How do dissent rights work when a shareholder objects to a buyout or reorganization?

Dissent rights protect a shareholder who is outvoted. When enough other shareholders approve a major corporate change, the minority usually cannot stop it, but corporate statutes let a shareholder who follows the right steps leave and be paid the fair value of their shares.

When the right arises

Under the Canada Business Corporations Act, a shareholder may dissent when the corporation resolves to amend its articles in certain ways, amalgamate (apart from short-form amalgamations, which directors approve), be continued into another jurisdiction, or sell, lease or exchange all or substantially all of its property. Ontario’s Business Corporations Act has a parallel section, and each statute sets its own list. A buyout where each owner simply sells their own shares is not itself one of those events, so the right matters when a corporate resolution binds everyone.

What the shareholder has to do

The steps are strict. Under the Canada Business Corporations Act, the shareholder sends the corporation a written objection at or before the meeting where the resolution is voted on, unless the corporation did not give the shareholder notice of the purpose of the meeting and of their right to dissent. If the resolution passes, the statute then sets fixed periods to demand payment of fair value in writing and to deliver the share certificates. A shareholder who misses a step can lose the claim.

How fair value is set

Under the Canada Business Corporations Act, after a shareholder dissents the corporation must offer an amount its directors consider fair value, with a statement of how they reached it, unless the statute’s solvency limits mean it cannot lawfully pay. If the shareholder does not accept, or no offer is made, a court can be asked to fix the value and may appoint appraisers. Meanwhile the dissenter generally has no shareholder rights except the right to be paid, and the payer is the corporation, not the buyer.

What it means for a seller

If a dissenter is paid out, the corporation carries that cost once the change takes effect, which belongs in the purchase agreement and the meeting timetable. With a few aligned owners the right rarely matters. With minority or inactive shareholders, it is worth identifying them early. Our glossary entry on dissent rights gives the short definition.