CHAPTER 02 Bulletproofing Your Board Against Oppression Claims
What Is an “ Oppression Claim ” ?
Oppression claims against public companies can impose significant financial, operational and reputational costs, both on the company itself and on its officers and directors personally. Boards need to consider these risks proactively, be aware of the types of situations that can result in oppression claims and consider best practices to prevent and defend against oppression claims. The oppression remedy is an equitable remedy, which means courts tend to focus particularly on issues of fairness, even-handedness and other “equities” when evaluating the merits of an oppression claim. Given this context, public companies can take steps that may pre-empt or minimize the risk of oppression claims and provide useful defences if such claims are commenced. Beneficial governance strategies include – considering best practices, including those set out below, with regard to internal governance, decision- making, minute-taking, public disclosure and information management; and – anticipating possible areas of concern or sensitivity and ensuring that potential complainants are treated with respect and afforded appropriate consideration – even if that respect and consideration are not always reciprocated.
In Canada, an oppression claim is a right of action created by federal and provincial corporate legislation. For federally incorporated companies, the oppression remedy is found in section 241 of the Canada Business Corporations Act . Analogous provisions appear in the corporate legislation of all provinces and territories. Similar regimes also exist under the laws of several foreign jurisdictions. The party initiating an oppression claim is called a “complainant.” As explained by the Supreme Court of Canada in BCE Inc v 1976 Debentureholders – a 2008 decision that remains the leading case on the oppression remedy – a complainant must prove that – the complainant had a reasonable expectation with respect to the management or governance of the corporation that was breached by the corporation and/ or its directors; and – the breach was oppressive, unfairly prejudicial to or unfairly disregarded the interests of the complainant, being any securityholder, creditor, director or officer of the corporation. Although complainants are usually minority shareholders, they can also include creditors, directors or officers. A court has latitude to grant a wide range of remedies if it finds that the complainant has successfully established oppression. These remedies include awarding compensation, ordering the issuance or exchange of securities, seating or unseating directors, setting aside transactions or ordering an investigation.
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