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Corporations - Dissenting Rights [OBCA s.185]. Husack v. Husack
In Husack v. Husack (Ont CA, 2023) the Court of Appeal considers 'dissenting shareholder rights' (and waiver thereof) under the OBCA [s.185], here in a family-held business in during estate dispute:[1] This appeal arises out of an estate dispute among family members. The appellant seeks to exercise dissent rights under ss. 184 and 185 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”), in response to the estate trustees’ decision to liquidate and wind up a family-owned holding company, Frank Husack Holdings Inc. (“the Holding Company”), which holds interests in various commercial properties, as well as liquid assets.
[2] The appellant submits that the application judge erred in concluding that the shareholders’ dissent rights were explicitly waived by the provisions of the Unanimous Shareholders Agreement (“USA”) signed by the Holding Company’s shareholders. She did not appeal the application judge’s dismissal of her request for an oppression remedy, nor does she take any issue on appeal with the application judge’s order that the shareholders appoint an independent liquidator for the purpose of winding up the Holding Company’s business and affairs and distributing its property.
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[6] The application judge’s dismissal of the appellant’s application principally turned on her interpretation of the USA. The USA was signed by all the shareholders; its validity and enforceability are not impugned.
[7] The application judge concluded that the shareholders’ rights under s. 184(3) of the OBCA were triggered by the proposed liquidation and winding up. She went on to consider whether these dissent rights were waived by the USA. As the application judge correctly stated, contracting parties are entitled to waive statutory rights, unless they are precluded by public policy.
[8] Having considered the relevant provisions of the OBCA, the factual matrix, including the estate planning purpose of the Holding Company, the articles of amalgamation that created the Holding Company (the “Articles”) and the USA, the application judge determined that s. 9.01 of the USA constituted a clear waiver of any dissent rights triggered by the sale and liquidation of the Holding Company. Section 9.01 of the USA provides as follows:It is the intent of the parties that such provisions of The Business Corporations Act or any successor legislation granting rights to shareholders, which may be in conflict with the provisions of this Agreement, are hereby waived, and the provisions hereof shall govern their dealings among themselves (to the extent allowed by law). [9] She found that to hold otherwise would render meaningless s. 3.01 of the USA, which states that, “[n]otwithstanding the foregoing, the ESTATE shall have the right at its option to cause the [Holding Company] to sell all or substantially all the assets owned by it to such person or persons at such time and upon such terms and conditions as the ESTATE in its sole and exclusive discretion considers advisable.”
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[12] The application judge rejected the appellant’s argument, renewed on appeal, that the reference to s. 184 of the OBCA in clause C of the Articles explicitly recognizes her dissent rights despite s. 9.01 of the USA. She noted that the USA had an entire agreement clause, s. 10.01, and found that the USA was necessarily entered into by the shareholders after the creation of the Holding Company by the Articles. Mrs. Husack, as president of both corporations amalgamated into the Holding Company, was the sole signatory to the Articles.
[13] Absent extricable error of law, the application judge’s interpretation of the Articles and the USA are subject to considerable appellate deference: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50-55. We see no reversible error. The application judge’s interpretation reflects the clear language of the USA. Importantly, it is in keeping with the constituent purpose of the Holding Company, namely, to manage and operate Mr. Husack’s assets in accordance with his will, including the veto granted to Mrs. Husack so she could maintain control over the corporation. In this context, the waiver of any dissent rights that could prevent the orderly distribution of the estate’s assets is entirely reasonable and in keeping with the objective intention of the parties as expressed in the USA.
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