Can a minority shareholder block a sale the majority wants?

A minority shareholder does not have a veto just because they own part of the company. Whether a sale can go ahead without them depends on what is being sold, how many votes the majority holds, and what the shareholder agreement says. This page uses the federal Canada Business Corporations Act (CBCA) as its example. A corporation formed under a provincial statute follows that province’s Act, so check which one governs yours.

If the corporation sells its assets

Under CBCA s.189(3), a sale, lease or exchange of all or substantially all of a corporation’s property, other than in the ordinary course of business, requires shareholder approval. Under s.189(6), each share carries the right to vote on such a sale whether or not it otherwise carries the right to vote. Under s.189(8) it is adopted when the holders of each class or series entitled to vote approve it by a special resolution. The Act defines a special resolution as one passed by a majority of not less than two-thirds of the votes cast by the shareholders who voted, or signed by all the shareholders entitled to vote. Ontario’s Business Corporations Act (OBCA) s.184(3) and (7) follow the same pattern. A holder whose votes cannot stop a two-thirds majority is outvoted.

Where a minority can still have leverage

CBCA s.189(7) gives a class or series a separate vote only if the sale affects it in a manner different from the shares of another class or series. A shareholder who objects may also have dissent rights. Subject to sections 191 and 241, s.190(1)(e) lets a holder dissent from a resolution to sell under s.189(3), and under s.190(3) a holder who complies with s.190 is entitled to be paid the fair value of their shares when the sale becomes effective. Corporations Canada notes that a shareholder agreement can go further than the Act, for example by requiring that a decision to sell be approved unanimously where the CBCA requires only a special resolution. Read the agreement and the articles before assuming the default rule applies.

If shares are sold instead of assets

The vote above applies where the corporation sells its property. If a buyer wants the shares, each shareholder is asked to sell their own. Ask whether a drag-along clause in a shareholder agreement obliges holders to sell alongside the majority, and read the CBCA’s Part on compulsory acquisitions if a take-over bid is involved. The sale-of-shares answer explains why that structure matters.

The oppression remedy is not a veto

CBCA s.241 lets a court make an order to rectify conduct that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of, a security holder, creditor, director or officer. The court may make any interim or final order it thinks fit, so the result is a judgment about fairness rather than an automatic block.