Can I force my business partner to buy me out?

Whether you can make a partner buy depends first on what you have agreed. This page asks whether you can make your partner buy; how to buy out a partner covers the mechanics once both sides are willing, and what happens if one partner wants out and the other does not looks at the other side. The answer depends on your agreement and on whether the business is a corporation or a partnership.

Start with your agreement

A shareholders’ agreement or partnership agreement may contain buy-sell terms, such as a right to require a purchase after a stated event. Read it first. Under the Canada Business Corporations Act (CBCA), a unanimous shareholder agreement may entitle a complaining shareholder to demand dissolution of the corporation after the occurrence of a specified event; if that event has occurred, a court may order the liquidation and dissolution of the corporation on a shareholder’s application (s. 214(1)(b)(i)). A court may also do so if it is satisfied that it is just and equitable (s. 214(1)(b)(ii)). Corporations Canada’s guide says that voluntary liquidation and dissolution needs shareholders to authorize it by special resolution, which a deadlocked owner may not be able to obtain.

The oppression remedy

Under CBCA s. 241, a complainant may apply to a court. If the court is satisfied that the corporation’s acts, its conduct of business or the exercise of directors’ powers are oppressive or unfairly prejudicial to, or unfairly disregard, the interests of any security holder, creditor, director or officer, it may make an order to rectify the matters complained of. The orders it may make include directing the corporation, subject to s. 241(6), or any other person, to purchase securities of a security holder. "May" is the word in the Act: no one is entitled to a buyout as of right. Section 241(6) limits a payment by the corporation if there are reasonable grounds for believing it is or would be unable to pay its liabilities as they become due, or that the realizable value of its assets would be less than its liabilities.

Provincial corporations and winding up

The CBCA applies to every corporation incorporated, or continued as a corporation, under it (s. 3(1)). If your corporation was incorporated under a provincial statute, check that statute instead. Ontario’s Business Corporations Act has its own oppression remedy (s. 248) and its own provisions for winding up by order of the court (s. 207). For a general partnership, the rules sit in the partnership agreement and the province’s partnership law, which the sources on this page do not cover.