Oppression Remedy Denied To Non-shareholder Of Corporation

• Published date: 30 March 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation, Shareholders
• Law Firm: Gardiner Roberts LLP
• Author: Mr James R.G. Cook

The oppression remedy in corporate law statutes such as the Ontario Business Corporations Act provides a mechanism for disgruntled shareholders or other stakeholders to obtain relief from the courts to protect their reasonable expectations. However, a person must be able to establish that they qualify as a proper "complainant" under the legislation. The case of Bernier v. Kinzinger, 2022 ONSC 1794 (CanLII), addressed whether the applicant was actually a shareholder of the respondent corporations who could avail himself of the oppression remedy.

The respondent corporation ("Skilcor"), was in the business of manufacturing meat products sold in grocery stores across the country. Skilcor was founded in the late 1960s by the father of D.K., who had become the sole shareholder by the early 1990s.

In 2005, the applicant was hired as Skilcor's Executive Vice-President, contemporaneous with a plan to build a manufacturing facility in Ontario and consolidate food operations. The applicant had been employed in the industry and was a long-standing business acquaintance of D.K. Skilcor and the applicant entered into an employment agreement which renewed annually.

In 2005, D.K. and her husband, who was the CFO, incorporated another company ("La Riberie"), to set up manufacturing facilities for the business.

Finally, in early 2006, D.K.'s holding company acquired control of a food product business ("Northbud"). At the time of the acquisition, D.K. agreed to grant the applicant 10% of the shares of Northbud, initially at no cost.

From the outset, the food businesses of the three corporations operated collectively as a consolidated group from an organizational and operational perspective. The officers were the same for the three corporations and their annual financial statements were prepared on a consolidated basis.

The applicant was part of the management team and worked closely and collaboratively together to grow the companies' businesses. There was no question that he was a very integral part of the management team.

As a result of concerns that the applicant had no "skin in the game," he subsequently agreed to pay $200,000 for shares of Northbud in exchange for a corresponding increase to his salary to cover the cost.

In late 2007, D.K. and the other principals began exploring a potential merger of the food businesses of Skilcor, La Riberie and Northbud. The discussions were complicated because Skilcor had assets that were unrelated to the food business. In addition...