Sale of all or substantially all assets (shareholder approval)

When a corporation sells its business as assets, the sale is not only a deal between the corporation and the buyer. Corporate statutes can also require the corporation’s own shareholders to approve it. A buyer can ask to see evidence that any required approval was properly obtained.

What the two statutes say

Under s. 189(3) of the Canada Business Corporations Act and s. 184(3) of Ontario’s Business Corporations Act, a sale, lease or exchange of all or substantially all of a corporation’s property, other than in the ordinary course of its business, requires shareholder approval. Approval is by special resolution of the holders of each class or series entitled to vote (CBCA s. 189(8); OBCA s. 184(7)). The meeting notice must include a copy or summary of the agreement and a statement of the right to dissent, though leaving the statement out does not invalidate the sale. Under the CBCA, each share carries a vote on the sale whether or not it otherwise does (s. 189(6)), and a holder of shares of any class may dissent, subject to ss. 191 and 241 (s. 190(1)). Under the OBCA, a holder of shares of any class or series entitled to vote on the resolution may dissent, subject to s. 185(3) and ss. 186 and 248 (s. 185(1)). This entry covers corporations under those two statutes only.

What to check or ask

• Which statute governs the selling corporation
• Whether the sale is of all or substantially all the property, and outside the ordinary course
• Whether the meeting notice carried the required items and the approval was by special resolution

See dissent rights when a company sells its assets and special resolution.