Minority shareholder rights in a BC company: records, meetings and the oppression remedy

Minority shareholders in small BC companies often find out how little they control only when a relationship with the majority breaks down. Dividends stop, information dries up and decisions are made without them.

The Business Corporations Act gives shareholders some baseline rights that do not depend on the goodwill of the majority. This guide explains the records you can inspect, the meetings you can insist on and the court remedies available when the company is run unfairly, along with what majority owners should keep in mind.

Start with the company's own documents

Your rights as a minority shareholder come from three places: the Business Corporations Act, the company's articles, and any shareholders' agreement. The articles and agreement can give you more than the Act does, for example a right to appoint a director, approve major decisions or be bought out on set terms. They can also restrict share transfers or set out how disputes must be handled. Before you do anything else, get copies of all three and read them together. Our article on shareholders' agreements explains what those agreements usually cover.

Your right to see the company's records

Every BC company must keep certain records at its records office under section 42 of the Act. These include its articles, the register of directors, the central securities register showing who owns which shares, minutes and resolutions of shareholders, and certain financial statements.

Under section 46, a shareholder may inspect those records without charge, with some exceptions. Minutes and resolutions of the directors, and records of directors' disclosures of conflicts, are not on the shareholder list unless the articles allow it. A current director, by contrast, may inspect all of the records. The company may set inspection times by ordinary resolution, but must allow access during the times the regulations require.

• Copies. Under section 48, if you are entitled to inspect a record you can ask for a copy on paying any copying fee, which cannot exceed the prescribed fee. You are entitled to a copy of the notice of articles and the articles without charge.
• Financial statements. Under section 185, if you ask within six months after an annual reference date, the directors must promptly send you a copy of the financial statements that were required to be placed before the annual general meeting.
• If the company refuses. Section 50 lets you apply in writing to the registrar. The registrar can require the company to produce the record or a signed statement of why you are not entitled to it, and you can then apply to court if needed.

Meetings you can insist on

Under section 182, a company must hold an annual general meeting each calendar year within the time the Act sets, unless all of the shareholders entitled to vote agree by unanimous resolution to defer or waive it or consent to its business. In many small companies the annual meeting is handled by a written resolution that every shareholder signs. If you are a voting shareholder and do not sign, the company cannot rely on a unanimous waiver, and the meeting has to be held or the registrar's permission sought for a later date.

Under section 167, shareholders holding at least one-twentieth of the issued voting shares can requisition a general meeting. The requisition must state the business in 1,000 words or less, be signed by the requisitioning shareholders and be delivered to the registered office. The directors must then call a meeting to be held within four months, unless one of the exceptions in the section applies.

The oppression remedy

When a minority shareholder is being treated unfairly, the main court remedy is section 227. A shareholder, which includes a beneficial owner and anyone else the court considers appropriate, can apply on the ground that:

• the company's affairs are being or have been conducted, or the directors' powers exercised, in a manner oppressive to one or more shareholders, or
• an act of the company, or a shareholder resolution, done, threatened, passed or proposed, is unfairly prejudicial to one or more shareholders.

If the court is satisfied, it can make any interim or final order it considers appropriate to remedy the problem. The section lists examples, including regulating how the company is run, appointing or removing directors, ordering the company or another shareholder to buy your shares, setting aside a transaction or resolution, ordering an accounting, or, in serious cases, liquidating the company.

Timing matters. The court may make an order only if satisfied the application was brought in a timely manner, so waiting years while you try to put up with the situation can weaken your position. If you would rather leave than fight, our article on when a shareholder wants out covers the exit routes.

Derivative actions: when the wrong is to the company

Sometimes the harm is done to the company itself, for example a director diverting a business opportunity or taking company money. Under section 232, a shareholder or director can, with leave of the court, bring a legal proceeding in the company's name. Under section 233, leave may be granted if the complainant has made reasonable efforts to get the directors to act, has given notice of the application, is acting in good faith, and the proceeding appears to be in the best interests of the company. Any settlement or discontinuance needs court approval.

If you are the majority owner

The same rules point to how majority owners can reduce the risk of a claim. Keep the minute book current, respond to records requests within the rules, hold or properly waive annual meetings, document why decisions on dividends, salaries and new shares were made, and treat a complaint as a reason to get advice rather than to dig in.

Shut out of your company, or facing a shareholder complaint? Get advice early

Our business lawyers can review the articles and any shareholders' agreement, request records and meetings on your behalf, assess whether the conduct may support an oppression or derivative claim, and help you negotiate a buyout or other resolution.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.