Members of a company generally have rights against each other and against the company, as provided in the applicable legislation, the common law and the company’s constitution.
Some of the parties to corporate litigation include shareholders, members, and directors.
Minority shareholders have limited voting rights.
They therefore must accept the will of the majority (majority rule). Majority rule can be unfair, especially where there is one controlling shareholder. So the law has developed some exceptions to the general principle of majority rule.
Two types of shareholder litigation are
In a direct action, a shareholder sues the corporation because it may have denied his personal rights. If the shareholder wins, any monetary damages award goes to him.
In a derivative (or representative) action, the alleged injury is to the corporation. For example, a corporate director may breach his fiduciary duty to the corporation by appropriating for himself a contract that belongs to the corporation.
The director has allegedly violated his duties and obligations toward, the shareholders. They suffer collectively through the lost corporate opportunity.
They can sue the corporation derivatively; they name the corporation as a nominal defendant and the director personally as the real defendant and wrongdoer. If the shareholders win, any monetary damages award goes to the corporation, not to the shareholders.
Another basis of shareholders’ lawsuit is the oppression remedy. Our team of experts at HLF can represent both minority shareholders and boards of directors in disputes over allegations that the company affairs are being conducted in a manner that is oppressive to or prejudicial against the shareholders’ interests.
Other types of corporate disputes with which we can assist include where business partners sue one another for breach of a partnership agreement, or a corporation sues a business partnership for breach of contract or fraud.
Our dedicated team at HLF can explain to you the rights and obligations provided in such corporate law sources as the Ontario Business Corporations Act (OBCA), Canada Business Corporations Act (CBCA) and the common law.
Whether you are a director, officer, shareholder, or other stakeholder, our advocacy team can represent you in any dispute. We realize corporate disputes can be protracted and costly.
While not shying away from court if necessary, we are committed to ensuring you get a favourable outcome by negotiating vigorously on your behalf. To schedule a consultation, please contact us.