were guided by the standards reflected by LordCooper's words in Elder v. Elder & Watson Ltd., [1952] S.c. 49 at p. 55. I quote:

... the essence of the matter seems to be that the conductcomplained of should at the lowest involve a visible departurefrom the standards of fair dealing and a violation of the conditionsof fair play on which every shareholder who entrusts his money toa company is entitled to rely.

19

20

21

(1996), 140 Sask. R. 245 (Q.B.).

Supra, footnote 17 at p. 505.

(1987),38 D.L.R. (4th) 368 at pp. 372-73.

20

Lord Cooper's words of "fair dealing" and "fair play" are central to the court's determination of

conduct justifying an oppression remedy.

3. The Oppression Legislation is to be Broadly Interpreted

As referred to above in Eiserman v. Ara Farms Ltd.22 and 347883 Alberta Ltd. v. Producers

Pipelines Inc./3 the court will interpret oppression broadly. That does not mean that lack of

confidence or disagreement between shareholders will give rise to an oppression remedy. In

Elder v. Elder & Watson24, Lord Keith remarked:

... It is not lack of confidence between shareholders per se that brings [theoppression remedy] into play, but lack ofconfidence springing from oppression ofa minority by a majority in the management of the company's affairs ...

This principle was approved in WaterGroup Co. et al. v. Stevens et al./5 where the court

dismissed the oppression application and refused to give any order of relief notwithstanding the

"disagreeable atmosphere" which existed and was likely to continue to exist among the disputing

shareholders. Disagreement between shareholders, in and of itself, does not suffice to establish

oppression under the legislation.

4. "Oppressive" Means "Burdensome, Harsh and Wrongful"

One of the definitions of oppressive which has been approved by the courts is the definition

applied by Lord Simonds in Scottish Co-operative Wholesale Society, Ltd. v. Meyer26, namely

conduct which is "burdensome, harsh and wrongful". Another definition of oppression is the

statement of Lord Keith in Elder v. Elder & Watson27, where it was defined to mean "a lack of

22Supra, footnote 16.

23 Supra, footnote 18.

24 [1952] S.C. 49 at p. 60.

2S(1996), 140 Sask. R. 245 (Q.B.).

26[1958] 3 All E.R. 66 (H.L.).

27Supra, footnote 24.

)

21

probity and fair dealing in the affairs of the company to the prejudice of some portion of its

members.,,28

5. "Unfairly Prejudicial" or "Unfairly Disregards" is Conduct Which is Not "Just andEquitable"

In Saskatchewan, the defInition of "prejudice" and "unfair" adopted by Fulton, J. in Diligenti v.

R. W.MD. Operations Kelowna Ltd.29, that what is unjust and unequitable is also unfairly

prejudicial, has been adopted in Saskatchewan. In Eiserman v Ara Farms Ltd. 30 , the

Saskatchewan Court ofAppeal at p. 506 stated:

The terms ''unfairly prejudicial" or "unfairly disregards" did not come from· theEnglish legislation. The First Canadian case which discussed the meaning ofthose terms is Diligenti v. RWMD Operations Kelowna Ltd. (1976), 1 B.C.L.R. 36(B.C.S.C.). Fulton, J. said at pp. 45-6:

There has been no interpretation, in this context, of the words''unfairly prejudicial". Turning to the dictionaries for assistance, IfInd the following defInitions in the Shorter Oxford EnglishDictionary, 3rd ed.:

"Prejudice ... I. Injury, detriment, or damage, caused to a person byjudgment or action in which his rights are disregarded; hence,injury to a person or thing likely to be the consequence of someaction ...

"Prejudicial ... I. Causing prejudice; detrimental, damaging (torights, interests, etc.) ...

''Unfair ... Not fair or equitable; unjust .. Hence, unfairly."

It is signifIcant that the dictionary defInitions support theinstinctive reactions that what is unjust and inequitable isobviously also unfairly prejudicial.

28

29

30

Approved by the Saskatchewan Court ofAppeal in 347883 Alberta Ltd. v. Producers Pipelines Inc., supra,footnote 24 and Eiserman v. Ara Farms Ltd., (1988), 52 D.L.R. (4th) 498 (Sask. c.A.).

(1976), 1 B.C.L.R. 36 (S.C.) at pp. 45-46.

(1988),52 D.L.R. (4th) 498 (Sask. c.A.).

22

Also, in the Eiserman case, the Court of Appeal approved the reference to what is "unjust and

inequitable" made by Lord Wilberforce in Ebrahimi v. Westbourne Galleries Ltd.31 Lord

Wilberforce stated at pp. 499-500:

... The foundation of it all lies in the words 'just and equitable' and, if there is anyrespect in which some of the cases may be open to criticism, it is that the courtsmay sometimes have been too timorous in giving them full force. The words area recognition of the fact that a limited company is more than a mere judicialentity, with a personality in law of its own: that there is room in company law forrecognition of the fact that behind it, or amongst it, there are individuals, withrights, expectations and obligations inter se which are not necessarily submergedin the company structure.... The 'just and equitable' provision does not, as therespondents suggest, entitle one party to disregard the obligation he assumes byentering a company, nor the court to dispense him from it. It does, as equityalways does, enable the court to subject the exercise of legal rights to equitableconsiderations; considerations, that is, of a personal character arising between oneindividual and another, which may make it unjust, or inequitable, to insist on legalrights, or to exercise them in a particular way.

6. Disjunctive, Not Conjunctive

To succeed, the applicant need not prove the conduct was "oppressive", "unfairly prejudicial to",

and "unfairly disregards the interest". Rather, the applicant need only show the conduct fits one

of these three categories.32 In most cases, conduct which supports an oppression remedy will

easily fall into anyone of these three grounds. Although much of the jurisprudence explains the

definitions and the differences, the more important exercise is the reasoning as to why particular

conduct in the circumstances deviates from the acceptable standard of fair play and fair dealing.

Such explanation provides useful guidance in establishing standards of corporate conduct which

is not acceptable.

31

32

[1972] 2 All E.R. 492 (H.L.).

Allbright, J. in Wark v. Kozicki (1997), 153 Sask. R. 127 (Q.B.) at p. 132.

23

7. The Impugned Conduct Must Affect the Complainant's Interest as a Shareholder

Conduct which is oppressive or unfair, but does not affect the interest as a shareholder cannot be

used to support a finding ofoppression under section 234 (see Naneffv. Con-Crete Holdings Ltd.33et al. ).

In Stone v. Stonehurst Enterprises Ltd. 34, at issue was whether a sale by the company of its

assets to a third party rather than to a minority shareholder who wanted to buy them was

oppressive to that minority shareholder. Landry, J. held that the provisions of the oppression

legislation cannot be used to protect or advance, directly or indirectly, other personal interests,

such as being a prospective purchaser of the assets of the company. To succeed, the applicant

must establish that it is his interest as a shareholder that has been affected.

8. Frustrated Shareholders' Expectations

"Reasonable expectations" or as what Mr. Justice Matheson in WaterGroup Companies Inc. v.

Stevens35, referred to as "legitimate expectations" are the benchmark against which "fair

dealing" and "fair play" are measured. If corporate conduct defeats, frustrates or deviates from

such expectations, then it is unfair. Such shareholder's expectations, however, must be

"reasonable, not outlandish".

"Reasonable expectations" were referred to by Mr. Justice Farley in 820099 Ontario Inc. v.

Harold E. Ballard Ltd.36:

Shareholder interests would appear to be intertwined with shareholderexpectations. It does not appear to me that the shareholder expectations which areto be considered are those that a shareholder has as his own individual ''wish list".They must be expectations which could be said to have been (or ought to havebeen considered as) part of the compact of the shareholders. Expectations were

)

33

34

35

36

(1995),23 O.R. (3d) 481 (C.A.).

(1987),80 N.B.R. (2d) 290.

(1996), 140 Sask. R. 245 (Q.B.) at p. 254.

(1991),3 B.L.R. (2d) 113 (ant. Gen. DiY.), affd (1991),3 B.L.R. (2d) 113 (Ont. Diy. Ct.), affd (1991),3B.L.R. (2d) 123 (ant. Gen. Diy.) at pp. 185-86.

24

discussed in B. Welling, Corporate Law in Canada: The Governing Principles(Toronto: Butterworths, 1984), pp. 533 and 535:

Thwarted shareholder expectation is what the oppression remedy isall about. Each shareholder buys his shares with certainexpectations. Some of these are outlandish. But some of them,particularly in a small corporation with few shareholders, are quitereasonable expectations in the circumstances ...

Mr. Justice Farley's statement has recently been quoted by Mr. Justice Zarzeczny in Walker v.

Walker et al.37 Further, in WaterGroup, Mr. Justice Matheson seized upon author Welling's

statement that "thwarted shareholder expectation is what the oppression remedy is all about" at p.

254 ofhis judgment. Further to this point I would refer the reader to J.A. Campion, S.A. Brown,

A.M. Crawley, The ODpression Remedy: Reasonable Expectations of Shareholders (1995) Spec.

Lect. L.S.D.C. 229-253.

9. It is the Cumulative Affect of the Conduct which Determines Oppression

While a single corporate act may constitute oppression, it is normally the case that it is the

overall pattern of corporate conduct which results in oppression. It is the cumulative impact of

the conduct which is important. The cumulative effect of alleged oppression was considered by

Matheson, J. in WaterGroup Co. et al.38, when he reviewed the authorities and stated:.

In Scottish Co-operative Wholesale Society v. Meyer, [1954] S.C. 381 (affin. byHouse ofLords, [1958] 3 All E.R. 66) Lord Cooper stated, at p. 392:

The word "oppression" is a word in common use andunderstanding in the English language. I would, however, observein passing that the section does not say ''who complains of acts ofoppression", it says "that the affairs of the company are beingconducted in a manner oppressive" ... In other words. I think itinvites attention. not to events considered in isolation. but to eventsconsidered as part of a consecutive story .., (Emphasis added)

37

38

(1997), 151 Sask. R. 207 (Q.B.).

Supra, footnote 35, at p. 269.

)

25

Those words were adopted Hanner (H.R.), Re., [1958] 3 All E.R. 689 (C.A.) at p.704 and Miller and Miller v. F. Mendel Holdings Ltd. and Mitchell, supra, at p.307.

Allbright, J. in Wark v. Kozicki et al.39, was also in agreement with this principle.

10. Bad Faith is Not a Prerequisite to Oppression

Bad faith is definitely relevant, and on its own can constitute oppressive conduct. However, it is

not necessary to prove bad faith if the conduct causes an unfair result. Put another way, good

faith is not a defence if the conduct is unfair. Mr. Justice Laing in Lee et al. v. To et al. 40 made

the following reference to the authorities with respect to the respondents' defence ofgood faith:

With respect to the respondents' position that they acted in good faith and weresimply ignorant of the obligations on them as managers and majority shareholdersin the corporation, I agree with Peterson, Shareholder Remedies in Canada,wherein he states at para. 18.76.1:

It is preferable to focus on the nature of the wrongdoing, ratherthan on the bona fides of the oppressor

when considering what is unfairly prejudicial or unfairly disregards the interestsof a minority shareholder. Peterson relies in part for this statement on the OntarioCourt of Appeal decision in Brant Investments Ltd. et al. v. KeepRite Inc. et al.(1991), 3 O.R. (3d) 289 (C.A.), wherein McKinlay lA. noted at p. 306 (O.R.),334 (O.A.C.):

... However, in considering the alternative question of whether anyact is unfairly prejudicial to, or unfairly disregards the interests ofone of the protected persons or groups, I am of the view that arequirement of lack of bona fides would unnecessarily complicatethe application of the provision and add a judicial gloss that isinappropriate given the clarity of the words used. Of course, theremay be many situations where the rights of minority shareholdershave been prejudiced or their interests disregarded, without anyremedy being appropriate. The difficult question is whether or nottheir rights have been prejudiced or their interests disregarded''unfairly''. In testing the facts in a given case against the word"unfairly", evidence ofbad faith as to motive could be relevant, but

39

40

(1997), 153 Sask. R. 127 (Q.B.).

(1997), 153 Sask. R. 58 (Q.B.) at p. 63.

26

there may be other cases where particular acts effect an unfairresult, but where there has been no bad faith whatsoever on the partof the actors. Such a case came before the Ontario DivisionalCourt in Palmer v. Carling O'Keefe Breweries of Canada Ltd.(1989), 67 a.R. (2d) 161; 41 B.L.R. 128; 56 D.L.R. (4th) 128, 32a.A.c. 113.

On the contradictory evidence presented, I am not able to determine the bona fidesof the respondents, but I do not consider such bona fides to be relevant given thenature of the conduct complained of; namely, the failure to keep any or properfinancial records.

In Brant Investments Ltd. v. KeepRite Inc. 41 , after concluding that evidence of bad faith or want

of probity in the actions complained of is unnecessary in an application under section 234 went

on to say that it was unlikely that an act could be found to be oppressive without there being an

element of bad faith involved. In other words, "oppressive" includes bad faith, however,

''unfairly prejudicial to" and "unfairly disregards the interests of' do not require lack of bona

fides.

The British Columbia Court of Appeal decision in Safarik v. Ocean Fisheries Ltd. 42 , casts a

doubt as to whether oppression can be found without bad faith. The Court of Appeal questioned

the trial judge's finding that neither bad faith nor improper motive is a necessary ingredient to an

oppression claim. The Court of Appeal stated that although this conclusion was "not patently

incorrect", it contained within it "the potentiality for serious error".43

11. Oppression Can Occur Even if the Directors are Not in Breach of Their FiduciaryDuty

Directors who comply with their statutory and common law obligations of loyalty and care can

still act in a manner which oppresses the interests of a group of shareholders. As pointed out

earlier in Brant Investments Ltd. v. KeepRite Inc. 44, acting in the best interests of the corporation

41

42

43

44

(1991),3 O.R. (3d) 289 (C.A.).

(1996), 12 B.C.L.R. (3d) 342.

Ibid. at para. 54.

Supra, footnote 41.

27

can, in some circumstances, require the director to act other than in the best interests of one of

the groups protected under section 234.

In Deluce Holdings Inc. v. Air Canada45 the Ontario Court (General Division) held:

All of the facts must be considered, however. I agree with Farley J.'s conclusionin Ballard, supra, at p. 176, that when assessing the directors' conduct in relationto the s. 122 duty to act in good faith with a view to the best interests of thecorporation, "the question is, what was it the directors had uppermost in theirminds after a reasonable analysis ofthe situation" (emphasis in original). I alsoagree with the view expressed at p. 178 of the same decision, that even if, after aproper analysis of the situation, the directors may be said to have acted in goodfaith, as required by s. 122 of the CBCA, the result of such action may still besuch that it "oppresses" the interests of the minority shareholder in a fashionwhich brings the "oppression remedy" section (s. 241) into play.

C. SPECIFIC CONDUCT GIVING RISE TO OPPRESSION

Bear in mind that oppressive conduct is fact specific. Shareholders' expectations change from

one set of circumstances to another. Thus, conduct which may give rise to oppression in one set

of circumstances may not give rise to oppression in another. In WaterGroup Co. et al. v. Stevens

et al.46, Matheson J. stated:

In the end result, each alleged oppression case "turns on its own facts". What isoppressive or unfairly prejudicial in one case may not be necessarily so in theslightly different setting of another: Re Ferguson and Imax Systems Corp.(1983), 150 D.L.R. (3d) 718 at 724 (Ont. C.A.).

In Arthur v. Signum Communications Ltd.47, Austin J. summarized patterns ofconduct which are

prone to resulting in oppression as follows:

• lack ofvalid corporate purpose for the transaction;

45

46

47

(1992), 12 O.R. (3d) 131 (Gen Diy.) at p. 146.

(1996), 140 Sask. R. 245 (Q.B.) at p. 254.

[1991], O.J. No. 86 (Gen. DiY.), afi'd on appeal, [1993] O.J. No. 1928 (DiY. Ct.).

28

• failure on the part of the corporation and its controlling shareholders to take reasonable steps

to simulate an arm's length transaction;

• lack ofgood faith on the part of the director of the corporation;

• discrimination between shareholders to the effect ofbenefiting the majority shareholder to the

exclusion or to the detriment of the minority shareholder;

• lack of adequate and appropriate disclosure of material information to the minority

shareholders in a plan or design to eliminate the majority shareholder.

Mr. Justice Laing in Aquino et al. v. First Choice Capital Fund Ltd. et al. 48, referring to Dennis

Peterson, in his text Shareholders' Remedies in Canada, itemized the conduct which can result in

oppression where he stated at p. 261 as follows:

... Referring back to the statement of Mr. Peterson quoted, supra, their allegationsfall into the following categories:

1) discrimination or unfair dealing between classes ofshareholder [sic];

2) breach of equitable rights that the law implies would attach to their classof share; and

3) appropriation ofcorporation property.

Examples of conduct which have led to a finding of oppression resulting in a remedy under

section 234 are:

(a) failure to keep any or proper financial records;

(b) failure to provide relevant financial information;

(c) failure to call a shareholders' meeting as required by the Act;

(d) failure to deliver promised financial information;

48 (1995), 130 Sask. R. 252 (Q.B.).

)(e) "cooking the books";

29

\I

/

(f) conduct prohibited under the Act;

(g) lack ofprior disclosure of interest in contracts;

(h) self-dealing;

(i) mismanagement;

(j) removal of shareholder from management;

(k) misconduct does not necessarily disentitle a minority shareholder to relief;

(1) breach of fiduciary duty;

(m) failure to pay dividends;

(n) failure to secure investments;

(0) conduct amounting to oppression is not restricted to closely held corporations;

(P) misrepresentation - oppression or other cause ofaction.

1. Failure to Keep Any or Proper Financial Records

In Lee et al. v. To et al.,49 Mr. Justice Laing had no difficulty in finding that failure to maintain

adequate financial record keeping and financial accountability, notwithstanding no proof ofmala

fides, amounted to oppression. The applicant decided to apply to immigrate to Canada as an

immigrant investor under the Entrepreneur Program. It invested $75,000.00 in a corporation

which operated a grocery store business in Rose Valley. The applicant moved to Rose Valley

and commenced working in the store where friction arose between him and the majority

shareholder. At the time of the applicant's investment, the business was profitable. After the

investment, the records (to the extent that they could be reconstructed) showed a net loss in the

49 (1997), 153 Sask. R. 58 (Q.B.).

30

intervening 4 1/2 year period of $177,000.00. More importantly, during this period no tax

returns were filed, and generally the books were in a mess. The corporation did not provide

financial infonnation with respect to the business, and in particular, did not satisfy subsection

149(1) of the Act. The financial records of the business were so deficient that the accountants

who testified stated that the records could not be reconstructed with any accuracy. Laing J.

stated at p. 64:

Whether the corporation is large or small, financial record keeping, and financialaccountability which cannot exist without proper record keeping as reflected in s.149(1) of the BCA, are fundamental obligations of the directors and managementof any corporation. Without the same no proper decision-making can occur byeither the corporation, or the shareholders who have invested in the corporation.

To the extent the absence of such financial record keeping occurs as a result of theactions of the majority shareholders, such action or inaction, is unfairly prejudicialto the rights of the minority shareholders, and also unfairly disregards theirinterests; at least when such minority shareholders have no other means ofassessing the business activity, the management, or the financial position of thecorporation, as is the case in this matter.

2. Failure to Provide Relevant Financial Information

In Aquino et al. v. First Choice Capital Fund Ltd. et al.,50 one of the actions which constituted

oppression was the inadequate disclosure of financial infonnation which prevented the minority

shareholders from following with any degree of precision what use was made of their money.

Approximately 300 immigrant investors invested close to $47,000,000.00 in three immigration

funds. The immigrant investors individually and collectively did not and could not control the

fund corporations. The fund corporations were controlled by First Canadian, who was also the

manager of the fund corporation. The offering documents identified the fund managers were to

be paid certain fees, including a management fee. However, substantial fees, in addition to those

disclosed and pennitted, were also paid by affiliates of the fund corporations to the fund

manager. The financial statements provided were those of the fund corporations. The financial

50 Supra, footnote 48.

)

31

infonnation of affiliated corporations, were not provided on a timely basis. Had such been

provided, the fees in issue would have been disclosed.

3. Failure to Call a Shareholders' Meeting as Required by the Act

Contravention of any statutory obligation provides evidence of oppression. Shareholders can

expect that the corporation will conduct its affairs in accordance with the laws. If it fails to do

so, even if such breach does not result in direct damage to the shareholder, such failure may

nonetheless result in oppression. In Aquino et al. v. First Choice Capital Fund Ltd. et al.,51 Mr.

Justice Laing found that failure to ever call a shareholders' meeting in compliance with section

127 of the Act was oppressive. All of the immigrant investors held non-voting shares. The

argument was presented that even if the shareholders' meetings had been properly convened

pursuant to the Act, the applicants would be in no different position than what they were in

without the shareholders' meeting. The financial statements which were required to be placed

before the shareholders at every annual meeting were delivered. The auditor was to be appointed

by ordinary resolution and the immigrant investors had no vote. These facts had no impact upon

the court's finding ofoppression.

However, it should be remembered that minority shareholders are entitled to the full benefit of

their statutory rights, arguably without any obligation to prove that denial of the same results in

damage. Also, it is the totality of the conduct which is examined, as opposed to isolated acts, in

order to determine whether oppression has occurred.

4. Failure to Deliver Promised Financial Information

Failure to deliver unqualified, timely, annual audited and promised semi-annual, unaudited

financial statements is evidence of oppression and conduct which is unfairly prejudicial to

shareholders. In Tsui v. International Capital Corp. 52 , Barclay 1. held that failure to deliver

unqualified timely audited annual and promised semi-annual financial statements was part of the

51

52

Ibid.

[1993] 4 W.W.R. 108 Sask. R. 62 (Q.B.); aff'd (1993), 113 Sask. R. 3 (C.A.).

32

pattern of corporate conduct which he concluded was in its totality oppressive and unfairly

prejudicial. At pp. 630-631 he stated:

I agree with counsel for Tsui that the failure to provide adequate fmancialdisclosure undennines one of the fundamental provisions of The BusinessCorporations Act. In Gower's Principles of Modern Company Law, 4th ed.(London: Stevens & Sons, 1979), the learned author states at p. 497:

On the basis that "forewarned is foreanned" the fundamentalprinciple underlying the Companies Acts has been that ofdisclosure. If the public and the members were enabled to find outall relevant information about the company, this, thought thefounding fathers of our company law, would be a sure shield ...basically, disclosure still remains the principle safeguard on whichthe Companies Acts pin their faith ...

In Iacobucci, Pilkington and Prichard, Canadian Business Corporations (Toronto:Canada Law Book, 1977), the learned authors quote from the Kimber Committee,[Kimber Report, para. 4.01] at p. 369:

Disclosure of corporate information has been considered by theCommittee in its broadest implications and also in its specificapplications. Adequate disclosure was the purpose of securitieslegislation passed in England over 100 years ago. Subsequentsecurities laws in England, the United States and Canada have allendeavoured to promote, as one of their principal purposes,adequate disclosure of financial information to investors ...

The Tsui case is the first case in Saskatchewan to deal with the minority shareholder rights of

immigrant investors that took advantage of the federally sponsored Immigrant Investor Program

to gain immigrant status in Canada. The immigrant investors were sophisticated. Eligibility

required a net worth in excess of $500,000.00 and proven business experience; specifically, a

participant had to have successfully operated a business for more than two years. The minimum

investment was $150,000.00 in a Saskatchewan fund.

Immigrant investors could neither control the fund in which they invested, nor the eligible

investments made by the fund. The fund was required to invest 70% of its capital in eligible

investments in Saskatchewan approved under the program, and the remaining 30% could be held

in safe investments. The purpose of the program was to provide venture capital for businesses in

specified geographic areas which might otherwise not attract such capital.

33

The promoters clearly represented that they would manage and control the fund. They were to be

paid a fee for this ongoing management, as well as a placement fee for raising the initial capital.

The fund manager was to make all investment decisions. Investments were authorized in a

conflict of interest situation, providing that such conflict was first fully disclosed.

In Tsui, like the other immigrant investor cases, the promoters represented and promised more

than what they were able to deliver. In Tsui, investments were made in corporations in which the

fund managers had an interest without prior disclosure. Further, the bulk of the capital was

invested in the Willows Golf Course in Saskatoon. At the time of the summary hearing before

Mr. Justice Barclay, there were unsatisfied judgments against the fund and the fund manager.

The assets of the Willows Golf Course were seized by the sheriff Overall, the fund had raised

$17,650,000.00. A large number of the immigrant investors had not received immigrant status.

Mr. Justice Barclay's finding of oppression and the remedies were supported by the Court of

Appeal. However, when reference is made to the Tsui decision, counsel should bear in mind that

when the Court of Appeal dismissed the promoters' appeal, Mr. Justice Sherstobitoff stated at p.

3:

While we may not agree with everything said in the judgment of Barclay J., weare satisfied that there was ample evidence to support his finding that the conductof the appellants was oppressive, unfairly prejudicial to, and unfairly disregardedthe interests of the respondents within the meaning of s. 234 of The BusinessCorporations Act, R.S.S. 1978, c. B_1O.53

5. "Cooking the Books"

Financial disclosure which falsely represents the financial state of affairs is evidence of

oppression. It is oppressive to falsify financial statements. In Re National Building Maintenance

Ltd.54, the majority shareholder presented the minority shareholder with financial statements

which showed a depletion of the company's retained earnings. These retained earnings had been

diminished because the majority shareholder had charged retroactive management fees in his

)

S3

S4

Ibid.

[1971] 1 W.W.R. 8 (B.C.S.C.) affd [1972] 5 W.W.R. 410 (B.C.C.A.).

34

favour. The minority shareholder had devoted his life to the window cleaning business in issue

and when the pressure of running the business got to him, he wanted out. The majority

shareholder was an accountant and was a passive investor. He had prepared the statements in the

past, and had never charged management fees. It was only when the minority shareholder

wanted out that he took advantage of the opportunity to reduce the market value of the shares for

sale purposes by recording these fees.

6. Conduct Prohibited Under the Act

Action which is specifically prohibited under the Act is evidence ofoppression. Such conduct is

illegal. Payment ofdividends in circumstances where the corporation cannot satisfy the solvency

tests under section 40 of the Act was found unfairly prejudicial to and unfairly disregarding the

interests of a creditor, namely Revenue Canada, in R. v. Sands Motor Hotel Ltd. 55 In this case,

Revenue Canada had the status of "complainant" as a creditor of the corporation. The

corporation had paid dividends and redeemed shares to the extent that all of the assets of the

corporation were distributed. This left the corporation without any assets to pay the taxes which

Revenue Canada assessed for capital gains.

In Ceapro Developments Inc. v. Canamino Inc. et al. 56, Hrabinsky, J. found that Canamino and

its directors were not committing an act of oppression when they failed to declare and pay the

dividend arrears on the preferred shares in circumstances where the solvency tests under the Act

were not satisfied. Hrabinsky, J. held that such conduct could not be oppressive to the preferred

shareholders because if dividends were paid in such circumstances, such conduct would then be

oppressive to the creditors of the corporation.

55

56

[1985] 1 W.W.R. 59 (Sask. Q.B.).

(1996), 146 Sask. R. 117 (Q.B.).

) 7.

35

Lack of Prior Disclosure of Interest in Contracts

The failure to provide adequate and timely disclosure to minority shareholders of contracts in

which a majority shareholder has an interest is evidence of oppression. Simply put,in most

cases this is contrary to section 115 ofthe Act.

In Aquino et al. v. First Choice Capital Fund Ltd.57 , the management agreement between the

fund and its manager allowed the manager to make fund investments in corporations in which the

manager had an interest in, provided "that such involvements, arrangements, or allocations are

fully disclosed to the corporation prior to recommending or implementing" any investment in

such business by the fund corporation. Hotel Saskatchewan was an investment and an affiliate of

the fund corporations. The fund manager failed to disclose in advance to the non-voting

immigrant investors both the investment held by the fund manager in Hotel Saskatchewan and its

interest in contracts with the hotel through which the fund manager charged and received fees.

The immigrant investors did not discover particulars of these contracts until several years after

their investments were made. Mr. Justice Laing had little difficulty in finding that these

undisclosed contracts were acts of oppression. The fact that the fund corporation itself had

knowledge of these particulars was not good enough. The disclosure had to be made to and

approved by the shareholders who were not in a conflict of interest, namely, the immigrant

investors.

In Tsui v. International Capital Corp.58, Barclay, J. also concluded the same. In Tsui, the

offering memorandum authorized investments in conflict of interest situations subject to the

condition precedent that such conflict be fully disclosed. The investors were not informed of

existing conflicts at the time of making their investments, and the court found that this conflict

and non-disclosure was part of the conduct which was adjudged to be oppressive.

)

57

58

(1995), 130 Sask. R. 252 (Q.B.).

Supra, footnote 52.

36

With regard to this issue, of interest is the fact that in Aquino there was a unanimous shareholder

agreement in two of the three fund corporations in which the shareholders waived section 115 of

the Act. The statement in the unanimous shareholder agreement was as follows:

The Shareholders do hereby waive all provisions of Section 115 of the BusinessCorporations Act Province of Saskatchewan, except as agreed to pursuant to theManagement Agreement.

Although this waiver was raised in argument both before the Court of Queen's Bench and the

Court of Appeal, neither court in rendering their reasons for judgment made any reference to the

effect of this waiver. The argument presented was that because there was this waiver, conflict of

interest did not render the transactions illegal. What minority shareholders have agreed to in

advance cannot later amount to oppression, especially if the contracts are fair and reasonable.

The waiver negates any disclosure requirements. Unfortunately, the courts felt that they did not

have to deal with the legal effect of the waiver in subsections 115(9) and (10) ofthe Act.

8. Self-Dealing

Misuse of corporate assets for personal benefit is strong evidence of oppression. Again,in

Aquino et al. v. First Choice Capital Fund Ltd.59, Mr. Justice Laing held that utilizing the fund

corporation's money for the directors' own purposes was oppressive. In this case, the controlling

shareholder and manager of the corporation caused the corporation to lend $2,874,443.00 to

another corporation controlled by the majority shareholder and in which the immigrant investors

had no interest. The proceeds were used by the fund manager in this other corporation to acquire

and develop a condominium project for its own purposes. This action was found to be

oppressive, notwithstanding that the loan was repaid, together with 6% interest.

Also, in Aquino, there were two other unauthorized benefits which the court found amounted to

oppression. Firstly, the fund manager acquired a 20% equity investment in Hotel Saskatchewan

for a nominal sum ($20,000.00) when substantial amounts of money were advanced by way of

loans from the fund corporations. The court found there was no business reason why the Hotel

S9Supra, footnote 57.

37

Saskatchewan needed the extra capital invested by the manager to justify having to give up 20%

equity in the corporation. Two of the funds had advanced $22,000,000.00 by loan and had

received 40% each equity while the third fund received no equity interest for its $7,000,000.00

loan. Simply put, the carried interest by the fund manager at the expense of the fund corporation

in circumstances which were neither disclosed nor approved was evidence of oppression.

Secondly, the fund manager arranged a hotel management fee contract with the Hotel

Saskatchewan which guaranteed a minimum of $300,000.00 per year to manage the hotel. Both

of these unauthorized benefits to the controlling shareholder in such circumstances amounted to

oppression.

Again in Aquino, Mr. Justice Laing, in his initial judgment concerning liability, found that the

fees charged by the fund manager to the Hotel Saskatchewan in the form of a "finder's fee",

"construction supervision fee" and "guarantee fees" in the circumstances were "burdensome,

harsh and wrongful".6o In addition to improper disclosure, Mr. Justice Laing initially found that

such contracts were either gratuitous, imprudent, or without value. It should be noted that Mr.

Justice Laing's statement with respect to such fees in the circumstances should not be taken out

of context for the following reasons:

(a) at appeal, the court remarked that his finding on these fees was done "more in the

context ofjustifying relief', and

(b) in Mr. Justice Laing's judgment concerning remedies, he modified his position on

the supervision and hotel management fees.

Excessive management fees or fees paid without justification in favour of a majority shareholder

are oppressive. In Re National Building Maintenance Ltd. 61 , management fees charged after the

fact amounted to oppression when initially there was no intention to charge a fee for such

servIce.

60

)/ 61

Ibid., at p. 263.

Supra, footnote 55.

38

Unauthorized directors' fees and consulting fees have amounted to oppression. See Re Abraham

and Inter Wide Investments Ltd. 62

In Low and Anderson v. Ascot Jockey Club Limited,63 again excessive management fees and

salaries amounted to oppression. In this case, Mr. Randall, Sr. and Mr. Randall, Jr. owned

approximately 97% of the shares in the corporation. Mr. Randall, Sr., with the consent of his

son, took most of the profits of the corporation as bonuses and management fees. Mr. Randall,

Sr. then sold approximately one-third of these shares to the applicants. The applicants found,

after reviewing the financial statements following the sale, that Mr. Randall, Sr., unbeknownst to

them, continued to pay himself significant management salaries and bonuses which in one year

amounted to $480,000.00. The court found that while Mr. Randall, Sr. could have used such

method to distribute the profit before the sale, it was oppressive conduct to continue to pay such

remuneration after the sale merely because he had done so in the past.

In Loveridge Holdings Ltd. v. King-Pin Ltd. 64 at issue was the refusal of the corporation to

redeem all of the preference shares which had a stated redemption price. The corporation took

the position that it was not able to redeem the shares because of "severe cash and liquidity

problems". The court found the reason for the liquidity problems was because the corporation

had made excessive loans for the benefit of the controlling shareholder, as well as paying

substantial bonuses to the controlling shareholder. The court ordered that the preference shares

be redeemed at the pre-determined price. Essentially, the corporation could not strip itself of

cash for the benefit of the majority shareholder to eliminate its contractual obligation to redeem

preferred shares. Such conduct in the circumstances was oppression on the preferred

shareholders.

Loans made to a controlling shareholder which are either unsecured or on non-commercial terms

are strong evidence of oppression. Such was the case in Loveridge Holdings Ltd. v. King-Pin

62

63

64

(1985), 51 O.R. (2d) 460 (H.C.J.).

(1986), 1 B.C.L.R. (2d) 123 (B.C.S.C.).

(1992),5 B.L.R. (2d) 195 (ant. Gen. Div.).

39

Ltd. 65 Also, in Hansen v. Eberle,66 the Saskatchewan Court of Appeal in obiter stated that a

loan in favour ofone shareholder without interest or any repayment terms in itselfwent a far way

to provide justification that the director acted in a manner that unfairly prejudiced and

disregarded the interests of a 50% shareholder.

Oppression was found in the following circumstances:

• In Calmont Leasing Ltd. v. Kredle,67 the directors borrowed $140,000.00, interest-free,

without proper disclosure.

• In Chicago Blower Corp. v. 141209 Canada Ltd. et al.,68 corporate assets were transferred to

an entity controlled by the majority shareholders on terms which were extremely favourable

and could not be commercially justified.

• In Re Keho Holdings Ltd. et al. and Nobel et al.,69 a director, on his own, arranged for the

corporation to borrow a substantial amount of money and then subsequently caused the

corporation to advance the money to a company controlled by him without security.

9. Mismanagement

Mismanagement by the directors and officers is often tenuous evidence of oppression. In my

opinion, it is tenuous only because is often difficult to establish to the satisfaction of the court

that there has been a substantial deviation from prudent management. Typically, if the applicant

is able to do that, it is also probably able to establish other misconduct which the court can more

easily seize upon to support a finding ofoppression.

65

66

67

68

69

Ibid.

(1997), 152 Sask. R. 138 (C.A.).

[1993] 7 W.W.R. (Alta. Q.B.) 428, aff'd [1995] 8 W.W.R. 179 (Alta. C.A.).

(1988),40 B.L.R. 201 (Man. Q.B.).

(1987), 38 D.L.R. (4th) 368 (Alta. C.A.).

40

However, mismanagement, to the extent that the directors and officers do not exercise the skill

and prudence required of them under section 117 of the Act, should be grounds supporting

oppression. Shareholders do and should expect the directors to exercise proper skill and

prudence in the business affairs of the corporation. If there is mismanagement, then these

"reasonable expectations" have been thwarted.

The cases suggest that in order to be successful on an allegation of mismanagement, more than

carelessness or an error in judgment need be shown. Rather, the applicant must prove severe

mismanagement to be successful. (See Dennis Peterson, Shareholders' Remedies in Canada,

sections 18.102 to 18.104.1 inclusive.)

In Credit Foncier Franco-Canadien v. C.S. W. Enterprises Ltd., Carson and Siwak/o the court

found that mismanagement unfairly disregarded the shareholder's interest and was oppressed.

However, in my opinion, a finding of oppression could just as easily been based on

misappropriation of assets or conflict of interest.

10. Removal of Shareholder From Management

Minority shareholders do not have a legal right to be a director, to be involved in management, or

to hold other employment positions with the corporation. However, the classic case of

oppression occurs when minority shareholders in closely held corporations have been so

involved in the corporation and then removed by the majority shareholder. The courts strive to

protect the equitable right of the shareholder as distinct from the legal right.

In closely held corporations, the right that is protected is mown as the "incorporated partnership

doctrine" or the "partnership analogy". It started in the 1973 House of Lords decision in

70 (1986),54 Sask. R. 97 (Q.B.).

41

Ebrahimi v. Westbourne Galleries Ltd. 71 The factors that Lord Wilberforce considered to give

rise to relief

... typically may include one, or probably more of the following elements: (i) anassociation formed or continued on the basis of a personal relationship, involvingmutual confidence -- this element will often be found where a pre-existingpartnership has been converted into a limited company; (ii) an agreement, orunderstanding, that all, or some (for there may be "sleeping" members), of theshareholders shall participate in the conduct of the business; (iii) restriction on thetransfer of the members' interest in the company -- so that if confidence is lost, orone member is removed from management, he cannot take out his stake and goelsewhere.72

The above factors form the basis of the theory that shareholder's reasonable expectations will

determine oppression. The circumstances lead to an expectation that a shareholder will

participate in management as long as he or she remains a shareholder.

The Ebrahimi decision was endorsed by our Court of Appeal in Eiserman v. Ara Farms Ltd. 73

Mr. Eiserman, Sr., through his hard work and frugality had built a successful farming operation

near Welsh, Saskatchewan. On advice from his accountant in 1965, he did an estate freeze. The

farming assets were rolled into Era Farms Ltd. Mr. Eiserman, Sr. maintained the voting control

through preferred shares, and the growth shares went to his wife and three children. Allan

Eiserman, one ofthe sons, continued to be actively involved in the farming business. Years later,

friction developed between Allan and his parents and the brother who had returned to work on

the farm. The final blow up came in 1981, when Allan confronted his family. He told them he

was being taken advantage of and was being treated badly, and quit. Reluctantly, the family

members accepted his resignation as a director and advised Allan he was no longer entitled to the

benefits as an employee of the company. Later, Allan, by a notice ofmotion, sought relief under

sections 207 and 234 of the Act. The Court of Queen's Bench found that Allan was not entitled

to relief, for it was he who terminated the relationship. Essentially, his misconduct deprived him

71

72

73

[1972] 2 All E.R. 492 (H.L.).

As cited in Eiserman v. Ara Farms Ltd. (1988), 52 D.L.R. (4th) 498 (Sask. C.A.) at p. 508.

Ibid.

42

of the claim. The Court of Appeal was of a different view. It found the relationship between the

father and the son was clearly the quasi-partnership relationship contemplated in Ebrahimi and

met all three of the criteria. Allan had spent 15 years, which represented most of his working

life, with the corporation, many without salary, and in circumstances where the profits were

plowed back in the corporation. The court found that Allan's removal as a working shareholder

and director was unfairly prejudicial to him. (See also the recent decision of Zarzezcny, J. in74Walkerv. Walker )

Diligenti v. R. WMD. Operations Kelowna Ltd.,75 was the first Canadian decision to consider

the modem statutory oppression remedy. In this case, four individuals formed a corporation to

operate a restaurant business. After differences arose over the management fee paid to the

applicant for his services, the applicant was removed from his position as manager and director

through actions taken by the other shareholders. After his removal, the remaining three

shareholders/directors resolved to pay themselves directors' and management fee~ to the

exclusion of the applicant. The defence advanced was that such action did not oppress the

applicant's right as a shareholder, but rather only as a director and employee. The defence

argued that as a shareholder he had no right to be either a director or employee of the

corporation. The court, in applying Ebrahimi recognized that the applicant had the expectation

that all the shareholders would provide management services to the corporation and receive

payment for such services. Although his removal as a director did not oppress his proprietary

right as a shareholder, the denial of his expectation oppressed his equitable right and was found

to be unfairly prejudicial to him as a shareholder.

The recent decision in Naneff v. Con-Crete Holdings Ltd.,76 is another example of the equitable

rights which flow to shareholders in privately held corporations when they have expectations to

be involved in the day-to-day management of the business. Nick Naneff, the father, a self-made

entrepreneur starting from nothing, built a successful business. An estate freeze was done when

74

75

76

(1997), 151 Sask. R. 207 (Q.B.).

(1976), 1 B.C.L.R. 36 (S.C.).

(1995),23 O.R. (3d) 481 (C.A.).

43

his sons were teenagers. Nick and his wife maintained control for the voting preference shares

and the gross shares went to the two sons who worked in the business. Later the parents took

issue with the lifestyle of one of their sons, Alex. Alex refused to end a relationship with a

company employee who had two children. The climax. came on Christmas Day in 1990, when

the parents threw Alex out of the family home. Later Alex was removed as an employee and

director ofthe company. The two sons had worked in the business and contributed to its success.

Prior to the incident, both of the sons, although receiving relatively small incomes, had their

living expenses paid, and each received, by way of a shareholders' loan, 50% of the profits as a

bonus. At the time of the incident, Alex's loan, payable to him from the company, was

$830,000.00. After the incident, all of the profits were bonuses to the father. Although the

company attempted to justify its conduct on the basis that Alex's "drinking and partying"

detrimentally affected his performance in the company, this was rejected. The court found

Alex's expulsion from the management of the company was "oppressive" conduct in that it did

not conform to his legitimate expectation that control in the business would eventually pass to

him and his brother on his father's death.

This does not mean that every shareholder has a "right" to be an employee or director of the

company. Each case will depend on its facts. The underlying test is what was the "pact" when

he or she became a shareholder, or agreed to remain as a shareholder. Share ownership does not,

in and of itself, provide job security in a closely held corporation. Corporations can and do deal

with employees qua employees, and not as shareholders when they are discharged. Also, in

small closely held corporations, there are passive investors who never had any intention to be

involved in the day-to-day affairs.

11. Misconduct Does Not Necessarily Disentitle a Minority Shareholder to Relief

In Eismerman v. Ara Farms Ltd.,77 the trial judge found that Allan, the minority shareholder and

son, was the author of his own misfortune by acting recklessly and without sufficient cause in

) 77 (1988),52 D.L.R. (4th) 598 (Sask. C.A.).

44

terminating his relationship with the company. The trial judge was of the view that such

misconduct disentitled Allan to reliefunder section 234 ofthe Act.

The Court of Appeal did not agree. It relied on Re Bird Precision Bellows Ltd. 78 and Re Mason

and Intercity Properties Ltd. 79 Misconduct does not necessarily disentitle a minority

shareholder to relief "Intemperate conduct" does not of itself disentitle such relief. In

Eiserman, the Court ofAppeal concluded that Allan's situation was so intolerable and unfair that

there was no other course available to him, but to terminate his relationship with the company.

The court also noted under section 234 of the Act, the conduct of the company need not be

deliberate; it is sufficient if the conduct has the effect of being prejudicial. Also, they stated at p.

511:

As an appeal court, we cannot disregard the finding of fact on the part of the trialjudge that the appellant quit. Even if the finding of the trial judge amounts to afinding that the appellant deserved to be excluded from the company, that doesnot, on the basis of Re Bird Precision Bellows Ltd. and Re Mason and IntercityProperties Ltd. and on the facts of this case, disentitle him to relief.

12. Breach of Fiduciary Duty

Directors are required to fulfill their duties of loyalty and care to the corporation, and it is

reasonable to expect that they will adhere to such obligations. Logically, it follows that any

breach of such duty is contrary to the reasonable expectations of a shareholder. To the extent

that such breach causes loss to the corporation, there is almost always some element of prejudice

or unfairness to the shareholder.

The following cases are examples ofwhere relief was granted pursuant to the oppression remedy

because ofbreach by the directors of their fiduciary obligations to the corporation:

78

79

[1984] 3 All E.R. 444, affd [1986], 2 W.L.R. 158.

(1987),38 D.L.R. (4th) 681 (Ont. C.A.).

45

• In Calmont Leasing Ltd. v. Kredle,80 the court found that one of the directors was not acting

in the best interests of the corporation when taking advantage of his power and position to

secure personal benefits at the corporation's expense. In this case, the director leased vehicles

at a rate below that ordinarily charged to employees, presumed entitlement to an interest-free

loan, charged excessive management fees, did not document his expenses, and charged

unauthorized consultant fees.

• In Miller and Miller v. F. Mendel Holdings Limited and Mitchell,81 the majority shareholder,

after removing of the director nominated by the minority shareholder, caused the corporation

to transfer certain property to her for her personal benefit. The court found such trahsaction

was not in the best interests of the company, or its shareholders.

• In Re Little Billy's Restaurant (1977) Ltd., Falkatas v. Paskalidis et al.,82 a majority of the

directors who were also majority shareholders resolved to enter into a franchise agreement and

pay a franchise fee to another corporation in which they owned, and in which the minority

shareholder had no interest. The franchise fee stripped the corporation ofmost of the profits.

• In Abraham v. Inter Wide Investments Ltd.,83 the directors authorized and paid themselves

"directors' fees" which were not associated with their duties or responsibilities as directors.

In each of the above cases, the court found that such conduct was in breach of the director's

fiduciary duties which resulted in conduct which was "unfairly prejudicial to and/or "unfairly

disregarded" the interests of the applicant shareholder.

80

81

82

83

[1993] 7 W.W.R. (Alta. Q.R) 428, affd [1995] 8 W.W.R. 179 (Alta. C.A.).

(1984),30 Sask. R. 298 (Q.B.).

(1983),21 B.L.R. 246 (RC.S.C.).

(1985),51 O.R. (2d) 460 (H.C.J.).

13. Failure to Pay Dividends

46

)

In certain circumstances, the court has found that failure to pay dividends constitutes oppression

(see Re Ferguson and Imax Systems Corp.84). However, ifthere is no legitimate expectation that

dividends will be paid, and ifnon-payment has an equal effect on all shareholders, such failure to

make a dividend payment will not, in and of itself, amount to oppression. The court should be

reluctant to intervene in the dividend policies of the corporation unless there is good justification

to do so.

In Ceapro Developments Inc. v. Canamino Inc.,85 the court refused to impose an obligation on

the corporation to pay a dividend and stated at p. 126:

It is a fundamental principle of law that courts will be extremely reluctant tointervene in the internal management ofbusiness corporations.

However, if it can be shown that a dividend policy was part of the "pact" upon becoming a

shareholder, or if a corporation which has been paying dividends in the past suddenly, and for no

justifiable reason stops doing so, such failure to pay dividends is evidence of unfairly

disregarding the interests of the minority shareholder.

Investment bankers and business valuators often place a premium on the share value of a

corporation which has a policy or has stated that it will pay dividends, as opposed to a

corporation which has no such policy or has stated it will not pay dividends. It is my view that

whether failure to pay dividends will amount to oppression depends upon the reasonable

expectation ofthe shareholder and whether or not that expectation has been thwarted.

14. Failure to Secure Investments

In Tsui, Barclay, J. found that the postponement by the fund corporation of its security interests

in its investments, without the consent or knowledge of the immigrant investors, was to their

prejudice and as such was part of the conduct leading the court to conclude there was oppression.

84

85

(1983), 150 D.L.R. (3d) 718 (Ont. C.A.).

(1996),146 Sask. R. 117 (Q.B.).

47

It should be noted that the court in Tsui could just as easily have categorized this conduct as a

breach of fiduciary duty if there was no prudent business objective for the action and there was

strong evidence that the directors had either failed to act in the best interests of the corporation or

had failed to exercise the skill and care required in the circumstances.

15. Conduct Amounting to Oppression is Not Restricted to Closely Held Corporations

More often than not, the judicial review of conduct giving rise to the oppression remedy relates

to closely held rather than public corporations. However, the oppression remedy is alive and

available to shareholders ofall corporations, big and small, private and public.

The difference is that the shareholder's expectations in a public corporation are quite different

than they would be were that corporation private. For example, the shareholder making a

$100,000.00 investment in Deere Ltd. has different expectations than he would if he made the

same investment in the local Deere fann implement dealer. In the former, there is no expectation

of involvement in management or policy making. In the latter, it would not be unreasonable to

expect that the investor be somehow involved in the business. In each case, however, there are

certain expectations that are the same. Firstly, the investor expects to be treated fairly; secondly,

he expects the directors and managers will act selflessly and without any conflict of interest; and

thirdly, he expects the directors to exercise care and prudence in the pursuit ofwhat is in the best

interests ofthe corporation.

I refer to two cases involving public corporations where the oppression remedy was successfully

advanced by the minority shareholders:

• In Westfair Foods Ltd. v. Watt,86 the preferred shareholders challenged Kelly Douglas when

the company introduced a "trailing dividend policy". Kelly Douglas owned 56% of the

preferred shares and all of the common shares in Westfair Foods Ltd. The "trailing dividend

policy" required the previous year's profits be paid out as dividends to Kelly Douglas. Kelly

Douglas in turn lent the money back to Westfair at commercial rates. The preferred

86 [1991] 4 W.W.R. 695 (N.S.C.A.), aff'g [1990] 4 W.W.R. 685 (N.S.Q.B.) leave to appeal refused (1993) 7B.L.R. (2d) 86 (N.S.C.c.).

48

shareholders were entitled to a fixed, non-cumulative dividend and would share equally with

the common shareholders upon dissolution ofthe company. The Court ofAppeal reversed the

trial court's finding that the trailing dividend policy was oppression. The appeal court found,

based on the reasonable expectation analysis, that there was no expectation of the preferred

shareholders to share in the success ofthe company beyond the payment of the fixed dividend.

However, on other procedural issues, the court did find that the conduct of the corporation

was unfair, and pursuant to the oppression remedy, ordered that it was best for all to have the

corporation redeem the preferred shares. The grounds upon which the oppression was found

were:

(a) the corporation did not consult with the preferred shareholders before changing

the dividend policy; and

(b) the corporation allowed the shares to be delisted from the TSE without prior

notice or consultation with the preferred shareholders.

• In Palmer v. Carling O'Keefe Breweries of Canada Ltd.,87 an Australian multi-national

acquired Carling's brewing company in Canada. They then proceeded to amalgamate the

Canadian company with a subsidiary of the multi-national. Although there was no bad faith,

the court found the amalgamation to be unfairly prejudicial to the interests of the preferred

shareholders because:

(a) the debt to equity ratio increased from 1:5 to 10:1; and

(b) the nature of the investment changed from an investment in a Canadian brewing

company to an investment in a diversified multi-national holding company.

The company was ordered to redeem the preferred shares at the redemption price which was

in excess of the market price for which the shares had been trading.

87 41 B.L.R. 128.

49

16. Misrepresentation - Oppression or Not?

Statements made to a shareholder prior to the investment in the corporation have been held not to

amount to oppression. In Aquino et al. v. First Choice Capital Fund Ltd.88, the investors alleged

that representations made in material issued by the promoter inducing them to invest were not

true, and as such amounted to oppression. Mr. Justice Laing did not agree. He found that such

misrepresentations were extraneous to their status as a shareholder. At p. 260 he stated:

However, the question arises whether these allegations arising out of materialsissued by a promoter are properly the subject of a request for relief under s. 234 ofthe BCA. I conclude they are not.

However, in Re Themadel Foundation,89 the court found that the corporate oppression remedy

can be used in cases involving misrepresentation made in continuous disclosure documents and

statements contrary to the Ontario Securities Act. However, it appears that such

misrepresentations occurred after the applicants were shareholders as they were made for the

purpose of assessing a takeover offer. In Re Themadel Foundation the basis of the claim under

the oppression remedy was that the "promise" or representation becomes a reasonable

expectation of a shareholder which is protected by the oppression provisions.

These two cases are reconcilable only the basis that in the one case the representations were

made after the applicant became a shareholder and in the other case, before becoming a

shareholder.

However, if the reasonable expectation analysis is to be employed to detennine oppression, it is

logical that representations made before the applicant becomes a shareholder be considered. If

thwarted shareholders' expectations are the benchmark for oppression, it is submitted that there

is no better way in which to determine this benchmark than to look at the representations and

promises which were made to the applicant at the time he or she was induced to become a

88

89

(1995), 130 Sask. R. 252 (Q.B.).

(1995),23 O.R. (3d) 7 (Gen. Div.).

50

shareholder. It is these representations that fonn the "pact" and understanding of the parties to

the relationship.

D. OVERVIEW OF REMEDIES

The oppression remedy, on the surface, appears to be very broad and open-ended. It is broad

because it allows the court to intervene in the conduct of inter-corporate affairs and confers

discretion to remedy oppressive conduct. It is open-ended because on its face there is little or no

statutory guidance as to how or when a court is to intervene, or as to the limits of the court's

powers after it does intervene. Not only is the test for liability under the statute with,out precise

definition, the remedial provisions of the statute provide little meaningful guidance.

However, the court has definitely taken a very active and progressive role in corporate

governance in framing remedies.

The statute restricts the purposes for which a court may exercise its discretion in the wake of a

fmding of oppression. Subsection 234(2) of the Act provides that once there has been a finding

of oppressive conduct, the court may make an order to "rectify the matters complained of'.

Subsection 234(3) provides that the court is to make an order that is "fit". The statutory

limitations referred to were aptly stated by Galligan, J.A. in Naneff v. Con-Crete Holdings

Ltd. 90 :

I conclude, therefore, that the discretionary powers in s. 248(3) O.B.C.A. must beexercised within two important limitations:

i) they must only rectify oppressive conduct

ii) they may protect only the person's interest as a shareholder, director orofficer as such.

The court does not have authority to grant a remedy which goes beyond rectifying conduct that is

found to be oppressive. Again, Galligan, lA. in Naneffat p. 488 stated:

90 (1995),23 O.R. (3d) 481 (C.A.) at pp. 489-490.

51

The provisions of s. 248(3) give the court a very broad discretion in the manner inwhich it can fashion a remedy. Broad as that discretion is, however, it can only beexercised for a very specific purpose; that is, to rectify the oppression. Thisqualification is found in the wording of s. 248(2) which gives the court the power,if it finds oppression or certain other unfair conduct, to "make an order to rectifythe matters complained of'. Therefore, the result of the exercise of the discretioncontained in s. 248(3) must be the rectification of the oppressive conduct. If it hassome other result the remedy would be one which is not authorized by law. Iagree with the opinion expressed by Professor lG. MacIntosh in his paper "TheRetrospectively of the Oppression Remedy" (1987-88), 13 Can. Bus. LJ. 219 atp.225:

The private law character of the enactment strengthens theargument, for in seeking to redress equity between private partiesthe provision does not seek to punish but to apply a measure ofcorrectivejustice.

Personal interests, other than interests as a shareholder, are not to be protected by the oppression

remedy. Reference should again be made to Galligan, J.A. in Naneff v. Con-Crete Holdings

Ltd.,91 at p. 488-489, and in particular, his comments regarding the decision of Landry, l in

Stone v. Stonehurst Enterprises Ltd., (1987), 80 N.B.R. (2d) 290 when he stated at p. 489:

I agree with and adopt Landry J.'s analysis as a correct statement of the law.Persons who are shareholders, officers and directors of companies may have otherpersonal interests which are intimately connected to a transaction. However, it isonly their interests as shareholder, officer or director as such which are protectedby s. 248 ofthe O.B.C.A. The provisions of that section cannot be used to protector to advance directly or indirectly their other personal interests.

E. GENERAL RULES FOR OPPRESSION REMEDIES

The courts have developed general principles for fashioning an oppression remedy. These

principles are:

(a) the remedy should be consistent with the reasonable expectations of the

shareholders;

(b) the remedy should minimize intrusion in corporate affairs;

91 Ibid.

52

(c) shareholders' expectations are not static but can change;

(d) the remedy should not seek to punish, but rather apply a measure of corrective

justice;

(e) the remedy should be sensitive to the interests of third parties; and

(f) the conduct which is to be rectified is the conduct that has occurred and not the

conduct that is anticipated to occur in the future.

While there may be rules of general application, they are definitely not consistently applied. The

facts more often than no dictate the result, not the legal rules.

1. The Remedy Should be Consistent with the Reasonable Expectations of theShareholders

The reasonable expectations of the shareholder are important not only in the detennination of

liability, but also to determine the remedy. The Saskatchewan cases clearly acknowledge a

legitimate shareholder's expectations as the standard by which oppressive conduct will be

detennined. However, in Saskatchewan, this standard is not readily apparent in the framing of

the remedy. Perhaps time will change this, and courts will draft remedies consistent with the

principles which have emerged from Ontario, and in particular, the Naneffdecision. The remedy

should not give a shareholder something which was beyond the shareholder's expectation based

on the relationship to which he freely subscribed upon becoming a shareholder. Galligan, lA. in

Naneffv. Con-Crete Holdings Ltd.,92 states:

The law is clear that when detennining whether there has been oppression of aminority shareholder, the court must detennine what the reasonable expectationsof the person were according to the arrangements which existed between theprincipals. The cases on this issue are collected and analyzed by Farley, J. in820099 Ontario Inc. v. Harold E. Ballard Ltd. (1991),3 B.L.R. (2d) 113 at p. 123(Ont. Ct. Gen. Div.), affinned (1991),3 B.L.R. (2d) 113 (Ont. Div. Ct.). I agreewith his comment at pp. 186:

92 Ibid. at p. 490.

53

Shareholder interests would appear to be intertwined withshareholder expectations. It does not appear to me that theshareholder expectations which are to be considered are those thata shareholder has as his own individual ''wish list". They must beexpectations which could be said to have been (or ought to havebeen considered as) part of the compact of the shareholders.

The determination of reasonable expectations will also, in my view, have animportant bearing upon the decision as to what is a just remedy in a particularcase.

The order of Blair J. gave Alex something which he knew he could never havewhile his father was alive and active -- the opportunity to obtain full control of thefamily business. A remedy that rectifies cannot be a remedy which gives ashareholder something that even he never could have reasonably expected.(Emphasis added)

A remedy which gives a shareholder a windfall at the same as depriving another of a right which

is clearly beyond the expectation of the parties at the time of entering into the relationship should

not be permitted by the court.

Mr. Justice Laing, in Aquino et al. v. First Choice Capital Fund Ltd.93 made the following

comment:

Most of the cases that touch on the topic of "shareholders' expectations" are casesin which the board of directors have been elected by shareholders as opposed tobeing self-appointed. In these cases, allegations of "oppression" must beconsidered in the context of shareholder democracy.

I cannot say that much turned on this statement in this case. However, it is a fundamental

principle ofcorporate law that directors are elected by a majority ofvotes unless the articles or an

agreement among shareholders provides otherwise. Even though the directors are elected by

shareholders, they are also "self-appointed" by the majority shareholders. If "shareholder

expectation analysis" is to apply, it should not matter in what context the directors are elected.

93 (1996),143 Sask. R. 81 (Q.B.) atp. 88.

54

Nominated directors, as pointed out earlier, have the same fiduciary duty to the corporation as

any other director.

2. Minimal Intrusion in Corporate Affairs

The principal of not interfering unduly in the affairs of the corporation was recognized by Mr.

Justice Barclay in Tsui v. International Capital Corp.94 where he stated:

The principal to be applied by the court in detennining an appropriate remedy isto grant relief only to the extent necessary to protect aggrieved shareholders.(Emphasis in original)

3. Shareholders' Expectations are Not Static

Shareholders' expectations are not static. The expectations of a shareholder can change from the

time of their initial investment. Mr. Justice Laing, in Aquino et al. v. First Choice Capital Fund

Ltd. et a1. 95 approved the statement by Farley, J. in 820099 Ontario Inc. v. Harold E. Ballard

Ltd. et al., 96 where he stated:

In my view, one cannot regard expectations as a static matter. Expectations maywell evolve from the situation of the shareholder going into the corporation (byway of setting up the corporation or by way of gift - or by way of purchasingpreviously issued shares). Certainly these original expectations may stronglyinfluence the evolutionary process. As well, in a closely held corporation, it willbe much easier to consider the "factual" expectations of the shareholders; in awidely held corporation, these expectations will have to be assumed or proxied ifthey are to be discerned at all. I would think that the expectations that count arethose that are reasonable and which are in existence as the directors make theirdecisions from time to time.

In Aquino, the expectation was that the applicant investors would be purely passive and allow

their money to be invested in a closed and blind syndicate fund. Mr. Justice Laing found that for

so long as the management lived up to its obligations, this expectation should not change.

94

95

96

(1993), 108 Sask R. 63 (Q.B.) at p. 77 para. 75.

Supra, footnote 93 at p. 88.

(1991),3 B.L.R. (2d) 113 (Ont. Gen. Diy.), affd (1991),3 B.L.R. (2d) 113 (Ont. Diy. Ct.), affd (1991), 3B.L.R. (2d) 123 (Ont. Gen. Diy.) at p. 191.

55

However, once these expectations were shattered with the losses which were incurred and the

manner in which they were incurred, their expectations changed, and they were entitled to

change as a result of the decisions made by the directors of the funds. In this case, the applicant

shareholders sought and were successful in removing the controlling shareholders, both as

shareholders and directors of the funds.

4. The Remedy is not Punitive

The remedy should only go so far as necessary to rectify the oppressive conduct. The courts

have repeatedly emphasized where there has been oppression they should intervene in the affairs

of the corporation and the relationship between the shareholders only to the extent necessary to

rectify the matters complained of. Mr. Justice Farley in 820099 Ontario Inc. v. Harold E.

Ballard Ltd. et al.,97 stated:

The court should not interfere with the affairs of a corporation lightly. I think thatwhere relief is justified to correct an oppressive type of situation, the surgeryshould be done with a scalpel, and not a battle axe. I would think that thisprinciple would hold true even if the past conduct of the oppressor were found tobe scandalous. The job for the court is to even up the balance, not tip it in favourof the hurt party. I note that in Explo [Explo Syndicate v. Explo Inc., a decision ofthe Ontario High Court, released June 29, 1989], Gravely L.J.S.C. stated at p. 20:

In approaching a remedy the court, in my view, should interfere aslittle as possible and only to the extent necessary to redress theunfairness. (Emphasis in original)

Section 234 does not authorize the court to punish for oppressive conduct (see Naneffv. Con­

Crete Holdings Ltd. 98 ). Two wrongs do not make a right (820099 Ontario Inc. v. Harold E.

Ballard Ltd. et al. 99 ).

97

98

99

Ibid. atp. 197.

Supra, footnote 90 atp. 491.

Supra, footnote 96 at p. 198.

56

5. The Remedy Should Be Sensitive to the Interests of Third Parties

Any remedy which a court is inclined to make should be assessed to see what, if any, impact it

would have on third parties, including other shareholders. Mr. Justice Farley, once again in

820099 Ontario Inc. v. Harold E. Ballard et al. lOO stated:

It also seems to me that there is a third principle to consider. That is, what is theimpact of the injustice claimed or of the remedy demanded on the interests ofthird parties. Should not the court in this case consider the impact upon, say, theminority shareholders ofMLGL? I would think yes, if that were necessary.

Section 234 is not a panacea of relief to the exclusion of all other corporate legislation in the

common law.

Not all alleged improprieties are to be remedied under section 234. The words of Farley, J. in

820099 Ontario Inc. v. Harold E. Ballard Ltd. et al. 101 , are appropriate in this respect:

I too feel that s. 247(3) gives the court tremendous latitude. Subject to beingconcerned about the interfering as little as possible (see Explo Syndicate v. ExploInc., unreported, (June 29, 1989), Doc. Niagara North 6007/87, Gravely L.J.S.C.(Ont. H.C.) and Re Sabex Intemationale Ltee (1979), 6 B.L.R. 65 (Que. S.C.),infra), a judge should be able to use his ingenuity to effect the remedy mostsuitable to the situation. However, I would think that there should also be a noteof caution as to the diagnosis of the true illness as well as to the administration ofthe medicine. Section 247 does not have a life of its own: it must beinterpreted in the light of the overall corporate legislation and case law.Section 247 can be a help; it can't be the total law with everything else ignored orcompletely secondary. (Emphasis added)

I cannot conclude from the cases that this principle is generally followed. Section 234 more and

more is being used by complainants to rectify conduct which could otherwise support a cause of

action in common law. A good example is the Themadel case. In that case, the claim could have

been brought in tort for misrepresentation. The difference was that if the claim was in

misrepresentation, the constituent element of detrimental reliance need be proven. In the

100

101

Supra, footnote 96 at p. 199.

Ibid., atp. 181.

57

oppression remedy there was no requirement to show reliance, only that the conduct effected a

result which was unfair.

6. Conduct to be Rectified

The oppression remedy is designed to rectify conduct found to have occurred: it is not to be

invoked in order to remedy anticipated conduct feared to be oppressive which may possibly take

place in the future. Mr. Justice Farley in Ballario2 stated:

I would think that it would be the foolhardy oppressor who, once having beenchastised, would embark upon a further course of wrongdoing against a minorityshareholder. One would ordinarily expect him to be on his best behavior for theforeseeable future. In passing, it would appear to me that apprehension of futureoppression might be dealt with if it was clear on a balance of probabilities thatsuch oppression would take place.

Again, there are cases which provide a remedy to prevent future misconduct if it is likely to

occur.

F. SPECIFIC REMEDIES

As the cases continue to demonstrate, it is only the imagination of the counsel and the courts

which limit the scope of the remedies available to right the wrong. To the extent that judicial

precedent is required, which in many cases it is not, the following remedies can serve as

precedent. Bear in mind, it is more often than not the facts which dictate the result and the

remedy more than the law.

In some cases, the facts overwhelm the law. The facts as found by the court in Tsui and Aquino

gave rise to extreme remedies.

1. Removing and Appointing Directors

The removal ofa director or directors is an extreme remedy. It is suitable when it is clear that the

incumbent director cannot be trusted and removal is the only way to protect the complainant.

102 Ibid., at p. 201.

58

In Tsui v. International Capital COrp.,103 the controlling shareholder was removed as a director

and officer ofthe corporation. In this case, the court found the controlling shareholder's conduct

to be "unjust, harsh and wrongful", a "clear lack of probity" having not acted "openly and in

good faith and the blatant failure to fulfill the promise was so flagrantly wrong that it was

characterized as an act ofdeceit."

In Aquino et al. v. First Choice Capital Fund Ltd., 104 the controlling shareholders were removed

as directors and officers and from having any "continuing management role" with respect to the

companies and their affiliates. Mr. Justice Laing stated at p. 264:

The conclusion I have arrived at after reviewing the uncontradicted documentaryevidence submitted is that the approach of FCCC and its directors to the fundcorporations was predatory, and their appetite was not modest. The cumulativeeffect of the foregoing acts of "oppression" indicate an overwhelming disregardby the respondents for the legal and equitable interests of the class B shareholders.

In each of Tsui and Aquino, directors were appointed in lieu of the displaced directors. The

interim directors were the immigrant investors who had agreed to act in such capacity and were

directed to convene a shareholders' meeting within a period of 4 months to elect permanent

directors.

2. Amendment of Unanimous Shareholder Agreement

In Aquino et al. v. First Choice Capital Fund Ltd. et al.,105 the Court ofAppeal approved, as part

of Mr. Justice Laing's corporate remedies, the necessary amendments to the unanimous

shareholder agreement to permit the immigrant investors to have the necessary control and

management of the corporation.

i·

103

104

105

[1993] 4 W.W.R. 613 (Sask. Q.B.).

(1995), 130 Sask. R. 252 (Q.B.).

(1997), 148 Sask. R. 288 (C.A.).

3. Amendment to Articles

59

Again, in Aquino et al. v. First Choice Capital Fund Ltd. et al.,106 significant amendments were

made to the articles of incorporation of the fund corporations, as well as its affiliate, Hotel

Saskatchewan. The non-voting shares were provided with voting rights. Barclay, J. in Tsui v.

International Capital Corp.,107 made a similar amendment.

In Naneff v. Con-Crete Holdings Ltd.,108 amendments made to the articles after the falling out

with the son were in and of themselves part of the oppressive acts and such amendments were

reversed by the court.

4. Setting Aside or Varying Contracts

Transactions and contracts which either constitute or result in oppressive conduct are usually set

aside and the parties are put back into the position they were in before the contracts were

consummated. Typically, the contracts which are set aside are those which do not involve third

parties, but rather only the parties who have benefitted as a result of the oppressive conduct.

In Aquino et al. v. First Choice Capital Fund Ltd., 109 Mr. Justice Laing varied or set aside the

following transactions:

(a) The fund management agreement was terminated. Such termination was not

retroactive.

(b) The hotel management agreement was terminated on the same basis.

(c) The debentures granted by the Hotel Saskatchewan to the funds were amended to

delete any reference to change of control provisions.

106

107

108

109

Supra, footnote 104.

Supra, footnote 103.

(1995),23 O.R. (3d) 481 (C.A.).

(1996), 143 Sask. R. 81 (Q.B.).

60

(d) The priority agreement granted by each of the three funds were also amended to

delete any consequence upon a change ofcontrol.

The undisclosed contracts which the promoter entered into with the subsidiary of the fund

corporation, namely, for guarantee fees, hotel management fees, construction supervision fees

and finder fees, were set aside ab initio.

These corporate remedies were upheld on appeal.

There are two interesting observations as to these orders. First, the court set aside a contract

which did not result from oppressive conduct. The fund management agreements were clearly

disclosed and consented to by all· shareholders. The offering memoranda circulated to the

immigrant investors never contemplated that any party other than First Canadian would manage

these funds. The management agreements were for a lengthy fixed term were to continue in the

case of Fund I for 10 years, and Funds II and ill, 15 years from closing. The argument made,

which was rejected by the court, was that the investors would receive an unexpected windfall if

these contracts were prematurely terminated. Secondly, in the case of two of the funds, the

management agreements actually set out the circumstances in which the agreement could be

cancelled. The provisions stated that cancellation could take place if there was "material gross

negligence, bad faith or willful misconduct and 75% of the investors of the funds approved."

Neither Mr. Justice Laing nor the Court of Appeal considered the termination provisions. The

argument presented was that the management contracts which were freely entered into provided

that oppressive conduct was not sufficient for cancellation by itself. In addition to misconduct,

75% of the investors in the funds had to approve such termination and they had not.

5. Compensation

Compensation or a monetary judgment may be made in favour of the corporation or any other

party to the transaction or contract which is set aside.

61

In R. v. Sands Motor Hotel Ltd.,110 the court ordered the shareholders to return all dividends and

share redemption proceeds to the corporation, and the corporation was enjoined from making any

further distribution of corporate property until the taxes assessed by Revenue Canada were paid.

In Aquino et al. v. First Choice Capital Fund Ltd. et al., III Mr. Justice Laing granted monetary

awards in favour of the fund corporations against First Canadian, the controlling shareholder and

its "directing minds". A third individual, Mr. Blewett, was at all material times a solicitor for

First Canadian and each of the funds. He was also a director of the funds. Monetary judgment

was not assessed against Mr. Blewett because the evidence did not establish that he directly

benefitted from any of the money ordered to be repaid. Monetary awards against First Canadian

and Machula and O'Brien were for (i) amounts borrowed from the funds ($5,245,390.00) which

borrowing was found to be oppressive, (ii) the guarantee fees ($225,042.00) paid by Hotel

Saskatchewan to First Canadian, and (iii) the finder's fee paid by Hotel Saskatchewan to First

Canadian in the amount of $378,000.00 were ordered to be repaid. Mr. Justice Laing found

support in the case law for such monetary judgments and stated at p. 91:

The case law supports that it is proper to order money or assets improperlyadvanced by management of a corporation for their own purposes to be repaid orreturned to the corporation if such advances constitute an act of "oppression"within the meaning of s. 234 of the BCA. Vide: Chicago Blower Corp. v. 141209Canada Ltd. and Transregent Holdings Ltd. et al. (1988), 56 Man. R. (2d) 276;40 RL.R. 201 (Q.R); Keho Holdings Ltd. and Oliver v. Noble et al. (1987), 78A.R. 131; 38 D.L.R. (4th) 368 (C.A.). The case law also supports that themanagers who were the directing minds of such improper advances and benefittedfrom the same directly or indirectly, should also have liability attached to them forsuch repayment. Vide: Re Keho Holdings Ltd., supra,; Jackman v. JacketsEnterprises Ltd. (1977), 2 RL.R. 335 (B.C.S.C.). This is particularly true whenthere is some doubt about the ability of the recipient of such advances or loans torepay the same. On the facts of this case, FCCC has declined to make availableany financial information with respect to its operations, and it is not known whatits ability to repay any of the foregoing advances is.

110

111

[1985] 1 W.W.R. 59 (Sask. Q.B.).

Supra, footnote 109.

62

The Court of Appeal in Aquino set aside all monetary remedies. However, this was done not

because the court lacked the authority to make such award, but rather because the monetary

award was summarily made in the face of factual matters which were genuinely disputed.

Essentially, there was a genuine need that the amount ofmonetary award and the liability for the

same be determined in the context of a trial and not summarily.

Mr. Justice Laing's order with respect to the hotel construction supervision and hotel

management contract is quite interesting. In his first judgment concerning liability, he held that a

wrongdoer was not entitled to be remunerated on a quantum merit basis for a transaction set

aside as a result of oppressive conduct. The court relied upon the cases of Re National Building

Maintenance Ltd.,112 Low and Anderson v. Ascott Jockey Club,113 and Loveridge Holdings Ltd.

K · p' L d 114v. zng- zn t.

It was respectfully argued before Mr. Justice Laing at the remedy stage that such cases do not

support the proposition that if a contract is found to be oppressive there is no legal entitlement to

be compensated for the service provided. Mr. Justice Laing in his judgment respecting remedies

set aside the hotel construction and the hotel management contracts ab initio. However, he was

persuaded that value had been rendered to the fund corporations pursuant to such contracts, but it

was not clear as to the extent of these services. Instead of ordering that First Canadian and the

directing minds repay the construction fees of $1,024,863.00 and the management fees of

$1,143,296.00, he ordered the trial of the issue to determine the extent of the services provided

and the market value of the same. In essence, even though the contract which was a result of

oppressive conduct is set aside, the wrongdoer can still be remunerated on a quantum merit basis.

What is probably the most interesting is that Mr. Justice Laing went further and ordered that if

these issues were not set down for trial within a period of six months, the fund corporation would

be entitled to judgment against First Canadian, Machula and O'Brien for 75% of the amount paid

112

113

114

[1971] 1 W.W.R. 8 (B.C.S.C.).

(1986), 1 B.C.L.R. (2d) 123 (S.C.).

(1992),5 B.L.R. (2d) 195 (Ont. Gen. Div.).

)

63

pursuant to such contracts. There is nothing in his judgment or in any of the evidence presented

to the court, which I am aware of, which would lend any credence to the logic behind the 75%

judgment if there is no trial.

6. Interest on Monetary Judgment

Mr. Justice Laing, in Aquino, ordered that interest be paid on the monetary awards at the prime

rate plus 1 1/2%, calculated from the date such monies were wrongfully advanced. At pp. 91-92

he stated:115

I also consider it appropriate to order that interest be paid on the foregoingadvances. The investors had every reason to expect that their money would earninterest on an annual basis as had been represented to them, and this is anappropriate case to vary the normal practice ofawarding simple interest only. Theother factor that is relevant, is that the respondents should not be entitled to profitfrom their acts of oppression. Vide: Wallersteiner v. Moir (No.2), [1975] Q.B.373 (C.A.); Calmont Leasing Ltd. v. Kredl, [1993] 7 W.W.R. 428 428; 142 A.R.81 (Q.B.), affd [1995] 8 W.W.R. 179; 165 A.R. 343; 89 W.A.C. 343 (C.A.)

Mr. Justice Laing in Lee v. To116 took a different view with respect to interest, and specifically

stated that prejudgment interest was not payable on the amount ordered to be paid to the

oppressed shareholder.

7. Refund Monies to Shareholder

In Lee v. Tol17, the respondent requested that the company be wound up and the assets sold. In

this case, the company had little value, a result substantially attributable to the oppressive

conduct of the majority shareholder. A winding up order, or an order compelling either the

majority shareholder or the corporation to purchase the shares at fair value would be no remedy

and would simply condone the oppressive conduct which caused the financial loss. Mr. Justice

Laing referred to subsection 234(3)(g) of the Act and ordered the majority shareholders jointly

)

115

116

117

(1996), 143 Sask. R. 81 (Q.B.).

(1997), 153 Sask. R. 58 (Q.B.).

Ibid.

64

and severally to refund to the oppressed shareholder part of the monies paid initially for the

shares. He discounted the amount initially paid by one-third, and ordered that two-thirds of the

initial purchase price be refunded. The logic behind the discount was that it took into

consideration. the risk factor inherent in making the investment at the time it was made. Again,

as in Aquino1l8 we are uncertain from the reasons for judgment as to why a specific percentage

was arrived at.

8. Purchase of Shares

An order directing the corporation or the majority shareholder to buy the shares of the oppressed

shareholder is the most common and least obtrusive of most corporate restructuring oppression

remedies. In Peterson, Shareholders' Remedies in Canada, the learned author identifies at least

four circumstances where the courts will order a purchase of shares.119 These are:

(a) majority shareholder abuse leaves no meaningful opportunity for involvement by the

oppressed party in the corporation;

(b) the oppressive conduct is such that there is a justifiable loss of confidence making sale of

securities the only reasonable method of insuring long-term stability of the corporation;

(c) the shareholders desire to exit the corporation by selling their shares, but have been

oppressed in the course of doing so;

(d) the only feasible order is an order for purchase of shares.

If the oppressive conduct has caused the shares to decline in value, the price to be paid for those

shares is the amount they would have been worth if the oppressive conduct had not occurred.

(See Scottish Co-operative Wholesale Society, Ltd. v. Meye/20).

118

119

120

Supra, footnote 115.

Sections 18.178 to 18.186.

[1958] 3 All E.R. 66 (H.L.).

65

In Naneffv. Con-Crete Holdings Ltd.,121 the main issue on appeal was the order made initially

by Mr. Justice Blair, ordering that the entire group of companies be put up for judicial public

sale. It was open for the majority, the minority or an independent third party able to bid in such

sale. The Court of Appeal reversed such remedy on the basis of the reasonable expectation

analysis. Public sale was refused, and the majority shareholder was ordered to buy back the

shares at fair value. The applicant could not reasonably have expected to control the family

business while his father was alive, and furthermore, the son could not reasonably expect the

father's paternal bounty to continue if he were no longer considered to be the dutiful son and the

family ties were severed. The trial judge's award gave the son something which he knew he

could never have while his father was alive and active, i.e. the opportunity to obtain full control

of the family business.

Two other orders which were made in Naneff are of interest in that they do not normally fall

within the rubric of an oppression remedy. The Court of Appeal upheld a loss of income and a

transfer of property awards. Although the oppression remedy is not usually the proper vehicle

for compensating wrongful dismissal, in this case the court found that the interests of the

complainant as an employee were so intertwined with his interests as a shareholder and that his

dismissal was part of the pattern of conduct to exclude the applicant from participation in the

company. In these circumstances, the court awarded the applicant $200,000.00 for compensation

for loss of income.

The court also ordered that certain property on which the applicant had built his house be

transferred to him. It is important to note that the land had been owned by the majority

shareholders personally, and not by the corporation.

The importance of these two awards is to show that the courts do apply the oppression remedy

broadly to carry out its purpose.

121 (1995),23 O.R. (3d) 481 (C.A.).

66

Typically, the court orders the buy back to be priced at fair value. However, in Eiserman v. Ara

Farms Ltd.,122 while the misconduct of the applicant did not disentitle relief under the

oppression remedy, such misconduct of the applicant minority shareholder resulted in a price

which reflected a minority discount. Usually, the price to be paid is fair value without minority

discount, and it is only in unusual circumstances that the price will reflect a minority discount.

9. Trial of Any Issues

In Aquino, a major issue on appeal was that the finding of oppression and the remedies granted

by the Court of Queen's Bench were summarily made without a trial on any issue or even cross­

examination on any of the affidavits. The result was probably the largest summary judgment

award (approximately $7,000,000.00) ever made in this province. The Court of Appeal reversed

the monetary award, and directed such issues go to trial. However, the summary determination

of liability was upheld.

In Aquino et al. v. First Choice Capital Fund Ltd. et al. I23 ,Mr. Justice Laing stated:

My reason is, that the oppression proceedings available under s. 234 of the BCAare summary in nature, and intended to provide summary relief where entitlementto the same is clear.

Unless necessary facts are contested and controverted, it appears the court would be correct to

summarily determine such issues. However, there is no presumption of a summary remedy, nor

is it presumed that a summary remedy can not be given in complex cases. The Court of Appeal

in Aquino at p. 292 stated:

I am of the view that the chamber judge conducted a proper analysis to determineif a summary procedure was available that the evidence before him, albeitvoluminous, was capable of such analysis. That is, he focused on uncontestedfacts and canvassed them to see if instances of oppression could be found. Iaccept neither the respondents' contention that a presumption of summary remedyis intended, nor the submissions that in the case of complexity summary relief cannever be given. I believe the chamber judge chose the appropriate middle course

122

123

(1988),52 D.L.R. (4th) 498 (Sask. C.A.).

(1997), 148 Sask. R. 288 (C.A.).

67

as endorsed by this court and Bombardier Credit Limited v. Kostichuk et al.,[1994] 10 W.W.R. 257; 123 Sask. R. 89; 74 W.A.C. 89 (C.A.) at p. 272 [W.W.R.]which held:

If any factual aspect of the cause of action be in genuine dispute, orif the amount claimed as due be similarly in dispute, there must ofcourse be a trial. The primary function of the court acting underthese rules is not to resolve issues ofdisputed fact but to detennine,upon confirmed facts, whether the plaintiff has a cause of action towhich there is no legitimate defence and should therefore be givenleave to enter judgment summarily.

In Peterson, Shareholders' Remedies in Canada at 18.223, the learned author states:

A trial may be necessary if conflicting affidavit evidence is produced, or if thereare complex issues of fact and law. Nevertheless, a court should be hesitant toorder a trial where it appears to be a delaying tactic on the part ofthe oppressor.

The learned author cites Tsui, supra, as support for the latter statement. However, it should be

noted that although Tsui granted summary relief without a trial, neither the respondent nor

applicant requested a trial of any issue, and the court merely determined that it had the authority

in the circumstances to make a summary order.

The Court of Appeal recently again gave guidance on this issue in Rosetown and District

Community Bond Corp. v. Precision Metal Fabricating Ltd. et al. l24 The chambers judge

summarily determined both liability and the remedy on the premise that there were no facts in

dispute. The Court ofAppeal was of a different view, and found that there were material facts in

dispute, rendering it impossible for the chambers judge to have correctly concluded summarily

that the actions were oppressive. Jackson, J.A. at p. 237 stated:

A court must be reluctant to impede the use of the summary procedure which s.241 of the Act provides (see: Peterson, Shareholders Remedies in Canada at18.14). Nonetheless, in this case, having regard for the disputed facts, the learnedChambers judge should have heard viva voce evidence or directed a trial of anissue under s. 234(3)(n). This was essential to the application before him.

124 (1997), 152 Sask. R. 234 (C.A.).

68

A trial of the issue need not be directed if the necessary facts are not in dispute. That does not

mean that all relevant facts have to be uncontroverted, it means only that the facts necessary to

support a finding of oppression must not be controverted. In Lee v. TO,125 Laing, J. found that

the material presented did not allow him to determine the state of the accounts between the

parties. However, he was still able to determine oppressive conduct on those facts which were

not in dispute.

In Lee v. To,126 Laing, J.A. stated:

Section 234 of the BCA provides for a summary procedure to determine whether"oppression" of minority shareholder interests has occurred. The SaskatchewanCourt of Appeal has recently affirmed that the summary procedure should only beresorted to where the facts are not in dispute. Vide: Aquino et al. v. First ChoiceCapital Fund Ltd. et al.

10. Injunctive Relief

Injunctive relief is very intrusive into the affairs of the corporation. However, an order to

restrain oppressive conduct is suitable when made in the early stages before the damage is done.

In Re Little Billy's Restaurant (1977) Ltd., Faltakas v. Paskalidis et al./27 the company was

enjoined from entering into a franchise agreement which had been proposed, and if

consummated, would have siphoned off the profits to a company in which the minority

shareholders had no interest.

Injunctive relief need not be the only remedy. If the oppreSSIve conduct is irreversible,

injunctive relief may be too late, or may be insufficient without other remedies. In Aquino,

injunctive reliefwas granted at three stages:

(a) interlocutory, pending the determination ofoppression;

(b) the final remedy; and

125

126

127

(1997), 153 Sask. R. 58 (Q.R).

Ibid. at pp. 62-63.

(1983),21 RL.R. 246 (RC.S.C.).

69

(c) pending the appeal.

The interlocutory order made by Madam Justice Hunter shortly after the commencement of the

application enjoined First Canadian and its directing minds from:

(a) accessing any ofthe assets of the fund corporation;

(b) exercising any voting rights in the funds and their affiliated company; and

(c) taking any steps to reorganize or restructure the funds, including a public share

offering.

Also, the interim relief extended beyond the fund corporations to First Canadian in which the

immigrant investors had no interest by enjoining First Canadian from divesting any of its assets

other than in the ordinary course ofbusiness.

At the remedy stage, Mr. Justice Laing made permanent the above interim restraining order and

further ordered First Canadian and its shareholders deliver up all financial records and property

of the fund corporations and their affiliates.

Pending appeal, Mr. Justice Sherstobitoff in Chambers, extended the preservation order.

Initially, only First Canadian was enjoined from disposing of its assets in the ordinary course of

business. The Court of Appeal expanded this preservation order to include the directing minds,

Larry Machula and James O'Brien, and any other entities which they controlled.

Mr. Justice Barclay in Tsui, made a similar final order requiring the delivery over of all records

and property which, in that case, related not only to the fund corporation, but to the fund

management company.

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11. Costs

In Aquino, Laing, J. awarded that all costs, including the costs of the inspector's report, be paid

by First Canadian and Machula and O'Brien on a solicitor and client basis. Laing, J. stated at p.

94:128

The respondents did not leave the applicants any option but to bring theapplication under s. 234 of the BCA, because they refused to make availablecomprehensive financial information on a timely basis, particularly with respect tothe investments made by the various funds. Once the application was broughtthey did not co-operate in making such financial information available prior to thehearing of the matter and this in turn prompted me to appoint an inspector toobtain a better understanding of the overall financial picture. That picture turnedout to be very grim indeed, and is due solely to the acts of oppression of therespondents. Once the application was brought, the respondents resisted everyaspect of the applications at both the oppression stage and the remedy stage, forthe most part on the basis of technical arguments. It was the respondents' right todo so, but it added substantially to the cost of the proceedings. I agree with thestatement of Blair J. in Naneffv. Con-Crete Holdings Ltd., (1994) 11 B.L.R. (2d)218 (Ont. Gen. Div.), at p. 264, where he stated:

... To confine the plaintiff to the lower scale of costs would simplybe to compound the effect ofthat "oppressive" conduct. ...

The foregoing award ofcosts was upheld by the Ontario Court of Appeal reportedat (1995) 85 O.A.C. 29; 23 O.R. (3d) 481, at p. 495, per Galligan J.A., where hestated:

... the stance of the appellants on the issue of oppression convincesme that his order ofcosts at trial should not be interfered with.

Bear in mind that all monetary remedies were set aside on the basis there was a genuine need for

a trial. This included Mr. Justice Laing's order of solicitor and client costs.

Interim costs were also awarded in Aquino. After the finding of oppression, Mr. Justice Laing

ordered that the applicant's solicitor/client costs be paid by each of the three funds. These costs

were to include the costs of the investigation which resulted in the application and the

disbursements incurred by both the applicant's Saskatchewan and Vancouver counsel.

128 (1996), 143 Sask. R. 81 (Q.B.).

71

12. Appointment of Receiver Manager

Typically, if a receiver manager is to be appointed, it is on an interim basis. Usually, the receiver

manager is appointed in circumstances where the applicant's interests have been so grossly

abused that the very presence ofthe existing management leads to inevitable abuse. See Sparling

v. Javelin International Ltd. 129

In Aquino et al. v. First Choice Capital Fund Ltd. et al.,130 Laing, J. considered appointing a

receiver manager to oversee the transitional phase of moving control from the majority

shareholders to the minority shareholders. However, he declined to do so because of the position

taken by the applicants and their view that such appointment would reduce the viability and

value ofthe major assets of the fund corporations.

In Re Hansen v. Eberle131 it was the Court of Appeal which appointed the receiver pending the

sale of the motel. It did so in circumstances where it completely reversed the chambers judge's

summary dismissal of the application.

It appears from the statements made that one of the objectives in appointing the receiver was to

force the disputing shareholders to reach a private settlement of their differences. Wakeling, J.A.

stated at p. 140:

The interest of these parties will be best served by strong measures designed tomotivate the private settlement of their multi-faceted dispute, and failing suchsettlement the issues must be subject to a process which will provide a judiciallyimposed settlement.

This is a strong statement. Does it mean, in cases where there are equal shareholders, the court

will strive to find some way to separate the interests even if it is not able to find oppression under

section 234? This statement, however, must be read in light of the concession made by the

129

130

131

[1986] R.J.Q. 1073 (C.S.).

Supra, footnote 128.

(1997), 152 Sask. R. 138 (C.A.).

72

parties at the hearing, that it would be in the best interests for the parties to separate their

interests either by a shotgun arrangement or a forced sale of the business.

13. Production of Financial Statements or Accounting

In Jackman v. Jackets Enterprises Ltd.,132 the minority shareholder had not received a proper

accounting or information of the affairs of the company. The court ordered that the company

strictly comply with its statutory obligations of providing such financial information and

allowing the shareholder to attend annual general meetings.

In Wark v. Kozicki, 133 Allbright, 1. made an interim order for an audit and disclosure of the

financial dealings of the company and connected entities. In this case, there was no conclusion

of any wrongdoing, but only proof of a reasonable possibility or likelihood of oppression. The

court felt results of the audit ordered may be of assistance in determining the issues.

14. Liquidation or Dissolution

The court is reluctant to order liquidation or dissolution, and usually does so as a last resort. In

Sparling v. Javelin International Ltd., 134 the court declined to make an order for liquidation and

dissolution. The company had good prospects for the future. Liquidation and dissolution

involved adverse tax consequences and the oppression could be remedied by other orders.

15. Investigation

The court can direct an investigation under Division XVII of the Act. This can be done at any

stage ofthe proceedings. In Aquino, Laing, J. appointed an inspector to investigate and report to

the court. The purpose was to assist the court in determining what remedies should flow from

132

133

134

(1977),2 B.L.R. 335 (RC.S.C.).

(1997), 153 Sask. R. 127 (Q.R), [1998] S.J. No.5 (C.A.), [1998] S.J. No. 150 (Q.R).

Supra, footnote 129.

)

73

the oppression finding. The specific terms of the order are attached to the reported case. (See

Aquino et al. v. First Choice Capital Fund Ltd. et al.)135 •

Such appointment was upheld by the Saskatchewan Court of Appeal in Aquino et al. v. First

Choice Capital Fund Ltd. et al. 136 The Court of Appeal was satisfied that the investors would

suffer prejudice, perhaps irreparable, if the inspector was not allowed to proceed. Although such

proceedings may be expensive, the court was of the view that the costs of the investigation were

small relative to the amounts invested ($47,000,000.00). The information obtained may expedite

proceedings and benefit all parties.

G. PROCEDURAL ISSUES

1. Onus and Standard of Proof

The onus of proving oppression lies with the applicant and the standard of proof is on a balance

ofprobabilities. In Tsui, Barclay, J. stated at p. 629:

The onus ofproof under the oppression remedy is on the applicant. Scottish Co­operative Wholesale Society Ltd. v. Meyer, [1958] 3 All. E.R. 66 (H.L.), and thestandard of proof is on a balance of probabilities. Miller v. F. Mendel HoldingsLtd., supra.

2. Commencement of Proceedings

Section 241 of the Act states that "the application may be made in a summary manner by

petition, originating notice ofmotion, or otherwise as the Rules ofCourt provide". The summary

procedure is permissive and not mandatory. It is my experience that applications commencing

proceedings under section 234 have been made by notice of motion, originating notice~ and by

statement of claim. It is my view that the correct procedure is to commence the proceedings by

originating notice pursuant to rule 451 of the Queen's Bench Rules of Court. However, I am not

aware ofany respondent or court taking issue with how the action is commenced.

135

136

(1996), 135 Sask. R. 7 (Q.B.).

(1996), 134 Sask. R. 241 (C.A.).

74

3. Right to Appeal

Section 242 provides a statutory right to appeal any order made by a Court of Queen's Bench

under the Act to the Court of Appeal. However, an order made under a rule of practice or

procedure in an oppression remedy application is not appealable as of right, leave to appeal such

order is required.

In Kelvin Energy Ltd. v. Lee,137 the issue was whether a judgment authorizing the examination

for discovery of a witness is appealable as of right when such order is made within the

oppression remedy proceedings. The Supreme Court of Canada found that only those orders

made pursuant to the powers specifically conferred by the Act were appealable as of right, and

interlocutory judgments rendered pursuant to rules of procedure which are of general application

do not have the same status.

4. No Security for Costs

Subsection 235(3) provides that a proper applicant is not required to give security for costs in any

application made pursuant to the oppression remedy.

5. Splitting the Case

In Aquino, Laing, J. split the case. First, he summarily determined there was oppression, then

ordered an investigation to assist in remedies and later heard argument and determined the

remedies. In my view, this process led to difficulty. Between the finding of oppression and the

hearing ofargument on the remedies, new claims were advanced by the applicants. These claims

flowed from the investigator's report. Laing, J. did not rule on such claims, partly because they

did not form part of the original findings of oppression. However, in my opinion, such new

claims, supported in part by the investigator's report which arguably was hearsay and not

admissible for the purpose of proving the contents thereof, perhaps influenced the court in its

view ofthe appropriate remedy.

137 [1992] 3 S.C.R. 235.

75

Recently, the Court ofAppeal in Wark v. Kozicki, [1998] S.J. No.5 Reasons for Judgment dated

January 13, 1998, made the following statement:

In applications of this kind the Court should avoid fragmented proceedings.Furthermore, it is important that applications of this kind be handled in adisciplined manner.

In this case, Allbright, J. had initially dealt with oppression remedy applications by directing the

motion be adjourned and a financial audit conducted. The applicant then brought a new motion

before Matheson, J. for an order directing the trial of the issue. This application was dismissed.

The judgments of both Matheson, J. and Allbright, J. were appealed. The Court of Appeal

allowed the appeal of the judgment of Matheson, J. and remitted the matter to Allbright, J. for

determination ofthe application that was before him.

6. Trial of the Issue

If either the applicant or the respondent requests the court direct a trial of the issue,. it must set

out with sufficient particularity the issues in order to enable the parties to be apprised of the

allegations and to effectively respond to them. (See Wark v. Kozicki, [1998] S.J. No. 150

Reasons for Judgment, March 13, 1998, Allbright, J.) As stated by the Court of Appeal in Wark

v. Kozicki, supra, "Counsel have a heavy responsibility to define the issues before the Chambers

judge."

APPENDIX A

000076

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BUS~SSCORPORATIONS

67

c. B·10 aeooaoDirectors' liability

113(1) Directors of a corporation who vote for or consent to a resolutionauthorizing the issue of a share under section 25 for a consideration other thanmoney are jointly and severally liable to the corporation to make good any amountby which the consideration received is less than the fair equivalent of the moneythat the corporation would have received ifthe share had been issued for money onthe date of the resolution.

Further directors' liabilities(2) Directors of a corporation who vote for or consent to a resolution authorizing:

(a) a purchase, redemption or other acquisition of shares contrary tosection 32, 33 or 34; .

(b) a commission contrary to section 39;

(c) a payment of a dividend contrary to section 40;

(d) financial assistance contrary to section 42;

(e) a payment of an indemnity contrary to section 119; or

(f) a payment to a shareholder contrary to section 184 or 234;

are jointly and severally liable to restore to the corporation any amounts sodistributed or paid and not otherwise recovered by the corporation.

Contribution . . .(3) A director wht> has satisfied ajudgment rendered under this section is entitledto contribution from the other directors who voted for or consented to the unlawfulact upon which the judgment was founded.

Recovery(4) A director liable under subsection (2) is entitled to apply to a court for an ordercompelling a shareholder or other recipient to payor deliver to the director anymoney or property that was paid or distributed to the shareholder or other recipientcontrary to section 32, 33, 34, 39, 40, 42, 119, 184 or 234.

Order ofcourt(5) In connection with an application under subsection (4) a court may, if it issatisfied that it is equitable to do so:

(a) order a shareholder or other recipient to payor deliver to a director anymoney or property that was paid or distributed to the shareholder or otherrecipient contrary to section 32, 33, 34, 39, 40, 42, 119, 184 or 234;

(b) order a corporation to return or issue shares to a person from whom thecorporation has purchased, redeemed or otherwise acquired shares;

(c) make any further order it thinks fit.

No liability(6) A director is not liable under subsection (1) ifhe proves that he did not knowand could not reasonably have known that the share was issued for a considerationless than the fair equivalent ofthe money that the corporation would have receivedifthe share had been issued for money.

1998·1

68

c. B·lO BUSrnESSCORPORATIONS aC008l

Limitation(7) An action to enforce a liability imposed by this section may not be commencedafter two years from the date of the resolution authorizing the action complainedof.

R.S.S. 1978, c.B·10, s.113.

Liability of directors for wages114 Directors of a corporation are jointly and severally liable, in accordancewith The Labour Standards Act, to employees of the corporation for all debtspayable to each such employee for services performed for the corporation while theyare such directors respectively.

R.S.S. 1978, c.B-10, 8.114.

Disclosure of interested director contract115(1) A director or officer ofa corporation who:

(a) is a party to a material contract or proposed material contract with thecorporation; or

(b) is a director or an officer ofor has a material interest in any person who isa party to a material contract or proposed material contract with thecorporation;

shall disclose in writing to the corporation or request to have entered in theminutes ofmeetings ofdirectors the nature and extent ofhis interest.

Time ofdisclosure for director .(2) The disclosure required by subsection (1) shall be made, in the case of adirector:

(a) at the meeting at which a proposed contract is first considered;

(b) ifthe director was not then interested in a proposed contract, at the firstmeeting after he becomes so interested;

(c) if the director becomes interested after a contract is made, at the firstmeeting after he becomes so interested; or

(d) ifa person who is interested in a contract later becomes a director, at thefirst meeting after he becomes a director.

. Time ofdisclosure for officer(3) The disclosure required by subsection (1) shall be made, in the case of anofficer who is not a director:

(a) forthwith after he becomes aware 'that the contract or proposed contractis to be considered or has been considered at a meeting ofdirectors;

(b) ifthe officer becomes interested after a contract is made, forthwith afterhe becomes so interested; or

(c) if a person who is interested in a contract later becomes an officer,forthwith after he becomes an officer.

1998-1

BUSINESS CORPORATIONS

69

c. B·10 000082

Time of disclosure for director or officer(4) If a material contract or proposed material contract is one that, in theordinary course of the corporation's business, would not require approval by thedirectors or shareholders, a director or officer shall disclose in writing to thecorporation or request to have entered in the minutes of meetings of directors thenature and extent of his interest forthwith after the director or officer becomesaware of the contract or proposed contract.

Voting(5) No director mentioned in subsection (1) shall vote on any resolution toapprove the contract unless the contract is:

(a) an arrangement by way of security for money lent to or obligationsundertaken by him for the benefit of the corporation or an affiliate;

(b) a contract relating primarily to his remuneration as a director, officer,employee or agent of the corporation or an affiliate;

(c) a contract for indemnity or insurance under section 119; or

(d) a contract with an affiliate.

(e) Repealed. 1984-85-86, c.44, a.5.

Continuing disclosure .(6) For the purposes ofthis section, a gene:ral notice to the directors by a directoror officer, declaring that he is a director or officer ofor has a material interest in aperson and is to be regarded as mterested in any contract made With that person, isa sufficient declaration of interest in relation to any contract so made.

Avoidance standards(7). A material contract between a corporation and one or more ofits directors orofficers, or between a corporation and another person ofwhich a director or officerof the corporation is a directOr or officer or in which he has a material interest, isneither void nor voidable by reason only ofthat relationship or by reason only thata director with an interest in the contract is present at or is counted to determinethe presence of a quoruin at a meeting of directOrs or Committee of directors thatauthorized the contract, ifthe director or officer disclosed his interest in accordancewith subsection (2), (3), (4) or (6), as the case may be, anci the contract was approvedby the directors or the shareholders and it was reasonable and fair to thecorporation at the time it was approved.

Application to court(8) Where a director or officer of a corporation fails to disclose his interest in amaterial contract in accordance with this section, a court may, upon theapplication of the corporation or a shareholder of the corporation, set aside thecontract on such terms as it thinks ::fit.

(8.1) Notwithstanding subsections (1) to (8), the shareholders of a corporationmay, by unanimous resolution passed at an annual meeting or a special meetingheld for the purpose, approve a material contract or proposed material contractthat the directors are unable to approve by reason ofthe material interest ofsomeor all of the directors in the contract.

1998·1

70

c. B·10 BUSL'\,'ESS CORPORATIONS OGG083

Agreement re exclusion and disclosure(9) Notwithstanding subsections (1) to (8), the shareholders ofa corporation may,by unanimous shareholder agreement:

(a) exclude the provisions ofthis section from application to the corporation;

(b) set forth provisions relating to disclosure of interests in materialcontracts and voting on those material contracts by directors that are inaddition to those set forth in this section; or

(c) do both ofthe things described in clauses (a) and (b).

Non-application of rules re disclosure(10) Where the shareholders of a corporation, by un8.nimous shareholderagreement, exclude the provisions ofthis section from application to the corporation,the rules of common law and equity do not apply to the disclosure of interests inmatenal contracts and voting on those material contracts by directors.

R.S.S. 1978, c.B-10, 8.115; 1984-85-86, c.44, 8.5;1992, c.44, 8.20.

Officers116 Subject to the articles, the bylaws or any unanimous shareholder agreement:

(a) the directors may designate the offices of the corporation; appoint asofficers persons of full capacity, specify their duties and delegate to thempowers to manage the business and affairs of the corporation, except powersto do anything referred to in.subsection (3) ofsection 110;

(b) a director may be appointed to any office of the corporation; and

(c) . two or more offices of the corporation may be held by the same person.

R.S.S. 1978, c.B-10, 8.116•.

Duty ofcare ofdirectors and officers117(1) Every director and officer of a corporation in exercising his powers anddischarging his duties shall:

(a) act honestly and in good faith with a view to the best interests of thecorporation; and

(b) exercise the care, diligence and skill that a reasonably prudent personwould exercise in comparable circumstances.

Duty to comply(2) Every director and officer of a corporation shall comply with this Act, theregulations, articles, bylaws and any unanimous shareholder agreement.

No exculpation(3) Subject to subsection (4) ofsection 140, no provision in a contract, the articles,the bylaws or a resolution relieves a director or officer from the duty to act inaccordance with this Act or the regulations or relieves him from liability for abreach thereof.

R.S.S. 1978, c.B-10, 8.117.

1998-1

BUSINESS CORPORATIONS

71

c. B·I0 0COO 84

)

Dissent118(1) A director who is present at a meeting of directors or committee ofdirectors is deemed to have consented to any resolution passed or action takenthereat unless:

(a) he requests that his dissent be or his dissent is entered in the minutes ofthe meeting;

(b) he sends his written dissent to the secretary of the meeting before themeeting is adjourned; or

(c) he sends his dissent by registered mail or delivers it to the registeredoffice of the corporation immediately after the meeting is adjourned.

Loss ofright to dissent(2) A director who votes for or consents to a resolution is not entitled to dissentunder subsection (1).

Dissent ofabsent director(3) A director who was not present at a meeting at which a resolution was passedor action taken is deemed to have consented thereto unless within seven days afterhe becomes aware of the resolution he:

(a) causes his dissent to be placed with the minutes ofthe meeting; or

(b) sends his dissent by registered mail or delivers it to the registered officeof the corporation.

Reliance on statements(4) A director is not liable under section 113, 114 or 117 ifhe relies in good faithupon:

(a) financial statements of the corporation represented to him by an officerofthe corporation or in a written report ofthe auditor ofthe corporation fairlyto reflect the financial condition of the corporation; or

(b) a report of a lawyer, accountant, engineer, appraiser or other personwhose profession lends credibility to a statement made by him.

R.S.S. 1978, c.B-10, 8.118.

Indemnification119(1) Except in respect of an action by or on behalf of the corporation or bodycorporate to procure a judgment in its favour, a corporation may indemnify adirector or officer ofthe corporation, a former director or officer ofthe corporation ora person who acts or acted at the corporation's request as a director or officer of abody corporate ofwhich the corporation is or. was a shareholder or creditor, and hisheirs and legal representatives, against all costs, charges and expenses, includingan amount paid to settle an action or satisfy a judgment, reasonably incurred byhim in respect ofany civil, criminal or administrative action or proc~dingto whichhe is made a party by reason ofbeing or having been a director or officer of suchcorporation or body corporate, if:

(a) he acted honestly and in good faith with a view to the best interests ofthecorporation; and

1998-1

BUSTh~SS CORPORATIONS

DIVISION XIV-FUNDAMENTAL CHANGES

97

c. B-1'{) COO 85

Amendment ofarticles167(1) Subject to sections 170 and 171, the articles of a corporation may byspecial resolution be amended to:

(a) change its name;

(b) Repealed. 1992, c.44, s.27.

(c) add, change or remove any restriction on:

(i) the business or businesses that the corporation may carry on; or

(li) the powers that the corporation may exercise;

(d) change any maximum number ofshares that the corporation is authorizedto issue;

(e) create new classes ofshares;

(f) change the designation of all or any of its shares, and add, change orremove any rights, privileges, restrictions and conditions, including rights toaccrued dividends, in respect of all or any of its shares, whether issued orunissued;

(g) change the shares ofany class or series, whether issued or unissued, intothe same or a different number of shares ofother classes or· series;

(h) divide a class of shares, whether issued or unissued, into series and :fixthe number ofshares in each series and the rights, privileges, restrictions andconditions thereof;

(i) authorize the directors to divide any class of unissued shares into seriesand :fix the number of shares in each series and the rights, privileges,restrictions and conditions thereof;

(j) authorize the directors to change the rights, privileges, restrictions andconditions attached to unissued shares of any series;

(k) revoke, diminish or enlarge any authority conferred under clauses (i)and (j);

(l) increase' or decrease the 'number of directors or the minimum ormaximum number ofdirectors, subject to sections 102 and 107;

(m) add, change or remove restrictions on the issue, transfer or ownership ofshares; or '

. (n) add, change or remove any other provision that is permitted by this Actto be set out in the articles.

Termination(2) The directors of a corporation may, if authorized by the shareholders in thespecial resolution effecting an amendment under this section, revoke the resolutionbefore it is acted upon ~thout further approval ofthe shareholders.

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Directors may amend articles(3) Notwithstanding subsection (1), the directors may amend the articles of acorporation:

(a) where a corporation has a designating number as a name, to change thatname to a name other than a designating number.

(b) Repealed. 1992, c.44, 8.27.

(4) Repealed. 1979, e.G, 8.39.

R.S.S. 1978, c.B-10, 8.167; 1979, e.G, 8.39; 1983,c.37, 8.12; 1992, c.44, 8.27.

Constraints on shares168(1) Subject to sections 170 and 171, a corporation, any ofwhose issued shares:

(a) are or were part of a distribution to the public;

(b) remain outstanding; and

(c) are held by more than one person;

may by special resolution amend its articles in accordance with the regulations toconstrain:

(d) the issue or transfer ofshares ofany class or series to persons other thanresident Canadians;

(e) the issue or transfer of shares of any class or series to enable thecorporation or any of its affiliates or associates to qualify under any law ofCanada, Saskatchewan or a province:

(i) to obtain a licence to carry on any business;

(ii) to become a publisher ofa Canadian newspaper or periodical; or

(iii) to acquire shares of a finaJicial intermediary as defined in theregulations; or

(f) the issue, transfer or ownership ofshares ofany class or series in order toassist the corporation or any ofits affiliates or associates to qualify under anyprescribed law of Canada, Saskatchewan or another province to receivelicences, permits, grants, payments or other benefits by reason ofattaining ormaintaining a specified level of Canadian ownership or control. .

Esception with respect to clause (l)(f)(2) Clause (l)(f) does not permit a constraint on the issue, transfer or ownershipof shares of any class or series ofwhich any shares are outstanding unless:

(a) in the case ofa constraint with respect to a class, the shares 'ofthe class;or

(b) in the case ofa constraintwith respect to a series, the shares ofthe series;

are already subject to a constraint permitted under that clause.

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Limitation on ownership(3) A corporation may, pursuant to clause (1)(f):

(a) limit the number of its shares that may be owned; or

(b) prohibit the ownership of shares;

by any person whose ownership would adversely affect the ability of thecorporation or any of its affiliates or associates to attain or maintain a level ofCanadian ownership or control specified in its articles that equals or exceeds aspecified level mentioned in clause (l)(f).

Change or removal ofconstraint(4) A corporation mentioned in subsection (1) may by special resolution amend itsarticles to change or remove any constraint on the issue, transfer or ownership ofits shares.

Termination(5) The directors of a corporation may, where authorized bythe shareholders inthe special resolution effecting an amendment under subsection (1) or (4), revokethe resolution before it is acted on without further approval of the shareholders.

Regulations(6) The Lieutenant Governor in Council may make regulations, with respect to acorporation that constrains the issue, transfer or ownership of its shares,prescribing:

(a) the disclosure required of the constraints in documents issued orpublished by the corporation; .

(b) the duties and powers of the directors to refusete:> issue or registettransfers ofshares in accordance with the articles ofthe corporation;

(c) the limitations on voting rights ofany shares held contrary to the articlesofthe corporation;

(d) the powers of the directors to require disclosure ofbeneficial ownershipof shares of the corporation, the rights of the corporation and its dire~rs,

employees· and agents to rely on such disclosure and the effects of suchreliance; and . .. .

(e) the rights of any person owning shares of the corporation at the time ofan amendment to its articles constraining share issues or transfers.

Validity ofacts(7) An issue or a transfer of a share or an act ·of a corporation is validnotwithstanding any failure to comply with this section or the regulations.

r983, e.S7, 8.13.

Proposal to amend169(1) Subject to subsection (2), a director or a shareholder who is entitled to avote at an annual meeting of shareholders may in accordance with section 131make a proposal to amend the articles.

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Cancellation(2) If shares of one of the amalgamating corporations are held by or on behalf ofanother of the amalgamating corporations, the amalgamation agreement shallprovide for the cancellation of such shares when the amalgamation becomeseffective without any repayment ofcapital in respect thereof, and no provision shallbe made in the agreement for the conversion of such shares into shares of theamalgamated corporation.

R.S.S.1978, c.B-10, 8.176.

Shareholderapproval177(1) The directors of each amalgamating corporation shall submit theamalgamation agreement for approval to a meeting of the holders of shares of theamalgamating corporation of which they are directors and, subject to sub­section (4), to the holders of each class or series of such shares.

Notice ofmeeting(2) A notice ofa meeting ofshareholders complying with section 129 shall be sentin accordance with that section to each shareholder of each amalgamatingcorporation, and shall:

(a) include or be accompanied by a copy or summary of the amalgamationagreement; and

(b) state that a dissenting shareholder is entitled to be paid a fair value ofhis shares in Iilccordance with section 184, but failure to make that statementdoes not invalidate an amalgamation.

Right to vote __ ,(3) Each share of an amalgalnating corporation carries the right to vote inrespect ofan amalgamation whether or not it otherwise carries the right to vote.

Class vote(4) The holders of shares of a class or series of shares of an amalgamatingcorporation are entitled to vote separately as a class or series in respect of anamalgamation if the amalgamation agreement contains a provision that, ifcontained in a proposed amendment to the articles, would entitle such holders tovote as a class or series under section 170.

Shareholderapproval-(5) An amalgamation agreement is adopted when the shareholders of eachamalgamating corporationhave approved ofthe amalgamation by special resolutionsof each class or series of such shareholders entitled to vote thereon.

Termination(6) An amalgamation agreement may provide that at any time before the issue ofa certifiCate ofamalgamation the agreement may be terminated by the directors ofan amalgamating corporation, notwithstanding approval of the agreement by theshareholders ofall or any ofthe amalgamating corporations.

R.S.S. 1978, c.B-10, s.177.

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Interpretation(10) For the purposes of subsections (8) and (9), "share" includes an instrumentreferred to in subsection (1) of section 29, a share warrant or a like instrument.

References in articles to par value shares(11) Where the Director determines, upon the application of a body corporate,that it is not practicable to change a reference to the nominal or par value ofsharesof a class or series that the body corporate was authorized to issue before it wascontinued under this Act, the Director may, notwithstanding subsection 24(1),permit the body corporate to continue to refer in its articles to those shares,whether issued or unissued, as shares having a nominal or par value.

Contents ofarticles(12) A corporation shall set out in its articles the maximum number ofshares ofaclass or series mentioned in subsection (11).

Prohibition re certain changes in share structure(13) No corporation shall amend its articles to increase the maximum number ofthe shares mentioned in subsection (11) or to change the nominal or par value ofthose shares.

R.S.S. 1978, c.B-10, s.181; 1979, c.6, 8.44; 1980­81, c.2, 8.5.

Continuance outside Saskatchewan182(1) Subject to subsections (2) and (9), a corporation may, ifit is authorized bythe shareholders in accordance with this section, and if it establishes to thesatisfaction of the Director that its proposed continuance in another jurisdictionwill not adversely affect creditors or shareholders of the corporation, apply to theappropriate official or public body of another jurisdiction. requesting that thecorporation be continued as if it had been incorporated under the laws of thatother jurisdiction.

Continuance ofcorporationprescribed inregulatiODB(2)'- A corporation of a class prescribed by the regulations shall not apply forcontinuance in another jurisdiction without the prior consent of the Minister.

Notice ofmeeting(3) A notice ofa meeting ofshareholders complying with section 129 shall be sentin accordance with that section to each shareholder and shall state that adissenting shareholder is entitled to be paid the fair value of his shares inaccordance with section 184, butfailure to make that statement does not invalidatea discontinuance under this Act.

Right to vote .(4) Each share of the corporation carries the right to vote in respect of acontinuance whether or not it otherwise calrles the right to vote.

Shareholderapproval(5) An application for continuance becomes authorized when the shareholdersvoting thereon have approved of the continuance by a special resolution.

Termination(6) The directors of a corporation may, if authorized by the shareholders at thetime of approving an application for continuance under this section, abandon theapplication without further approval of the shareholders.

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Discontinuance(7) Upon receipt of notice satisfactory to him that the corporation has beencontinued under the laws of another jurisdiction, the Director shall file the noticeand issue a certificate of discontinuance in accordance with section 255.

Notice deemed to be articles(7.1) For the purposes of section 255, a notice mentioned in subsection (7) isdeemed to be articles that conform to law.

Rights preserved(8) This Part ceases to apply to the corporation on the date shown in thecertificate of discontinuance.

Prohibition(9) A corporation shall not be continued as a body corporate under the laws ofanother jurisdiction unless those laws provide in effect that:

(a) the property of the corporation continues to be the property of the bodycorporate;

(b) the body corporate continues to be liable for the obligations of thecorporation;

(c) an existing cause ofaction, claiIJ? or liability to prosecution is unaffected;

(d) a civil, criminal or administrative action or proceeding pending by oragainst the corporation may be continued to be prosecuted by or against thebody corporate; and

(e) a conviction against, or ruling, order or judgement in favour of oragainst, the corporation may be enforced by or against the body corporate.

R.S.S. 1978, c.B-10, 8.182; 1979, c.6, 8.45.

Borrowingpowers183(1) Unless the articles or bylaws of, or a unanimous shareholder agreementrelating to, a corporation otherwise provide, the articles of a corporation aredeemed to state that the directors of a corporation may, without authorization ofthe shareholders:

(a) . borrow money upon the credit ofthe corporation;

(b) issue, reissue, sell or pledge debt obligations ofthe corporation;

(c) subject to section 42, give a guarantee on behalf of the corporation tosecure performance ofan obligation of any person; and

(d) .. mortgage, hypothecate, pledge o~ otherwise create asecurity interest inall or any property of the corporation, owned or subsequently acquired, tosecure any debt obligation of the corporation.

Delegationofborrowingpowers(1.1) Notwithstanding subsection 110(3) and clause 116(a), unless the articles orbylaws of, or a unanimous shareholder agreement relating to, a corporationotherwise provide, the directors may, by resolution, delegate the powers mentionedin subsection (1) to a director, a committee of directors or an officer.

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Extraordinary sale, lease or exchange(2) A sale, lease or exchange of all or substantially all the property of acorporation other than in the ordinary course of business of the corporationrequires the approval ofthe shareholders in accordance with subsections (3) to (7).

Notice ofmeeting(3) A notice of meeting of shareholders complying with section 129 shall be sentin accordance with that section to each shareholder and shall:

(a) include or be accompanied by a copy or summary of the agreement ofsale, lease or exchange; and

(b) state that a dissenting shareholder is entitled to be paid the fair value ofhis shares in accordance with section 184, but failure to make that statementdoes not invalidate a sale, lease or exchange referred to in subsection (2).

Shareholderapproval(4) At the meeting referred to in subsection (3) the shareholders may authorizethe sale, lease or exchange and may :fix or authorize the directors to fix any of theterms and conditions thereof.

Right to vote(5) Each share of the corporation carries the right to vote in respect of a sale,lease or exchange referred to in subsection (2) whether or not it otherwise carriesthe right to vote.

Class vote(6) The holders of shares of a class or series of shares of the corporation are

. entitled to vote separately as a class or series in respect ofa sale, lease or exchangereferred to in subsection (2) only ifsuch class or series is affected by the sale, leaseor exchange in a manner different from the shares ofanother class or series.

Shareholderapproval(7) A sale, lease or exchange referred to in subsection (2) is adopted when theholders of each class or series entitled to vote thereon have approved of the sale,lease or exchange by a special resolution.

Termination(8) The directors of a corporation may, if authorized by the .shareholdersapproving a proposed sale, lease or exchange, and subject to the rights of thirdparties, abandon the sale, lease or exchange without further approval of theshareholders.

Delegation ofpowers mentioned in subsection (1)(9) Notwithstanding subsection (3) of section 110 and clause (a) of section 116;unless the articles or bylaws of, or a unanjmous shareholder agreement relatingto, a corporation otherwise provide, the directors may by resolution delegate thepowers mentioned in subsection (1) to a director, a committee of directors, or anofficer. .

R.S.S. 1978, c.B-10, s.183; 1979, c.6, s.46.

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Right to dissent184(1) Subject to sections 185 and 234, a holder of shares of any class of acorporation may dissent if the corporation is subject to an order underclause 186.1(4)(d) that affects the holder or if the corporation resolves to:

. (a) amend its articles under section 167 or 168 to add, change or remove anyprovisions restricting or constraining the issue, transfer or ownership ofshares of that class;

(b) amend its articles pursuant to section 167 to add, change or remove anyrestriction on:

(i) the business or businesses that the corporation may carry on; or

(il) the powers that the corporation may exercise;

(c) amalgamate with another corporation, otherwise than undersection 178;

(d) be continued under the laws ofanother jurisdiction under section 182; or

(e) sell, lease or exchange all or substantially all its property undersubsection (2) of section 183.

Further right(2) The articles ofa corporation may provide that a holder ofany class or series ofshares ofa corporation, except a holder ofshares ofa distributing corporation, whois entitled to vote ,under section 170 may dissent if the corporation resolves toamend its articles in a manner described in that section.

Payment for shares(3) In addition to any other right he may have, but subject to subsection (26), ashareholder who complies with this section is entitled, when the action approvedby the resolution from which he dissents or an order made under sub­section 186.1(4) becomes effective, to be paid by the corporation the fair value oftheshares held by him in respect of which he dissents, determined as of the close ofbusiness on the day before the resolution was adopted or the order was made.

No partial dissent(4) A dissenting shareholder may only claim under this section with respect to allthe shares of a class' held by him on behalf of anyone beneficial owner andregistered in the name of the dissenting shareholder.

Objection(5) . A dissenting shareholder shall send to the corporation, at or before anymeeting ofshareholders at which a resolution referred to in subsection (1) or (2) isto be voted on, a written objection to the resolution, unless the corporation did notgive notice to the shareholder of the purpose of the meeting and of his right todissent. .

Notice ofresolution(6) The corporation shall, within ten days after the shareholders adopt theresolution, send to each shareholder who has :filed the objection referred to insubsection (5) notice that the resolution has been adopted, but such notice is notrequired to be sent to any shareholder who voted for the resolution or who haswithdrawn his objection.

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Demand for payment(7) A dissenting shareholder shall, within twenty days after he receives a noticeunder subsection (6) or, ifhe does not receive such notice, within twenty days afterhe learns that the resolution has been adopted, send to the corporation a writtennotice containing;

(a) his name and address;

(b) the number and class of shares in respect of which he dissents; and

(c) a demand for payment of the fair value of such shares.

Share certificate(8) A dissenting shareholder shall, within thirty days after sending a noticeunder subsection (7), send the certificates representing the shares in respect ofwhich he dissents to the corporation or its transfer agent.

Forfeiture(9) A dissenting shareholder who fails to comply with subsection (8) has no rightto make a claim under this section.

EndorsiDgcertificate(10) A corporation or its transfer agent shall endorse on any share certificatereceived under subsection (8) a notice that the holder is a dissenting shareholder

. under this section and shall forthwith return the share certificates to thedissenting shareholder.

SuspellSion ofrights .(11) On sending a notice under subsection (7), a dissenting shareholder ceases tohave any rights as a shareholder other than the right to be paid the fair value ofhis shares as determined under this section except where:

(a) the dissenting shareholder withdraws his notice before the corporationmakes an offer under subsection (12);

(b) the corporation fails to make an offer in accordance with subsection (12)and the dissenting shareholder withdraws his notice; or

(c) the directors revoke a resolution to amend the articles under sub­section .(2) of section 167 or subsection (4) of section 168, terminate anamalgamation agreement under subsection (6) ofsection 177 Qr an applicationfor continuance under subsection (6) of section 182, or abandon a sale, leaseor exchange under subsection (8) of section 183;

in which case his rights as a shareholder are reinstated as of the date he sent thenotice mentioned in subsection (7).

Offer to pay(12) A corporation shall, not later than seven days after the later of the day onwhich the action approved by the resolution is effective or the day the corporationreceived the notice referred to"in subsection (7), send to each dissenting shareholderwho has sent such notice:

(a) a written offer to pay for his shares in an amount considered by thedirectors of the corporation to be the fair value thereof, accompanied by astatement showing how the fair value was determined; or

(b) if subsection (26) applies, a notification that it is unable lawfully to paydissenting shareholders for their shares.

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Same terms(13) Every offer made under subsection (12) for shares of the same class Or" seriesshall be on the same terms.

...,:. .

Payment(14) Subject to subsection (26), a corporation shall pay for the shares of adissenting shareholder within ten days after an offer made under subsection (12)has been accepted, but any such offer lapses if the corporation does not receive anacceptance thereof within thirty days after the offer has been made.

Corporation application to court(15) Where a corporation fails to make an offer under subsection (12), or where adissenting shareholder fails to accept an offer, the corporation may, within fiftydays after the action approved by the resolution is effective or within such furtherperiod as a court may allow, apply to a court to :fix a fair value for the shares ofanydissenting shareholder.

Shareholderapplication to court(16) If a corporation fails to apply to a court under subsection (15), a dissentingshareholder may apply to a court for the same purpose within a further period oftwenty days or within any further period of time that the court may allow.

Venue(17) An application under subsection (15) or (16) shall be made to a court havingjurisdiction in the place where the corporation has its registered office or in theprovince where the dissenting shareholder resides if the corporation carries onbusiness in that province. .

No securityfor costs(18) A dissenting shareholder is not required to give security for costs in anapplication made under subsection (15) or (16).

Parties(19) Upon an application to a court under subsection (15) or (16):

(a) all dissenting shareholders whose shares have not been purchased bythe corporation shall be joined as parties and are bound by the decision ofthecourt; and

(b) the corporation shall notify each affected dissenting shareholder of thedate, place and consequences ofthe application and ofhis right to appear andbe heard in person or by counsel.

Powers ofcourt(20) Upon an application to a court under subsection (15) or (16), the court may"determine whether any other person is a dissentirigshareholder who should bejoined as a party, and the court shall then:fix a fair value for the shares of alldissenting shareholders.

Appraisers(21) A court may in its discretion appoint one or more appraisers to assist thecourt to fix a fair value for the shares of the dissenting shareholders.

Final order(22) The final order ofa court shall be rendered against the corporation in favourof each dissenting shareholder and for the amount of his shares as fixed by thecourt.

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Interest(23) A court may in its discretion allow a reasonable rate of interest on theamount payable to each dissenting shareholder from the date the action approvedby the resolution is effective until the date of payment.

Notice that subsection (26) applies(24) If subsection (26) applies, the corporation shall, within ten days after thepronouncement ofan order under subsection (22), notify each dissenting shareholderthat it is unable lawfully to pay dissenting shareholders for their shares.

Effect where subsection (26) applies(25) If subsection (26) applies, a dissenting shareholder, by written noticedelivered to the corporation within thirty days after receiving a notice undersubsection (24), may:

(a) withdraw his notice of dissent, in which case the corporation is deemedto consent to the withdrawal and the shareholder is reinstated to his fullrights as a shareholder; or

(b) retain a status as a claimant against the corporation, to be paid as soonas the corporation is lawfully able to do so or; in a liquidation, to be rankedsubordinate to the rights of creditors of the corporation but in priority to itsshareholders.

Limitation(26) A corporation shall not make a payment to a dissenting shareholder underthis section ifthere are reasonable grounds for believing that:

(a) the corporation is or would after the payment be unable to pay itsliabilities as they become due; or

(b) the realizable value ofthe corporation's assets would thereby be less thanthe aggregate ofits liabilities.

R.S.S.1978, c.B·IO, 8.184; 1979, c.6, 8.47; 1983,c.37,8.15; 1992, c.44, 8.29.

Interpretation185(1) In this section, "reorganization" means a court order made under:

(a) section 234;

(b) the Bankruptcy Act (Canada), approving a proposal; or

(c) any other Act of the Parliament of Canada or any Act of the Legislaturethat affects the rights among the corporation, its shareholders and creditors.

Powers ofcourt .(2) Ifa corporation is subject to an order referred to in subsection (1), its articlesmay be amended by such order to effect any change that might lawfully be made byan amendment under section 167.

Further powers(3) Ifa court makes an order referred to in subsection (1), the court may also:

(a) authorize the issue ofdebt obligations of the corporation, whether or notconvertible into shares ofany class or having attached any rights or options toacquire shares of any class, and fix the terms thereof; and

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c.B·10 OC0077

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Classes of shares(4) The articles may provide for more than one class of shares and, if they soprovide:

(a) the rights, privileges, restrictions and conditions attaching to the sharesof each class shall be set out therein; and

(b) the rights set out in subsection (3) shall be attached to at least one classof shares but all such rights are not required to be attached to one class.

R.S.S. 1978, c.B·10, 8.24; 1979, c.S, 8.8.

Issue of shares25(1) Subject to the articles, the bylaws, any unanimous shareholder agreementand section 28, shares may be issued at such times and to such persons and for suchconsideration as the directors may determine.

Shares non-assessable(2) Shares issued by a corporation are non-assessable and the holders are notliable to the corporation or to its creditors in respect thereof.

Consideration(3) No share shall be issued until the consideration for the share is fully paid inmoney or in property or past service that is not less in value than the fairequivalent of the money that the corporation would have received if the share hadbeen issued for money.

Consideration other than money(4) In determining whether property or past service is the fair equivalent of amoney consideration, the directors may take into account reasonable charges and

. expenses of organization and reorganization and payments for property and pastservices reasonably expected to benefit the corporation.

Property .(5) For the purposes of this section, "property" does not include a promissorynote or a promise to pay.

R.S.S. 1978, c.B·10, 8.25; 1979, c.S, 8.9.

Certain cbanges re number, c1aBs or series ofsh.8reti25.1(1) A corporation may, by special resolution, change the shares ofany class orseries, whether issued or unissued, into a different number of shares of the same

.class or series... .

(2) Section 170 applies, with any necessary modification, to a special resolutionmentioned in subsection (1) as if the special resolution were a proposal to amendthe articles. .

1992, c.44, 8.12.

Stated capital account26(1) A corporation shall maintain a separate stated capital account for each classand series of shares it issues.

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Entries in stated capital account(1.1) A corporation shall add to the appropriate stated capital account the fullamount ofany consideration it receives, net ofall bona fide selling commissions, forany shares it issues.

Esception for non-arm's length transaction(1.2) Notwithstanding subsection 25(3) and subsection (1.1) ofthis section, wherea corporation issues shares in exchange for:

(a) property ofa person who immediately before the exchange does not dealwith the corporation at arm's length within the meaning of that term in theIncome Tax Act (Canada);

(b) shares of a body corporate that, immediately before the exchange or,because of the exchange, immediately after the exchange, does not deal withthe corporation at arm's length within the meaning ofthat term in theIncomeTax Act (Canada); or

(c) property of a person who, immediately before the exchange, deals withthe corporation at arm's length within the meaning of the Income Tax Act(Canada), if the person, the corporation and an the holders of shares in theclass or series ofshares so issued consent;

the corporation may, subject to subsection (1.3), add to the stated capital accountsmaintained for the shares ofthe classes or series issued the whole or·anypart oftheamount of the consideration it received in the exchange.

Limit on addition to a stated capital account(1.3) No corporation shall add to a stated capital account, in respect ofa share itissues, an amount greater than the amount ofthe consideration it received for theshare.

Constraint on addition to a stated capital account(1.4) Where a corporation proposes to add any amount to a stated capital accountit maintains in.respect ofa class or series ofshares, and where:

(a) the amount to be added was not received by the corporation asconsideration for the issue ofshares; and

(b) the corporation has issued any outstanding shares ofmore than one classor series; .

the addition to the stated capital account must be approved by special resolution.

Other additions to stated capital(1.5) When a body corporate is continued under this Act, it may add to a statedcapital account any consideration received by it for a share it issued and acorporation may, at any time, add to a stated capital account any amount it.credited to a retained earnings or other surplus account.

Transitional(2) When a body corporate is continued under this Act, subsection (1.1) does notapply to the consideration received by it before it was so continued unless the sharein respect ofwhich the consideration is received is issued after the corporation is socontinued.

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)

Other reduction of stated capital36(1) Subject to subsection (3), a corporation may by special resolution reduce itsstated capital for any purpose including, without limiting the generality of theforegoing:

(a) extinguishing or reducing a liability in respect of an amount unpaid onany share;

(b) distributing to the holder of an issued share of any class or series ofshares an amount not exceeding the stated capital of the class or series;

(c) declaring its stated capital to be reduced by an amount that is notrepresented by realizable assets.

Contents of special resolution(2) A special resolution under this section shall specify the stated capital accountor accounts from which the reduction of stated capital effected by the specialresolution will be deducted. .

Limitation(3) A corporation shall not reduce its stated capiW for any purpose other thanthe purpose mentioned in clause (l)(c) ifthere are reasonable grounds for believingthat: . . .

(a) the corporation is, or would after the reduction be, unable to pay itsliabilities as they become due; or

(b) the realizable value ofthe corporation's assets would thereby be less thanthe 8.ggregate ofits liabilities. .

Recovery(4) A creditor of a corporation is entitled to apply to a court for an ordercompelling a shareholder or other recipient:

(a) to pay to the corporation an amount equal to any liability of thesharehold~rthat was extinguished or reduced contrary to this section; or

(b) to payor deliver to the corporation any money or property that was paidor distributed to the shareholder or other recipient as a consequence of areduction of capital made contrary to this section.

Limitation(5) An action to enforce a liability imposed by this section may not be commencedafter two years from the date of the act complained of.

Remedy preserved(6) This section does not affect any liability that arises under section 113.

E.S.S. 1978, c.B-10, 8.36; 1979, c.6, 8.12.

Adjustment of stated capital account37(1) Where a corporation purchases, redeems or otherwise acquires shares orfractions of shares under section 32, 33, 34, 43 or 184 or clause 234(3Xn, it shalldeduct from the stated capital account maintained for the class or series ofshares,of which the shares purchased, redeemed or otherwise acquired form a part, anamount equal to the product of:

(a) the stated capital of the shares ofthat class or series; and

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Interpretation231 In this Division:

(a) "action" means an action under this Act;

(b) "complainant" means:

(i) a registered holder or beneficial owner, and a former registeredholder or beneficial owner, of a security of a corporation or any of itsaffiliates;

(ii) a director or an officer or a former director or officer ofa corporationor of any ofits affiliates;

(iii) the Director; or

(iv) any other person who, in the discretion ofa court, is a proper personto make an application under this Division.

R.S.S. 1978, c.B-10, 8.231.

Commencing derivative action .232(1) Subject to subsection (2), a complainant may apply to a court for leave tobring an action in the name and on behalf of a corporation or any of itssubsidiaries, or intervene in an action to which any such body corporate is a party,for the purpose of prosecuting, defending or discontinuing the action on behalf ofthe body corporate.

Conditions precedent(2) No action may be brought and no intervention in an action may be madeunder subsection (1) unless the court is satisfied that:

(a) the complainant has given reasonable notice to the directors of thecorporation or its subsidiary of his intention to apply to the court undersubsection (1) ifthe directors ofthe corporation or its subsidiary do not bring,diligently prosecute or defend or discontinue the action;

(b) the complainant is acting in good faith; and

(c) it appears to be in the interests of the corporation or its subsidiary thatthe action be brought, prosecuted, defended or discontinued.

.R.S.S. 1978, c.B-10, 8.232.

Powers ofcourt >233 In connection with an action brought or intervened in under section 232, thecourt may at any time make any order it thinks fit including, without limiting thegenerality ofthe foregoing:

(a) an order authorizing the complainant or any other person to control theconduct ofthe action;

(b) an order giving directions for the conduct ofthe action;

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(c) an order directing that any amount adjudged payable by a defendant inthe action shall'be paid, in \,"hole or in part, directly to former and presentsecurity holders of the corporation or its subsidiary instead of to thecorporation or its subsidiary;

(d) an order requiring the corporation or its subsidiary to pay reasonablelegal fees incurred by the complainant in connection with the action.

R.S.S.1978, c.B·IO, 8.233.

Application to court re oppression234(1) A complainant may apply to a court for an order under this section.

Grounds(2) If, upon an application under subsection (1), the court is satisfied that inrespect of a corporation or any ofits affiliates:

(a) any act or omission of the corporation or any of its affiliates affects aresult;

(b) the business or affairs of the corporation or any of its affiliates are orhave been~ed on or conducted in a manner; or

(c) the powers ofthe directors ofthe corporation or any ofits affiliates are orhave been exercised in a manner;

that is oppressive or unfairly prejudicial to or that unfairly disregards theinterests of any seCurity holder, creditor, director or officer, the court may makean order to rectify the matters complained of.

Powers ofcourt(3) In connection with an application under this section, the court may make anyinterim or final order it thinks fit including, without limiting the generality of theforegoing:

(a) . an order restraining the conduct complained of;

(b) an order appointing a receiver or receiver-manager;

(c) an order to regulate a corporation's affairs by amending the articles orbylaws or creating or amending a unanimous shareholder agreement;

(d) an order directing an issue or exchange ofsecurities;

(e) an order appointing directors in place ofor in addition to all or any ofthedirectors in office; ,

(0 an order directing a corporation, subject to subsection (6), or any· otherperson, to purchase securities ofa security holder;

(g) an order directing a corporation, subject to subsection (6), or any otherperson, to pay to a security holder any part of the moneys paid by him forsecurities;

(h) an order varying or setting aside a transaction or contract to which acorporation is a party and compensating the corporation or any other party tothe transaction or contract;

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(i) an order requiring a corporation, within a time specified by the court, toproduce to the court or an interested person financial statements in the formrequired by section 149 or an accounting in such other form as the court maydetermine;

(j) an order compensating an aggrieved person;

(k) an order directing rectification of the registers or other records of acorporation under section 236;

(1) an order liquidating and dissolving the corporation;

(m) an order directing an investigation under Division XVII to be made;

(n) an order requiring the trial of any issue.

Duty of directors(4) If an order made under this section directs amendment of the articles orbylaws ofa corporation:

(a) the directors shall forthwith comply with subsection (4) of section 185;and

(b) no other amendment to the articles or bylaws shall be made without theconsent ofthe court, until a court otherwise orders.

Exclusion(5) A shareholder is not entitled to dissent under section 184 ifan amendment tothe articles is effected under this section.

Limitation(6) A corporation shall not make a payment to a shareholder under clause (f)or (g) ofsubsection (3) if there are reasonable grounds for believing that:·

(a) the corporation is or would after that payment be unable to pay itsliabilities as they become due; or

(b) the re81izable value ofthe corporation's assets would thereby.be less thanthe aggregate of its liabilities. . . . .

Altel'D8tive order(7) An applicant under this section may apply in the alternative for an orderunder section 207. .'

R.S.S.l978, c.B·lO, 8.234.

Evidence ofshareholder approval not decisive235(1) An application made or an action brought or intervened in under thisDivision shall not be stayed or dismissed by reason only that it is shown that analleged breach ofa right or duty owed to the corporation or its subsidiary has beenor may be approved by the shareholders of such body corporate, but evidence orapproval by the shareholders may be taken into account by the court in making anorder under section 207, 233 or 234.

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Court approval to discontinue(2) An application made or an action brought or intervened in under this Divisionshall not be stayed, discontinued, settled or dismissed for want of prosecutionwithout the approval ofthe court given upon such terms as the court thinks fit and,if the court determines that the interests ofany complainant may be substantiallyaffected by such stay, discontinuance, settlement or dismissal, the court may orderany party to the application or action to give notice to the complainant.

No security for costs(3) A complainant is not required to give security for costs in any applicationmade or action brought or intervened in under this Division.

Interim costs(4) In an application made or an action brought or intervened in under thisDivision, the court may at any time order the corporation or its subsidiary to pay tothe complainant interim costs, including legal fees and disbursements, but thecomplainant may be held accountable for such interim costs upon final dispositionofthe application or action.

R.S.S. 1978, c.B-10, 8.235; 1979, c.6, 8.53.

Application to court to rectify records. 236(1) Ifthe name ofa person is alleged to be or to have been wrongly entered or

retained in, or wrongly deleted or omitted from, the registers or other records of acorporation, the corporation, a security holder of the corporation or any aggrievedperson may apply to a court for an order that the registers or records be rectified.

Notice to Director(2) An applicant under .this section shall give the Director notice of theapplication and the Director is entitled to appear and be heard in person or bycounsel.

Powers ofcourt(3) In connection with an application under this section, the court may make anyorder it thinks fit including, without limiting the generality ofthe foregoing:

(a) an order requiring the registers or other records ofthe corporation to berectified;

(b) an order restraining the corporation from calling or holding a meeting ofshareholders or paying a dividend before such rectification;

(c) an order determining the right ofa party to the proceedings to have hisname entered or retained in, or deleted or omitted from, the registers orrecords of the corporation, whether the issue arises between two or moresecurity holders or alleged security holders, or between the corporation andany security holders or alleged security holders;

(d) an order compensating a party who has incurred a loss.

R.S.S. 1978, c.B·10, 8.236.

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Application for directions237 The Director may apply to a court for directions in respect of any matterconcerning his duties under this Act, and on such application the court may givensuch directions and make such further order as it thinks fit.

R.S.S. 1978, c.B·10, 5.237.

Notice ofrefusal by Director238(1) If the Director refuses to file any articles or other document required bythis Act to be filed by him before the articles or other document become effective, heshall, within sixty days after receipt thereof by him or sixty days after he receivesany approval that may be required under any other Act, whichever is the later, andafter giving the person who sent the articles or document an opportunity to beheard, give written notice of his refusal to the person together with reasonstherefor.

Deemed refusal(2) If the Director does not file or give written notice of his refusal to file anyarticles or document within the time limited therefor in subsection (1), he isdeemed for the purposes of section 239 to have refused to file the articles ordocument.

R.S.S. 1978, c.B·10, 8.238.

Appeal from Director's decision239(1) A person who feels aggrieved by adecision of the Director:

(a) to refuse to file in the form submitted to him any articles or otherdocument required by this Act to be filed by him;

(b) to give a name, to change or revoke a name, or to refuse to reserve,accept, change or revoke a name under section 12;

(c) to refuse to grant an exemption under subsection (2) of section 10,section 145, section 150, subsection (3) of section 154 and any regulationsthereunder, subsection (4) of section 157 or subsection (2) of section 165;

(c.1) to refuse under subsection 181(11) to permit a continued reference toshares having a nominal or par value;

(d) to refuse to issue a certificate of discontinuance under section 182;

(e) to refuse to revive a corporation under section 202; or

(f) to dissolve a corporation under section 205;

may apply to a court for an order requiring the Director to change his decision, andupon such application the court may so order and make any further order it thinksfit.

(2) A person making an application pursuant to clause (1)(b) shall make theapplication with notice to the proponent ofthe name or to any other person who, inthe opinion ofthe court, may be affected by the decision ofthe Director.

R.S.S. 1978, c.B-IO, 8.239; 1979, c.6, 8.54; 1984­85-86, c.44, 8.7.

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Restraining or compliance order240 If a corporation or any director, officer, employee, agent, auditor, trustee,receiver, receiver-manager or liquidator of a corporation does not comply with thisAct, the regulations, articles, bylaws, or a unanimous shareholder agreement, acomplainant or a creditor ofthe corporation may, in addition to any other right hehas, apply to a court for an order directing any such person to comply with, orrestraining any such person from acting in breach of, any provisions thereof, andupon such application the court may so order and make any further order it thinksfit.

R.S.S. 1978, c.B-10, 8.240.

Summary application to court241 Where this Act states that a person may apply to a court, the application maybe made in a summary manner by petition, originating notice of motion, orotherwise as the rules of the court provide, and subject to any order respectingnotice to interested parties or costs, or any other order the court thinks fit.

R.S.S. 1978, c.B-10, 8.241.

Appeal242 An appeal lies to the Court ofAppeal from any order made by a court undertbisAct.

R.S.S. 1978, c.B-10, 8.242.

DIVISION XIX-GENERAL

Approval ofSuperintendentoflDsurance243 No corporation that is:

(a) an insurer within the meaning ofThe Saskatchewan Insurance Act;

(b) a trust company as defined in the regulations;

(c) a loan company as defined in the regulations; or

(d) Repealed. 1992, c.44; 8.3l.

shall be incorporated or continued under this Part without the written approval ofthe Superintendent of Insurance.

. R.S.S. 1978, c.B-10, 8.243; 1992, c.44, 8.31.

Notice ofintentioD244 An applicant for incorporation, or a corporation applying for continuance,that is mentioned in clause (a), (b), (c) or (d) of section 243 shall advise theSuperintendent ofInsurance ofits intention to make an application for the writtenapproval required under section 243 at least one month before such application ismade.

R.S.S. 1978, c.B-10, 8.244.

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(b) the offeror shall notify each affected dissenting offeree of the date, placeand consequences ofthe application and ofhis right to appear and be heard inperson or by counsel.

R.S.S. 1978, c.B-10, 8.198.

Powers ofcourt199(1) Upon an application to a court under section 195, the court may determinewhether any other person is a dissenting offeree who should be joined as a party,and the court shall then fix a fair value for the shares ofall dissenting offerees.

Appraisers .(2) A court may in its discretion appoint one or more appraisers to assist the courtto fix a fair value for the shares of a dissenting offeree.

Final order(3) The final order ofthe court·shall be made against the offeror in favour ofeachdissenting offeree and for the amount for his shares as fixed by the court.

R.S.S. 1978, c.B-10, 8.199.

Additional powers ofcourt200 In connection with proceedings under this Division, a court may make anyorder it thinks fit and, without limiting the generality of the foregoing, it may:

(a) fix the amount ofmoney or other consideration that is required to be heldin trust under section 193;

(b) order thatmoney or other consideration be held in trust by a person otherthan the offeree corporation;

(c) allow a reasonable rate of interest on the amount payable to eachdissenting offeree from the date he sends or delivers his share certificatesunder section 191 until the date ofpayment;

(d) order that any money payable to a shareholder who cannot be found bepaid to the Minister of Finance and subsection (3) of section 220 applies inrespect thereof. . .

R.S.S. 1978, c.B-IO, 8.200.

DIVISION XVI-LIQUIDATION AND DISSOLUTION

Application ofDivision201(1) This Division does not apply to a corporation that is insolvent within themeaning ofthe BankruptcyAct (Canada) or that is a bankrupt within the meaningof that Act.

StayiDgproceedings(2) Any proceedings taken under this Division to dissolve or to liquidate anddissolve a corporation shall be stayed if the corporation is at any time found, in aproceeding under theBankruptcyAct (Canada), to be insolvent within the meaningofthat Act.

R.S.S. 1978, c.B-10, 8.201.

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Revival202(1) Where a corporation is dissolved under this Division any interestedperson may apply to the Director to have the corporation revived.

Articles ofrevival(2) Articles of revival in prescribed form shall be sent to the Director.

Certificate ofrevival(3) Upon receipt of articles of revival, the Director shall issue a certificate ofrevival in accordance with section 255.

Rights preserved(4) A corporation is revived on the date shown on the certificate of revival, andthereafter the corporation, subject to such reasonable terms as may be imposed bythe Director and to the rights acquired by any person after its dissolution, has allthe rights and privileges and is liable for the obligations that it would have had ifithad not been dissolved.

R.S.S. 1978, c.B-10, 5.202; 1979, c.6, s.49; 1980­81, c.2, s.6.

Dissolution before commenciDgbusiness203(1) Acorporation that has not issued any shares may be dissolved at any time

. by resolution of all the directors.

Dissolution ifno property(2) A corporation that has no property and no liabilities may be dissolved byspecial resolution ofthe shareholders or, where ithas issued more than one class ofshares, by special resolutions of the holders of each class whether or not they areotherwise entitled to vote.

Dissolution where property disposed of(2.1) A corporation that has property or liabilities, or both, may be dissolved byspecial resolution oftha shareholders or, where ithas issued more than one class ofshares, by special resolution of the holders of each class whether or not they areotherwise entitled to vote, if:

(a) by the special resolution or resolutions the shareholders authorize thedirectoFS to cause the' corporation to distribute any property and dischargeany liabilities; and

(b) the corporation has distributed any property and discharged anyliabilities before it sends articles of dissolution to the Director pursuant tosubsection (3). .

Articles ofdissolution(3) Articles of dissolution in prescribed form shall be sent to the Director.

Certificate ofdissolution(4) Upon receipt of articles ~f dissolution, the Director shall issue a certificate ofdissolution in accordance with section 255.

Effect ofcertificate(5) The corporation ceases to exist on the date shown in the certificate ofdissolution.

R.S.S. 1978, c.B-10, 8.203; 1979, c.6, 8.50•

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Proposing liquidation and dissolution204(1) The directors may propose, or a shareholder who is entitled to vote at anannual meeting of shareholders may, in accordance with section 131, make aproposal for, the voluntary liquidation and dissolution of a corporation.

Notice ofmeeting(2) Notice of any meeting of shareholders at which voluntary liquidation anddissolution is to be proposed shall set out the terms thereof.

Shareholders' resolution(3) A corporation may liquidate and dissolve by special resolution of theshareholders or, where the corporation has issued more than one class of shares,by special resolutions of the holders of each class whether or not they areotherwise entitled to vote.

Statement of intent to dissolve(4) A statement of intent to dissolve in prescribed form shall be sent to theDirector.

Certificate ofintent to dissolve(5) Upon receipt of a statement of intent to dissolve, the Director shall issue acertificate of intent to dissolve in accordance with section 255.

Effect ofcertificate(6) Upon issue of a certificate ofintent to dissolve, the corporation shall cease tocarry on business except to the extent necessary for the liquidation, but itscorporate existenc~ continues until the Director issues a certificate of dissolution.

Liquidation(7) After issue of a certificate ofintent to dissolve, the corporation shall:

(a) immediately cause notice thereof to be sent to each known creditor ofthecorporation;

(b) forthwith publish notice thereof in the Gazette and once in a newspaperpublished or distributed in the place where the corporation has its registeredoffice and take reasonable steps to give notice thereof in every jurisdictionwhere the. corporation was carrying on business at the time it sent thestatement ofintent to dissolve to the Director;

(c) proceed to collect its property, to dispose of properties that are not to bedistributed in kind to its shareholders, to discharge all its obligations and to

. do all other acts required to liquidate its business; and

(d) after giving the notice required under clauses (a) and (b) and adequatelyproviding for the payment or discharge of all its obligations. distribute itsremaining· property, either in money or in kind, among its shareholdersaccording to their respective rights.

Supervision by court(8) The Director or any interested person may, at any time during the liquidationof a corporation. apply to a court for an order that the liquidation be continuedunder the supervision of the court as provided in this Division. and upon suchapplication the court may so order and make any further order it thinks fit.

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Notice to Director(9) An applicant under this section shall give the Director notice of theapplication, and the Director is entitled to appear and be heard in person or bycounsel.

Revocation(10) At any time after issue of a certificate ofintent to dissolve and before issue ofa certificate of dissolution, a certificate of intent to dissolve may be revoked bysending to the Director a statement ofrevocation ofintent to dissolve in prescribedform, if such revocation is approved in the same manner as the resolution undersubsection (3).

Certificate ofrevocation of intent to dissolve(11) Upon receipt of a statement of revocation of intent to dissolve, the Directorshall issue a certificate of revocation of intent to dissolve in accordance withsection 255.

Effect ofcertificate(12) On the date shown in the certificate of revocation of intent to dissolve, therevocation is effective and the corporation may continue to carry on its business orbusinesses.

Right to dissolve(13) If a certificate ofintent to dissolve has not been revoked and the corporationhas complied with subsection (7), the corporation shall prepare articles ofdissolution.

Articles ofdissolution .(14) Articles of dissolution in prescribed form shall be sent to the Director.

Certificate of dissolution(15) Upon receipt ofarticles ofdissolution, the Director shall issue a certificate ofdissolution in accordance with section 255.

Effect ofcertificate(16) The corporation ceases to exist on the date shown in the certificate ofdissolution. .

R.8.S. 1978, c.B-IO, a.204: 1979, c.6, a.51.

Dissolution by Director205(1) Subject to subsections (2) and (3), where a corporation:

(a) has not commenced business within three years after the date shown inits certificate of incorporation;

(b) has not carried on its business for three consecutive years; or

(c) has not had its name restored to the register within two years after thedate on which it was struck offunder section 290;

the Director may dissolve the cOrporation by issuing a certificate of dissolutionunder this section or he may apply to a court for an order dissolving the corporation,in which case section 210 applies.

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Publication(2) The Director shall not dissolve a corporation under this section until he has:

(a) given to the corporation one hundred and twenty days notice of hisdecision to dissolve the corporation; and

(b) published in the Gazette notice ofhis decision to dissolve the corporation.

Certificate ofdissolution(3) Unless cause to the contrary has been shown or an order has been made by acourt under section 239, the Director may, after expiry ofthe period referred to insubsection (2), issue a certificate of dissolution in prescribed form.

Effect ofcertificate(4) The corporation ceases to exist on the date shown in the certificate ofdissolution.

R.S.S. 1978, c.B-10, 8.205.

Grounds for dissolution206(1) The Director or any interested person may apply to a court for an orderdissolving a corporation if the corporation has:

(a) failed for two or more consecutive years to comply with the requirementsofthis Act with respect to the holding ofannual meetings ofshareholders;

(b) contravened subsection (2) of section 16 or section 21, 151 or 153; or

(c) procured'any certificate under this Act by misrepresentation.

Notice to Director(2) An applicant under this section shall give the Director notice of theapplication, and the Director is entitled to appear and be heard in person or bycounsel.

Dissolution order(3) Upon an application under this section or section 205, the court may orderthat the corporation be dissolved or that the corporation be liquidated anddissolved under the supervision of the court, and the court may make any otherorder it thinks fit.

Certificate(4) Upon receipt of an order under this section, section 205 or section 207, theDirector shall:

(a) ifthe order is to dissolve the corporation, issue a certificate ofdissolutionin prescribed form; or

(b) if the order is to liquidate and dissolve the corporation under thesupervision of the court, issue a certificate of intent to dissolve in prescribedform and publish notice of the order in the Gazette.

Effect ofcertificate(5) The corporation ceases to exist on the date shown in the certificate ofdissolution.

R.S.S. 1978, c.B-10, 8.206.

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Further grounds207(1) A court may order the liquidation and dissolution of a corporation or anyof its affiliated corporations upon the application of a shareholder:

(a) if the court is satisfied that in respect of a corporation or any of itsaffiliates:

(i) any act or omission of the corporation or any ofits affiliates effects aresult;

(ii) the business or affairs of the corporation or any of its affiliates areor have been carried on or conducted in a manner; or

(iii) the powers ofthe directors ofthe corporation or any ofits affiliatesare or have been exercised in a manner;

that is oppressive or unfairly prejudicial to or that unfairly disregards theinterests of any security holder, creditor, director or officer; or

(b) if the court is satisfied that:

(i) a unanimous shareholder agreement entitles a complainingshareholder to demand dissolution ofthe corporation after the occurrenceofa specified event and that event has occurred; or

(ii) it is just and equitable that the corporation should be liquidatedand dissolved.

Alternative order(2) . Upon an application under this section, a court may make such order underthis section or section 234 as it thinks fit.

Application ofsection 235. (3) Section 235 applies to an application under this section.

R.S.S. 1978, coB-10, 8.207.

Application for supervision208(1) An application to a court to supervise a voluntary liquidation anddissolution under subsection (8) ofsection 204 shall state the reasons, verified byan affidavit of the applicant, why the court should supervise the liquidation anddissolution.

Court supervision(2)· Ifa court makes an order applied for under subsection (8) of section 204, theliquidation and dissolution ofthe corporation shall continue under the supervisionof the court in accordance with this Act.

R.S.S. 1978, c.B-lO, 8.208.

Application to court209(1) An application to a court under subsection (1) ofsection 207 shall state thereasons, verified by an affidavit of the applicant, why the corporation should beliquidated and dissolved.

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Show cause order(2) Upon an application under subsection (1) of section 207, the court may makean order requiring the corporation and any person having an interest in thecorporation or claim against it to show cause, at a time and place therein specified,not less than four weeks after the date ofthe order, why the corporation should notbe liquidated and dissolved.

Powers ofcourt(3) Upon an application under subsection (1) of section 207, the court may orderthe directors and officers of the corporation to furnish to the court all materialinformation known to or reasonably ascertainable by them, including:

(a) financial statements ofthe corporation;

(b) the name and address ofeach shareholder ofthe corporation; and

(c) the name and address ofeach known creditor or claimant, including anycreditor or claimant with Unliquidated, future or contingent claims, and anyperson with whom the corporation has a contract.

Publication(4) A copy of an order made under subsection (2) shall be:

(a) published as directed in the order, at least once in each week before thetime appointed for the hearing, in a newspaper published or distributed in theplace where the corporation has its registered office; and

(b) served upon the Director and each person named in the order.

Person responsible(5) Publication and service ofan order under this section shall be effected by thecorporation or by such other person and in such manner as the court may order.

R.S.S. 1978, c.B·10, 8.209.

Powers ofcourt210 In connection with the dissolution or the liquidation and dissolution of acorporation, the court may, if it is satisfied that the corporation is able to payoradequately provide for the discharge ofall its obligations, make any order it thinksfit including, without limiting the generality ofthe foregoing:

(a) an order to liquidate;

(b) an order appointing a liquidator, with or without security, :fixing hisremuneration and replacing a liquida~r;

(c) an order appointing inspectors or referees, specifying their powers, :fixingtheir remuneration and replacing inspectors or referees;

(d) an order determining the notice to be given to any interested person, ordispensing with notice to any person;

(e) an order determining the validity of any claims made against thecorporation;

(0 an order, at any stage of the proceedings, restraining the directors andofficers from:

(i) exercising any of their powers; or

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(ii) collecting or receiving any debt or other property ofthe corporation,and from paying out or transferring any property of the corporation,except as permitted by the court;

(g) an order determining and enforcing the duty or liability ofany present orformer director, officer or shareholder:

(i) to the corporation; or

(ii) for an obligation of the corporation;

(h) an order approving the payment, satisfaction or compromise of claimsagainst the corporation and the retention of assets for such purpose, anddetermining the adequacy of provisions for the payment or discharge ofobligations of the corporation, whether liquidated, unliquidated, future orcontingent;

(i) an order disposing of or destroying the documents and records of thecorporation;

(j) upon the application of a creditor, the inspectors or the liquidator, anorder giving directions on any matter arising in the liquidation;

(k) after notice has been given to all interested parties, an order relieving aliquidator from any omission or default on such terms as the court thinks fitand confirming any act of the liquidator;

0) subject to'section 216, an order approving any proposed interim or finaldistribution to shareholders in money or in property;

(m) an order disposingofany property belonging to creditors or shareholderSwho cannot be found;

(n) upon the application of any director, officer, security holder, creditor orthe liquidator:

(i) an order staying the liquidation on such terms and conditions as thecourt thinks fit; .

(ii) an order continuing or discontinuing the liquidation proceedings;or

(iii) an order to the liquidator to restore to the corporation. all itsremaining property;

(0) after the liquidator has rendered his final account to the court, an orderdissolving the corporation.

R.S.S.1978, c.B·10, s.2l0.

Effect oforder211 The liquidation of a corporation commences when a court makes an ordertherefor.

R.S.S. 1978, c.B-10, s.211.

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Cessation ofbusiness and powers212(1) If a court makes an order for liquidation of a corporation:

(a) the corporation continues in existence but shall cease to carry onbusiness, except the business that is, in the opinion ofthe liquidator, requiredfor an orderly liquidation; and

(b) the powers of the directors and shareholders cease and vest in theliquidator, except as specifically authorized by the court.

Delegation by liquidator(2) The liquidator may delegate any of the powers vested in him by clause (b) ofsubsection (1) to the directors or shareholders.

R.S.S. 1978, c.B-10, 8.212.

Appointmentofliquidator213(1) When making an order for the liquidation of a corporation or at any timethereafter, the court may appoint any body corporate or any person, including adirector, officer or shareholder of the corporation, as liquidator of the corporation.

Vacancy(2) Where an order for the liquidation of a corporation has been made and theoffice ofliquidator is or becomes vacant, the property ofthe corporation is under thecontrol ofthe court until the office ofliquidator is filled.

R.S.S. 1978, c.B-10, 8.213.

Duties ofliquidator214 A liquidator shall:

(a) forthwith after his appointment give notice thereofto the Director and toeach claimant and creditor known to the liquidator;

(b) forthwith publish notice in the Gazette and by insertion once a week fortwo consecutive weeks in a newspaper published or distributed in the placewhere the corporation has its registered office and take reasonable steps togive notice thereof in every jurisdiction where the corporation carries onbusiness, requiring any person:

(i) indebted to the corporation, to render an account and pay to theliquidator at the time and place specified any amount owing;

(ii) possessing property ofthe corporation, to deliver it to the liquidatorat the time and place specified; and

(iii) having a claim against the corporation, whether liquidated,unliquidated, future or contingent, to present particulars thereof inwriting to the liquidator not later than two months after the firstpublication ofthe notice;

(c) take into his custody and control the property ofthe corporation;

(d) open and maintain a trust account for the moneys ofthe corporation;

(e) keep accounts ofthe moneys of the corporation received and paid out byhim;

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(f) maintain separate lists of the shareholders, creditors and other personshaving claims against the corporation;

(g) ifat any time the liquidator determines that the corporation is unable topayor adequately provide for the discharge of its obligations, apply to thecourt for directions;

(h) deliver to the court and to the Director, at least once in every twelve­month period after his appointment or more often as the court may require,financial statements of the corporation in the form required by section 149 orin such other form as the liquidator may think proper or as the court mayrequire; and

(i) after his final accounts are approved by the court, distribute anyremaining property of the corporation among the shareholders according totheir respective rights.

R.S.S. 1978, c.B-lO, 8.214.

Powers ofliquidator215(1) A liquidator may:

(a) retain lawyers, accountants, engineers, appraisers and other professionaladvisers;

(b) bring, defend or take part in any civil, criminal or administrative actionor proceeding in the name and on behalf of the corporation;

(c) carry on the business ofcorporation as required for an orderly liquidation;

(d) sell by public auction or private sale any property ofthe corporation;

(e) do all acts and execute any documents in the name and on behalf of thecorporation;

(f) borrow money on the security ofthe property of the corporation;

(g) settle or compromise any claims by or against the corporation; and

(h) do all other things necessary for the liquidation of the corporation anddistribution ofits property.

Reliance on statements(2) A liquidator is not liable ifhe relies in good faith upon:

(a) financial statements of the corpo:r:ation represented to him by an officerof the corporation or in a written report of the auditor of the corporation toreflect fairly the financial condition ofthe corporation; or '

(b) an opinion, a report or a statement of a lawyer, an accountant, anengineer, an appraiser or other professional adviser retained by the liquidator.

Application for examjDstiOD(3) If a liquidator has reason to believe that any person has in his possession orunder his control, or has concealed, withheld or misappropriated any property ofthe corporation, he may apply to the court for an order requiring that person toappear before the court at the time and place designated in the order and to beexamined.

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Power of court(4) If the examination referred to in subsection (3) discloses that a person hasconcealed, withheld or misappropriated property of the corporation, the court mayorder that person to restore it or pay compensation to the liquidator.

R.S.S. 1978, c.B·10, 6.215.

Costs ofliquidation216(1) A liquidator shall pay the costs of liquidation out of the property of thecorporation and shall payor make adequate provision for all claims against thecorporation.

Final account(2) Within one year after his appointment, and after paying or making adequateprovision for all claims against the corporation, the liquidator shall apply to thecourt:

(a) for approval of his final accounts and for an order permitting him todistribute in money or in kind the remaining property ofthe corporation to itsshareholders according to their respective rights; or

(b) for an extension of time, setting out the reasons therefor.

Shareholderapplication(3) If a liquidator fails to make the application required by subsection (2), ashareholder ofthe corporation may apply to the court for an order for the liquidatorto show cause why·a :final accounting and distribution should not be made.

Publication(4) A liquidator shall give notice of his intention to make an· application undersubsection (2) to the Director, each inspector appointed under section 210, eachshareholder and any person who provided a security or fidelity bond for theliquidation, and he shall publish the notice in a newspaper published or distributedin the place where the corporation has its registered office or as otherwise directedby the court.

Final order(5) If the court approves the final accounts rendered by a liquidator, the courtshall make an order:

(a) directing the Director to issue a certificate of dissolution;

(b) directing the custody or disposal of the documents and records of thecorporation; and

(c) subject to subsection (6), discharging the liquidator.

Delivery oforder(6) The liquidator shall forthwith send a certified copy ofthe order referred to insubsection (5) to the Director.

Certificate ofdissolution(7) Upon receipt ofthe order referred to in subsection (5), the Director shall issuea certificate of dissolution in accordance with section 255.

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Effect of certificate(8) The corporation ceases to exist on the date shown in the certificate ofdissolution.

R.8.S. 1978, c.B-10, 8.216.

Right to distribution in money217(1) If in the course of liquidation of a corporation the shareholders resolve orthe liquidator proposes to:

(a) exchange all or substantially all the property of the corporation forsecurities of another body corporate that are to be distributed to theshareholders; or

(b) distribute all or part ofthe property ofthe corporation to the shareholdersin kind;

a shareholder may apply to the court for an order requiring the distribution of theproperty ofthe corporation to be in money.

Powers ofcourt(2) Upon an application under subsection (1), the court may order:

(a) all the property ofthe corporation to be converted into and distributed inmoney; or

(b) the claims of any shareholder applying under this section to be satisfiedby a distribution in money, in which case subsections (20) to (22) ofsection 184 apply.

R.8.S. 1978, c.B-10, 8.217.

Custody of records218(1) A person who has been granted custody ofthe documents and records ofadissolved corporation remains liable to produce such documents and records for sixyears following the date ofits dissolution or until the expiry of such other shorterperiod as may be ordered under subsection (5) of section 216.

Offence(2) A person who, without reasonable cause, contravenes subsection (1) is guiltyofan offence and liable on summary conviction to a fine not exceeding $5,000 or tounprisonment for a term not exceeding six months or to both.

R.8.S. 1978, c.B-10, 8.218.

Interpretation .219(1) . In this section, "shareholder" includes the heirs and legal representativesof a shareholder.

Continuation ofactions(2) Notwithstanding the dissolution ofa corporation under this Act:

(a) a civil, criminal or admjnistrative action or proceeding commenced by oragainst the corporation before its dissolution may be continued as if thecorporation had not been dissolved;

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(b) a civil, criminal or administrative action or proceeding may be broughtagainst the corporation within two years after its dissolution as if thecorporation had not been dissolved; and

(c) any property that would have been available to satisfy any judgement ororder if the corporation had not been dissolved remains available for suchpurpose.

Service(3) Service ofa document on a corporation after its dissolution may be effected byserving the document upon a person shown in the last notice filed undersection 101 or 108.

Reimbursement(4) Notwithstanding the dissolution of a corporation, a shareholder to whom anyof its property has been distributed is liable to any person claiming undersubsection (2) to the extent of the amount received by that shareholder upon suchdistribution, and an action to enforce such liability may be brought within twoyears after the date of the dissolution of the corporation.

Representative action(5) A court may order an action referred to in subsection (4) to be brought againstthe persons who were shareholders as a class, subject to such conditions as thecourt thinks fit and, if the plaintiff establishes his claim, the court may refer theproceedings to a referee or other officer ofthe court who may:

(a) add aEl a· party to the proceedings before him each person who was ashareholder found by the plaintiff;

(b) determine, subject to subsection (4), the amount that each person whowas a shareholder shall contribute towards satisfaction of the plaintiffsclaim; and

(c) direct payment ofthe amounts so deter:inined.

R.S.S. 1978, c.B-10, s.219•.

Unknown claimants220(1) Upon the dissolution of a corporation, the portion of the propertydistributable to a creditor or shareholder who cannot be found shall be convertedinto money and paid to the Minister ofFinance. . .

. Constru.ctive satisfaction(2) A payment under subsection (1) is deemed to be in satisfaction of a debt orclaim ofsuch creditor or shareholder.

Recovery(3) Ifat any time a person establishes that he is entitled to any moneys paid tothe Minister of Finance under this Act, the Minister of Finance shall pay anequivalent amount to him out ofthe consolidated fund.

R.S.S. 1978, c.B-10, 8.220.

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Vesting in Crown221(1) Subject to subsection (2) of section 219 and section 220, property of acorporation that has not been disposed ofat the date of its dissolution vests in HerMajesty in right ofSaskatchewan.

Return ofproperty on revival(2) If a corporation is revived under section 202, any property other than moneythat vested in Her Majesty pursuant to subsection (1) and that has not beendisposed of shall be returned to the corporation and there shall be paid to thecorporation out ofthe consolidated fund:

(a) an amount equal to any money received by Her Majesty pursuant tosubsection (1); and

(b) where property other than money vested in Her Majesty pursuant tosubsection (1) and that property has been disposed of, an amount equal to thelesser of:

(i) the value of any such property at the date it vested in Her Majesty;and

(ii) the amount realized by Her Majesty from the disposition of thatproperty.

R.S.S. 1978, c.B·10, s.22L

DMSION XVTI-INVESTIGATION

Investigation. 222(1) A security holder or the Director may apply, ex parte or upon such notice

as the court may require; to a coUrt having jurisdiction in the place where thecorporation has its registered offiCe for an order directing an investigation to bemade of the corporation and any of its affiliated corporations.

Grounds(2) If, upon an application under subsection (1), it appears to the court that: .

(a) the business of the corporation or any of its affiliates is or has beencarried on with intent to defraud any person;

(b) the business or affairs of the corporation or any of its affiliates are orhave been carried on or conducted, or the powers ofthe directors are or havebeen exercised in a manner that is oppressive or unfairly prejudicial to or that

. unfairly disregards the interests ofa security holder;

(c) the corporation or any of its affiliates was formed for a fraudulent orunlawful purpose or is to be dissolved for a fraudulent or unlawful purpose; or

(d). persons concernedwith the formation, business oraffairs ofthe corporationor any of its affiliates have in connection therewith acted fraudulently ordishonestly;

the court may order an investigation to be made of the corporation and any of itsaffiliated corporations.

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