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The Oppression Remedy

2 minute read

The oppression remedy is widely acknowledged as being one of the most powerful weapons in the arsenal of shareholders and other corporate stakeholders.

Where a proper complainant proves that the affairs of a corporation are or have been carried out in a manner that is “oppressive” or “unfairly prejudicial” to or in “unfair disregard” of its interests, that complainant can ask for an order to remedy the effects of that conduct. The oppression remedy is set out in broad terms in most of the provincial Business Corporations Acts, as well as the Canada Business Corporations Act; that broad remedy really gives the court the ability to apply equity-like powers, including to regularize corporate affairs, set aside or amend contracts, compel directors to act, and even to order that the securities of a shareholder to be purchased at fair value by the corporation or another shareholder.

To assert a claim for oppression, a stakeholder must first show that it has a “reasonable expectation” with respect to the behaviour of the corporation, its officers or directors. Whether the stakeholder indeed had a “reasonable expectation” is a fact-specific inquiry, with consideration of general commercial practice, the nature of the corporation, the relationship between the parties, past practices and other factors.

Once the claimant has established its reasonable expectation, it must demonstrate that the corporation's failure to meet this expectation caused detrimental consequences that amount to "oppression," "unfair prejudice," or "unfair disregard" of its interest.

There are no clear definitions of these terms. Generally, "oppression" involves conduct that is coercive, abusive, burdensome, harsh, in bad faith, an abuse of power, or some other kind of serious wrong. “Unfair prejudice" and “unfair disregard” involve a less culpable state of mind and include conduct such as providing certain shareholders with a disproportionate economic benefit or simply ignoring the claimant's interest in a manner that is contrary to its reasonable expectations.

Intriguingly, although the oppression remedy is still most often used by minority shareholders, the remedy is available to a range of other corporate stakeholders, including directors and officers, and even secured and unsecured creditors.

Perhaps classically, the oppression remedy is most frequently resorted to in the context of closely-held corporations, where the “compact of stakeholders” resembles a “partnership”. However, shareholders in publicly-traded corporations can also resort to oppression remedy claims, often taking the form of shareholder misrepresentation claims. The reasonable expectations of shareholders in public markets are often informed by the public pronouncements of corporations and their officers.

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