Legal Updates

Loss of trust between holders of a closely held corporation is sufficient for an oppression claim even if not actual oppression happened

February 7, 2017
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A shareholder in a company, holding 45% thereof (the remainder held by a father and son) raised a list of oppression arguments.  Inter alia he claimed that the control holder has other activities although one of them is the CEO of the company.

The Court held that this is a closely held company, both because of the small amount of shareholders and because at least at the beginning the parties intended to manage the company together and based on personal trust between the parties.

As to other activities of the control holders it was held that it is not oppression because it was not proven that the other activities was prohibited by agreement or damaged their activity in the company or created any damage to the company.  Other oppression arguments were also rejected but the Court held that the parties behavior prior to, and after, filing of the claim show that the trust between the parties, as shareholders of a closely held company, was lost and this by itself is grounds for an order of separation of the parties.  Thus, the Court held that one of the parties will purchase one another by method of "Buy Me Buy You" ("BMBY"), in which the party asking for separation will make an offer to purchase the other at a certain company valuation.  The other may then choose whether to sell his shares at such price or purchase the offering party at such valuation.

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