Surrey Shareholder & Partnership Disputes Lawyers
Top-rated Shareholder & Partnership Litigation Services for Surrey, British Columbia
Shareholder disputes can affect any type of company with more than one owner in British Columbia, including corporations, SMEs, family-run businesses, and joint ventures.
Conflicts or disagreements between shareholders of a company may arise over shareholder rights, obligations, strategic decisions, financial matters, company personnel, or other matters.
Regardless of the reason for the dispute, it is important to resolve disagreements swiftly to prevent long-term negative consequences for the business.
Let us look at the laws that govern B.C. shareholder disputes, the potential impact, and risks for businesses, and how disagreements can be prevented/remedied without costly and time-consuming litigation.
How are shareholder disputes addressed by British Columbia law?
The British Columbia Business Corporations Act (BCBCA) provides a comprehensive legal framework for incorporation, directors’ duties, shareholder rights, corporate records, and dissolution. It also addresses how shareholder disputes in the province can be resolved through legal action.
The Act includes rules and procedures for management disputes within corporations, as well as issues concerning the distribution of profits, the sale of shares, and the appointment of a receiver or liquidator if a dispute between shareholders cannot be resolved.
Shareholders may also apply to the courts for an order to wind up the corporation or for the purchase of their shares by the other shareholders or the corporation, if required.
How do shareholder disputes affect business owners in BC?
Shareholder disputes can severely impact small, medium, or larger businesses in British Columbia, especially if they result in costly and time-consuming legal action.
If the management of the company is affected, the day-to-day operation of the business may be impacted. It is, therefore, essential for shareholders to be familiar with their rights and obligations under the BCBCA and to seek timely resolutions to issues.
If necessary, companies should seek legal assistance early on in the process to settle shareholder disputes that are challenging to resolve. A skilled business dispute lawyer can mediate disagreements and seek an equitable resolution for all shareholders concerned without the costs and delays of court action.
Potential legal risks and challenges for businesses in BC
Some of the legal risks and challenges that shareholder disputes can create for businesses in B.C. include:
- Costly litigation (this should be a last resort).
- Impact on the day-to-day operations and business performance.
- Reputational damage from public disagreements.
- The dissolution of the business.
Shareholder rights in BC
Being a shareholder in a company in B.C. comes with some basic rights that all shareholders should be aware of, including the right to:
- Receive notice of shareholder meetings.
- Vote at shareholder meetings, including the annual general meeting.
- Participate in the profits of the corporation when distributions of profits (“dividends”) are made.
- Receive a portion of the assets of the company on dissolution, after creditors are paid.
- Transfer shares, subject to any transfer restrictions.
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Shareholder remedies in British Columbia
If a shareholder’s rights are violated or a dispute arises over company finances, operations, strategic decisions, etc., certain legal remedies are available to injured parties.
Importantly, the legal remedies available to a shareholder may be affected by the terms included in the shareholder agreement and the company’s articles, as well as the provisions of the BCBCA.
If discussion, collaboration, negotiation, or mediation cannot resolve the issue, the main legal options available depend on the precise circumstances, but may include:
- The oppression remedy: A shareholder applies to the Court for relief from unfair prejudice or disregard of the shareholders’ interests.
- Dissent proceedings: A shareholder disagrees with a proposed corporate action and seeks a court order requiring the company to purchase their shares for “fair value.”
- A derivative action: An action is taken by a shareholder or company director in the name of and on behalf of a corporation to enforce rights or obligations owed to the company, or to obtain damages for breach of those rights or obligations.
Derivative actions
Under BC’s Business Corporations Act, derivative actions are legal actions taken by complainants in the name of, and on behalf of, corporations. These actions can be taken against any entity that owes a right, duty, or obligation to the company, including shareholders, directors, and officers.
For example, a shareholder could apply to the court to commence a derivative action because the corporation fails to enforce its legal rights or defend itself against legal action to the detriment of its shareholders.
The action may be successful if it is proven to the court that:
- The complainant made reasonable efforts to persuade the company’s directors to prosecute or defend the legal proceeding in question.
- The complainant has given notice of their application for permission to begin a derivative action to the company and any other person, as ordered by the court.
- The complainant is acting in good faith.
It is in the company’s best interests for the legal proceeding to be prosecuted or defended.
BC Partnership disputes
Partners in companies may also need to deal with similar disputes to corporate shareholders. Rather than shareholder agreements and company articles, partner disputes may be settled by referring to the partnership agreement and BC’s Partnership Act.
Often, disputes arise over leadership roles and responsibilities, a conflict of interest between business duties and personal interests, the pursuit of business opportunities, the division of ownership or fraud/misappropriation of partnership assets.
Remedies for partnership disputes in BC
Under the terms of BC’s Partnership Act, business partners can exert certain rights with the court, though these rights are more limited than shareholder rights under the BCBCA.
Partners can seek damages for financial losses caused by a partner’s conduct, ask for a receiver to be appointed to take over business operations or liquidate assets, dissolve the partnership, request a buyout, or arrange an audit to trace funds.
Partners should seek legal advice about personal liability before taking legal action.
How to avoid shareholder disputes in BC
To avoid shareholder disputes in any small, medium, or large business/corporation, comprehensive shareholder agreements should be drafted, outlining the rights and responsibilities of each shareholder and the procedures for resolving disputes.
The company should aim to promote a strong corporate governance culture of transparency, accountability, and shareholder communication. If issues do arise between shareholders, as is relatively common, seek timely legal advice to prevent escalation into a full-blown dispute.
For a free 30-minute consultation about your legal options when faced with a shareholder dispute, contact the team at Legalbird today.
