It is not uncommon for disputes to happen between shareholders within a business.
These disputes can frequently occur when one or more people inherit shares in a company. Situations like this may include a shareholder passing away and leaving their shares to an individual who formerly had no stake in the company, or where a parent divides the control of a family business amongst their offspring. Under these circumstances, it is possible for the other stakeholders to attempt to "squeeze out" the individual who has inherited their stake by out voting the individual, excluding the individual from management decisions or failing to communicate with them altogether. It is also common for siblings to disagree on the future direction of the company when taking over a family business.
Inheriting a Stake in a Company
If you are inheriting a stake in a company, it is important to understand your basic rights. These can be found in the applicable legislation, the articles of the company and in agreements that deal with the rights of shareholders, if any.
The BC Business Corporations Act, SBC 2002, c57 for BC companies, and the Canada Business Corporations Act, RSC 1985, c C-44 for federally registered companies, both grant basic rights to shareholders. These rights include: the right to vote, the right to attend meetings, and the right to have access to certain information. The articles of the company, and by-laws if any, should be reviewed as they will contain rules regarding directors and shareholders meeting, including quorum, notice and how meetings are conducted, and may contain additional rights and obligations for shareholders of that particular company. Any shareholders agreement should also be reviewed as it will contain the rights among the shareholders and a change in ownership could trigger purchase and sale provisions or the dissolution of the company in some cases.
Voting is the primary mechanism through which shareholders control the makeup of the Board of Directors, which takes place at either special or general meetings. The Board of Directors is responsible for the management of the company. The right to vote is the means through which a shareholder exercises influence over a company. Shareholders have a right to be present at these meetings and cannot be arbitrarily excluded from them. Shareholders also have a right to certain information regarding the business and affairs of the company. This information allows the shareholders to make informed decisions on how the company should be governed.
It is important to note that different circumstances can give rise to different issues. Further information regarding specific circumstances can be found in various sections of this website. If you are expecting to inherit, or have inherited, a stake as a minority shareholder, you can look into our Minority Shareholder section. If you inherit a stake in a family business, you can read the Family Business section, which covers the unique treatment of family businesses by our courts. If you have been unfairly treated as a shareholder, the Oppression Remedies section can provide some guidance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.