Protecting Minority Shareholders: Rights and Remedies under Alberta’s Business Corporations Act

Written by Sean Kimak
JD Candidate 2025 | UCalgary Law
 
Traditionally, a minority shareholder (“MSH”) held minimal power to influence the decisions of directors, and therefore the overall direction of a corporation they owned a stake in.[1] In the absence of MSH rights provided by a shareholders agreement (such as a unanimous shareholders agreement), or by the articles or bylaws of the company, the majority shareholders of a corporation retain the right to appoint directors of the corporation and, therefore, to affect key decisions of the organization.[2] Where a MSH disagrees with these decisions, often their only recourse is to sell their shares in the company. However, even this option can be “somewhat illusory”, particularly in cases where there is a limited market for the shares or where resale restrictions exist.[3]
 
Consider the following scenarios:

• The majority shareholder (or shareholders) uses their power to give preferential or non-market-rate contracts to parties not at arm’s length (“NAL”) with the corporation.
• The majority shareholder borrows money from or lends money to themselves, or other NAL parties.
• The majority shareholder owns competing companies, and uses their control power to divert business opportunities to those companies, instead of the one you own a stake in.
• The majority shareholders are holders of a different class of shares than you, with preferential rights to dividends and/or priority in bankruptcy. This impacts their decision to issue dividends, or to file for bankruptcy.

 
Despite each share having an equal per-share equity stake by default, the above scenarios are examples of how majority shareholders may make decisions contrary to the interest of a MSH, for their own benefit. Luckily, there are various protections afforded to MSHs by both statute and common law.
 
This blog post provides a brief overview of the main protections afforded to MSHs of companies incorporated under the Alberta Business Corporations Act (“ABCA”)[4].  
 
Primary Rights & Remedies Enshrined by the ABCA
 
I. Fiduciary Duty & Duty of Care
The most basic protections afforded to a MSH are provided by the fiduciary duty and duty of care owed by director and officer of a corporation, towards the corporation.[5] These duties are statutorily enshrined in section 122(1)(a) and 122(1)(b) of the ABCA, respectively:
 
122(1)  Every director and officer of a corporation in exercising the director’s or officer’s powers and discharging the director’s or officer’s duties to the corporation shall
(a) act honestly and in good faith with a view to the best interests of the corporation, and
(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
 
In Peoples Department Stores Inc (Trustee of) v Wise,[6] the Supreme Court of Canada held that the statutory fiduciary duty enshrined in section 122(1)(a) of directors is owed exclusively to the corporation, and not directly to shareholders or other stakeholders such as creditors.[7] In exercising this duty of loyalty, directors and officers may consider the long-term interests of the corporation, the environment, and the interests of shareholders, employees, retirees, pensioners, creditors, consumers, and governments.[8] As a result of Peoples and the subsequent Supreme Court decision in BCE Inc. v. 1976 Debentureholders[9], directors and officers do not owe their fiduciary duty solely to shareholders.[10] Still, a duty to shareholders (including MSHs) may arise on the facts, such as in the case of a sale of shares. Unfortunately for shareholders, these decisions permitted directors to consider a multitude of factors outside of shareholder value maximization, when making decisions. This may limit the ability of a MSH to enforce the fiduciary duty required by ABCA section 122(1)(a) through a legal action.
 
Similarly, the duty of care owed by directors and officers per section 122(1)(b) does not refer to any specific party: it is an open-ended duty, and is owed to more than just the corporations shareholders to include parties such as creditors.[11] Furthermore, the Supreme Court determined that section 122(1)(b) of the CBCA does not provide an independent foundation for claims against directors or officers.[12] Thus, while actions may be brought against directors or officers who breach this duty in tort, or pursuant to other provisions of the ABCA, these actions are potentially difficult to enforce due to the multitude of parties to whom the duty is owed.[13]
 
Thus, while these duties are not owed solely to shareholders, they arguably still provide safeguards to ensure that directors act in the interest of the corporation. In most (but not all) cases, this provides a degree of protection for MSH interests. In cases where directors act against the best interest of the corporation (as opposed to a MSH), a derivative action may be brought.
 
II. Derivative Actions
Derivative actions, codified by Section 239 of the ABCA, originate from the fact that corporations have their own legal status. Bringing a derivative action is akin to assuming the position of the corporation to bring an action against a director or officer for harm that was suffered as a result of their conduct.[14]
 
To commence a derivative action, applicants require permission (known as “leave”) from the applicable court.[15] This is to prevent frivolous or vexatious actions, largely because the corporation must pay the legal fees for the action and because any decision will necessarily bind all shareholders of the company.[16] In considering whether to grant leave, the presiding court will ask whether the action is in the best interests of the company. Derivative actions can in theory be brought if a director breaches their fiduciary duty or duty of care towards the company as a whole; however if a MSH feels they are personally being treated unfairly and not the corporation as whole, a derivative action is of little use to them. Furthermore, derivative actions are difficult to litigate, so only a handful of derivative action cases have been brought in Canada against directors for breach of their duty of care.[17]
 
III. Oppression Remedy
By contrast, the oppression remedy, codified by section 242 of the ABCA,  allows complainants such as MSH to bring personal actions against the corporation. Per the Supreme Court of Canada in BCE:[18]
 
“[t]he oppression remedy focuses on harm to the legal and equitable interests of stakeholders affected by oppressive acts of a corporation or its directors. This remedy is available to a wide range of stakeholders — security holders, creditors, directors and officers.”
 
To succeed in their claim, a complainant must establish (1) that they held a “reasonable expectation”, and (2) that the “reasonable expectation was violated by conduct falling within the terms ‘oppression’, ‘unfair prejudice’ or ‘unfair disregard’ of a relevant interest”.[19] If the court finds that a director’s conduct falls under any of these definitions, the court may “make any interim or final order it thinks fit”.[20] While there is some ambiguity regarding “reasonable” expectations and debate over what conduct meets the threshold of oppression, unfair prejudice, or unfair disregard, the oppression remedy may still be best way for a MSH to enforce their right to be treated fairly.
 
IV. Right to Dissent & Right to Appraisal
There are further remedial protections under ABCA section 191 and CBCA section 190 to allow individual shareholders to dissent in cases where they disagree with fundamental changes to the company, including cases where a corporation resolves to amend its articles, to change or remove provisions relating to the issue, transfer, or rights of a class or series of shares, to change the type of business that the corporation may carry on, to amalgamate with another corporation, or to sell, lease or exchange all or substantially all its property.[21] In these cases, a dissenting shareholder has the right to be paid out at fair value of their shares. If the corporation and dissenting shareholder cannot agree on this value, a court may step in to determine the share price, and to make related orders.
 
The court also holds power under ABCA section 193 (Court Approved Arrangements), to approve or deny any proposed plan of arrangement[22]. Courts review proposed arrangements to determine if
 
V. Various Additional Rights Provided by the ABCA
All shareholders are entitled to access corporate records under section 23 of the ABCA. This includes articles, bylaws, unanimous shareholders agreements, meeting minutes, shareholder resolutions, notices of the appointment or election of directors, securities registers, copies of financial statements, and any corporate disclosures made relating to contracts under ABCA section 120.[25]
 
Furthermore, the registered holders or beneficial owners of not less than 5% of the issued shares may force management to call a shareholders meeting pursuant to ABCA section 142.
 
VI. Minority Protections under MI 61-101
In select circumstances, additional MSH protections are provided by Multilateral Instrument 61-101 (“MI 61-101”) as adopted by the Alberta Securities Commission, the provincial securities regulator.[26] The intent of MI 61-101 is to ensure that security holders are treated fairly in transactions where there is a potential material conflict between the interests of related parties and those of minority security holders”.[27]
 
MI 61-101 protects minority shareholders in certain types of transactions, including:

• Insider Bids: Offers by insiders to acquire additional voting or equity securities.
• Issuer Bids: Repurchases of securities by the corporation itself.
• Business Combinations: Reorganizations that alter or terminate shareholders’ interests without their consent.
• Related Party Transactions: Deals between the corporation and related parties.

 
The key protections that MI 61-101 provides include:

• Minority Approval: Transactions must be approved by a majority of MSH. i.e. the minority cannot be overruled by the majority shareholder in this vote.
• Independent Valuation: Independent experts must assess valuations relied upon in the transaction.
• Enhanced Disclosure: Comprehensive information must be disclosed to shareholders.
• Fairness Opinions: commonly obtained to demonstrate financial fairness.

 
Importantly, MI 61-101 only applies to “reporting issuers”.[28] There are also various technical exceptions to the requirements of the instrument. Still any company listed on the TSX, TSX Venture Exchange, Cboe Canada, or the Canadian Securities Exchange are subject to its requirements, giving some additional certainty to MSHs where a company is publicly listed.[29]
 
Conclusion
This blog post outlines the main remedies that may be available to MSHs when their interests are being materially impacted by actions outside of their control, in a unfair manner. It is not an exhaustive list and other remedies may exist in common law, statute, or contract.
 
Before becoming a MSH, it is important to consider the rights available to you and the potential costs to enforcing those rights. Since some of the above-mentioned rights and remedies are difficult to enforce, MSHs should look to further protect specific rights through well-defined shareholders’ agreements, or other agreements, where possible.
 
Disclaimer: This post is intended for informational purposes only and does not constitute legal advice. For legal advice, consult a qualified lawyer.


[1] L.M. Schaef, “The Oppression Remedy for Minority Shareholders” (1985) 23:3 Alta L Rev 511 [Schaef] at 512.

[2] Business Corporations Act (Alberta), RSA 2000, c B-9 [ABCA]at s. 106;

[3] Schaef, supra note 1, at 512.

[4] This blog post refers to relevant sections of the ABCA, however, all provinces except PEI, Nova Scotia and Quebec have adopted a business corporation act substantially similar to the Canada Business Corporations Act, RSC 1985, c C-44 [CBCA]. Therefore equivalent sections likely exist those other jurisdictions, with only very minor differences, if any. This blog post applies only to corporations. It is a broad overview of statutory protections and does not discuss the interpretation of these protections by the courts.

[5]BCE Inc. v. 1976 Debentureholders 2008 SCC 69 [BCE]: (“The directors are responsible for the governance of the corporation. In the performance of this role, the directors are subject to two duties: a fiduciary duty to the corporation under s. 122(1)(a) (the fiduciary duty); and a duty to exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances under s. 122(1)(b) (the duty of care)” at para 36.)

[6] Peoples Department Stores Inc (Trustee of) v Wise, 2004 SCC 68 [Peoples].

[7] Ibid, at para 42; This was reaffirmed in BCE, supra note 5, at paras 40-41; Both Peoples and BCE refer to the CBCA, but the same provisions exist in the ABCA.

[8] F Stewart, “A History of Canadian Corporate Law: A Divergent Path from The American Model?” in Harwell Wells, ed, The Research Handbook on the History of Corporate and Company Law (2018) 451 [Stewart]: (“In 2004, when the Supreme Court ruled on the Peoples case, it interpreted this provision as follows: [I]n determining whether [directors] are acting with a view to the best interests of the corporation it may be legitimate, given all the circumstances of a given case, for the board of directors to consider, inter alia, the interests of shareholders, employees, suppliers, creditors, consumers, governments and the environment. This decision shocked Canadian corporate law observers…” at 20-21).

[9] BCE, supra note 5.

[10] Practical Law Canada Corporate and Securities “Duties of Directors: Fiduciary Duties - Practice Note 7-567-9614” (Accessed 23 Feb 2025) online: Thomson Reuters Canada [PL – Fiduciary Duties].

[11] Practical Law Canada Corporate and Securities “Duties of Directors: Duty of Care - Practice Note 7-586-6493” (Accessed 23 Feb 2025) online: Thomson Reuters Canada [Practical Law – Duty of Care].

[12] Ibid; BCE, supra note 5 at para 44: (“Section 122(1)(b) does not provide an independent foundation for claims. However, applying the principles of The Queen in right of Canada v. Saskatchewan Wheat Pool, 1983 CanLII 21 (SCC), [1983] 1 S.C.R. 205, courts may take this statutory provision into account as to the standard of behaviour that should reasonably be expected.”).

[13] Practical Law - Duty of Care, supra note 11; Stewart, supra note 8: (“Iacobucci was critical, arguing that BCE ‘fails to articulate a determinate fiduciary duty’….He added that whether one believes… ….that such fiduciary duties ought to be owed to shareholders or stakeholders, ‘it is difficult to defend a fiduciary duty that fails to guide either directors or courts’… …VanDuzer worried about the wider discretion granted to directors, arguing they will ‘take comfort from the Court’s strong endorsement of the business judgement rule,’ foreseeing: ‘self-serving behaviors... dressed up as protecting the best interests of the corporation by reference to the interests of one stakeholder or another’”).

[14] BCE, supra note 5 at para 43; Natalie Leclerc & Nicholas Ramessar, “Options for Minority Shareholders Oppression and Derivative Relief” (30 November 2022), online: Carscallen LLP https://carscallen.com/commercial-litigation/options-for-minority-shareholders-oppression-and-derivative-relief/ [Leclerc & Ramessar].

[15] BCE, supra note 5at para 43.

[16] Ibid.

[17] Stewart, supra note 8 at 24.

[18] BCE, supra note 5 at para 45.

[19] Ibid at para 68; BCE notes these terms are poorly defined, at para 54.

[20] ABCA, supra note 2 at s 241.

[21] Refer to ABCA, supra note 2, at s. 191 for scope of application and exceptions.

[22] Defined by ABCA, supra note 2, at s 193(1).

[23] BCE, supra note 5, at para 46.

[24] Ibid.

[25] Types of records listed at ABCA, supra note 2, at s 21(1).

[26] Canadian Securities Administrators, “Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions”, (31 July 2017).

[27] Goodmans LLP ,“Conflict of Interest Transactions in Canada and Recent Regulatory Guidance.” Goodmans LLP, online: https://www.goodmans.ca/docs/default-source/default-document-library/conflict-of-interest-transactions-in-canada-and-recent-regulatory-guidance.pdf?sfvrsn=5e33b2b6_2&t at 2.

[28] “Reporting Issuer” is defined in the Securities Act RSA 2000, c S-4, at s 1(ccc).

[29] Practical Law Canada Corporate and Securities “Roadmap to Multilateral Instrument 61-101” (Accessed 23 Feb 2025) online: Thomson Reuters Canada.