In cases where a director of corporations breaches his duties, such as excessive pay, charging personal expenses to the company, or is dismissive of the other shareholders, then court can take steps to curtail such actions or even remove the director from office.
 
Justice Matheson in Penuvchev v. Crosslink Bridge Corp., summarized the law regarding the issues of misconduct by directors disregarding the interests of others, including shareholders. After reviewing s. 248 of Ontario Business Corporations Act, and jurisprudence relating to the sections, removed the respondent director from office and vested all of the powers of that office in the applicant who brought the application to have the other director removed from office.

Justice Matheson referred to Justice MacKinnon in the case of King City Holdings Ltd. v. Preston Spring Gardens Inc., 2001 CarswellOnt 1364, who stated the following at para. 13:

“A court may make whatever order it deems “just and equitable”. This gives the court to grant a wide range of discretionary remedies which are available to it in “oppression remedy” cases. 

Such remedies could include an order that all shares be sold, or that all assets be sold, that the Corporation or other shareholders purchase the shares of the applicant shareholder or that the unanimous shareholders’ agreement be amended. 

No finding of oppression need be made by the court.  It is clear that the parties no longer trust one another, have lost confidence in each other’s ability to deal fairly, and can no longer act properly and in a business-like manner. There is clear deadlock in the operation of this Corporation.”
Penuvchev v. Crosslink Bridge Corp., 2011 ONSC 7068, at para. 25

Justice Matheson also referred to Justice Killeen in the case of Krynen v. Bugg, 2003 CarswellOnt 1138, who stated at para. 8:

“Actual or material loss is not a prerequisite to a finding either of oppression, unfair prejudice or unfair disregard of interest. The object of  the remedies available under s.248(3) is to prevent the continuation of the misconduct in question if it is established that a harm or detriment, in the sense of infringement of rights or privileges, will follow in the absence of restraining such misconduct. 

On this issue, the concept of detriment as a prerequisite to obtaining a remedy is similar to the concept inherent in a quia timet injunction – even if there is no material loss or damage at the time but reasonable grounds are established to apprehend the same occurring if there is no relief granted, the applicant for the quia timet remedy will be entitled to the relief sought."

The Judge continued, 

"Thus, in establishing unfair disregard of the applicant’s interests as a result of misconduct, there is no requirement that there be actual detriment or loss to the applicant: Sahota v. Barsa, 1999 CanLII 14945 (ON SC), (1999), 45 B.L.R. (2d) 143 (Ont. Gen. Div.), at para. 30.”


There are many people who enter into business with their family, cousins, friends. It is then natural for these individuals to simply start operating their business without considering the issues of concern, such as how much equity is to be invested by each partner or shareholder, what happens if the business suffers a loss, and one or more do not have (or do not wish) money to invest, what happens if one person does not work as hard as others, what happens if they don't get along, or one of them separates and divorces, or someone becomes incapacitated and unable to work, or someone dies, or these partners cannot see eye to eye.

These are types of issues that must be agreed to by all BEFORE starting or investing in the business to avoid headaches later on.

There are many people who ruin into these problems and then the disputes is taken to court and the parties, all of them, suffer.

Jiwa recommends that all partners and/or shareholders intending to join forces to enter into any kind of undertaking discuss various issues that are important, and to enter into a written agreement so as to prevent as many disputes among the various parties.

One main point that must be dealt with is how one partner and/or shareholder can leave if he or she does not feel like continuing, or how one partner and/or shareholder can buy out the other's interest if the relationship of the various parties is not thriving, and/or becomes acrimonious without entering into litigation which would have severe negative consequences on the parties.

Jiwa is currently involved in seeking redress from a director of a closely held family corporation where the other director charged his personal expenses to the corporation, removed all of his shareholder advance and more (his shareholder advance was overdrawn), loaned monies to his son, and has wiped out the assets of the corporation.  The case is ongoing.