Can the majority sell the company without telling the minority in advance?

The answer turns on what the majority is selling. If the corporation sells its business, the corporate statutes give every shareholder specific rights. If the majority holders instead sell their own shares to a buyer, the approval rule below is written about the corporation’s property, so the position depends on the articles and any agreement among the owners.

When the company sells its business

Under the Canada Business Corporations Act and Ontario’s Business Corporations Act, a sale, lease or exchange of all or substantially all of a corporation’s property outside the ordinary course of business needs shareholder approval. The notice of the meeting goes to each shareholder, with a copy or summary of the agreement and a statement of the right to be paid fair value on dissent. Approval takes a special resolution, and under the federal Act every share carries a vote on the sale, whether or not it otherwise votes.

When the majority sells its shares

A sale of shares is a deal between their holders and the buyer, and the approval rule above does not on its terms reach it. What can add notice or consent rights is the corporation’s articles, by-laws and any unanimous shareholder agreement. Under the federal Act, if the articles or such an agreement require more votes than the Act does, those provisions prevail, and a shareholder may ask for a copy of them free of charge.

What the minority can do

A shareholder who objects to a sale of the corporation’s property can dissent and ask to be paid the fair value of their shares. The federal Act requires a written objection at or before the meeting. Both Acts also let a court make an order where the company’s affairs are run in a way that is oppressive or unfairly prejudicial to a shareholder’s interests, or unfairly disregards them. Neither remedy is automatic.

Check these before you act

Read the articles, by-laws and any shareholder agreement first. Other provinces have their own corporate statutes, so the rules may differ. Combining two corporations by long-form amalgamation also goes to a shareholders’ meeting, while a short-form amalgamation of a parent and its wholly-owned subsidiary needs only a directors’ resolution.