Today's post will highlight events in a recent B.C. Supreme Court trial inwhich Meldon Ellis represented the plaintiff, one of two 50% shareholders ina B.C. company.

During the trial, Mr. Ellis argued that the conduct the defendantshareholder, who also was the company’s sole director, was “oppressive”under the B.C. Business Corporations Act and that as a result of thisoppressive conduct the company should be dissolved and all its assetsdistributed to the shareholders. The oppressive conduct alleged by theplaintiff included the company’s failure to hold an annual general meeting(AGM) and its failure to provide the plaintiff with audited financialstatements. An AGM and audited financial statements are mandatory under theBusiness Corporations Act (the Act) http://www.qp.gov.bc.ca/statreg/stat/B/02057_00.htm
unless these requirements are waived byunanimous consent of the shareholders.

Mr. Ellis argued that there are two fundamental rights of every shareholderin a B.C. company: (1) to vote his shares at an AGM to elect a Board ofDirectors; and (2) to be provided with audited financial statements of thecompany. A company’s failure to meet these requirements, Ellis argued, is“oppressive conduct” under the Act and should lead to either a court-ordereddissolution of the company or other court-imposed remedies, such as a orderrequiring one of the parties to buy the others’ shares at fair market value.

The evidence presented at trial clearly established that the plaintiff hadnot received notice of any AGM (nor was any AGM ever held), had not receivedhis original share certificate and had not received audited financialstatements. The evidence also established that the plaintiff had worked inthe business for almost two years without compensation before he wassqueezed out by the defendant shareholder in 2002. Since that time, theDefendant had been paid over $150,000 in wages from the company, had enjoyedthe exclusive use of a company vehicle purchased and maintained by thecompany and had paid the lawyer representing him in the within litigationusing company funds.

The defendant argued that the simple failure to hold AGMs or to provideaudited financials cannot be considered oppressive under the Act, as theseare merely formal requirements. The defendant conceded at trial that theplaintiff was indeed a 50% shareholder in the company but he argued that theplaintiff should get less than 50% of shares because his initial cash contribution was about $10,000 less than the defendant. The defendantsubmitted that the plaintiff should only be paid back the amount of hisinitial capital investment in the company and that he should have nointerest in the company’s assets beyond that.

The court reserved judgment.