Directors of a corporation cannot invoke the business judgment rule to justify decisions that violate a unanimous shareholders’ agreement, the Ontario Divisional Court held recently.

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In Hu v. Sung, Superior Court Justice David Brown confronted the question of what to do when a shareholder in a private corporation has wrongfully excluded another from the affairs of the company, but by the time of trial the company has ceased operations, has not turned a profit and there is no evidence the offending shareholder personally benefited from the oppression.

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While the corporate oppression remedy is a broad remedy that can provide relief to a wide range of shareholders and certain other stakeholders harmed when a corporation is run contrary to their reasonable expectations, it will not provide relief to arm’s length contracting parties who later find that their contract does not give them the protection they want.

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In late March, the Ontario Court of Appeal overturned the decision of Mr. Justice Farley to remove two new directors of steelmaker, Stelco Inc., during its restructuring under the Companies’ Creditor s Arrangement Act (“CCAA”). In ordering the Stelco directors reinstated, the Court of Appeal highlighted that the discretion given by the CCAA to the [...]

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