Can my partner force me to sell my shares if we disagree?

A co-owner cannot make you sell simply because the two of you disagree about the business. Whether you can be pushed out turns on what you signed and on how a court views the way the corporation is run. This page covers corporations under the Canada Business Corporations Act (CBCA) and Ontario’s Business Corporations Act (OBCA). Other provinces have their own corporate statutes, and if your business is a partnership rather than a corporation, different law applies, so ask a lawyer which one governs you.

Start with the documents you signed

Corporations Canada describes a shareholder agreement as an agreement entered into by some, and usually all, of the shareholders of a corporation. Read yours for any clause that lets one holder require another to sell, or that sets out a buy-sell process when owners deadlock. The articles can also restrict share transfers, and Corporations Canada notes that transfers must conform to any conditions or restrictions that apply to the corporation’s shares. Corporations Canada adds that transfer restrictions can include detailed plans governing when a shareholder can or must sell his or her shares. See what a shareholder buy-sell agreement is.

When a court can order a purchase

Under CBCA s.241, a complainant may apply to a court. If the court is satisfied that an act or omission of the corporation or an affiliate effects a result, that its business or affairs are or have been carried on, or that the directors’ powers are or have been exercised, in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards, the interests of any security holder, creditor, director or officer, it may make an order to rectify the matters complained of. Under s.241(3) it may make any interim or final order it thinks fit. The list includes an order directing the corporation, subject to s.241(6), or any other person to purchase the securities of a security holder. The court may make such an order; it is not required to. Ontario corporations have a parallel remedy in OBCA s.248. Under s.241(6), a corporation shall not make a payment under such an order 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.

Your own right to leave

Both Acts also give a right to exit in certain cases. If a corporation resolves on a listed fundamental change, such as selling all or substantially all of its property, a shareholder may dissent (under OBCA s.185, a holder entitled to vote on the resolution) and, after complying with the section, is entitled to be paid the fair value of the shares (CBCA s.190; OBCA s.185), subject to the payment limits in CBCA s.190(26) and OBCA s.185(30). That is a right to leave, not a power to push you out. Under OBCA s.185(12), a dissenting shareholder who fails to comply with subsections (6), (10) and (11) has no right to make a claim under the section, so read the section as soon as such a resolution is proposed.