A holdout in a private company sale is rarely someone who can stop the deal. Under section 190 of the Canada Business Corporations Act they are someone who can leave it, forcing the corporation to buy them out at a price a court may end up setting. The right is powerful and unusually unforgiving: it runs on a chain of deadlines, and a shareholder who misses one loses it.
Key takeaways
SECTION 01 OF 10
Section 190 carries the marginal note Right to dissent. Subsection (1): “Subject to sections 191 and 241, a holder of shares of any class of a corporation may dissent” where the corporation resolves to change article restrictions on share ownership or on its business; to “amalgamate otherwise than under section 184”; to “be continued under section 188”; to “sell, lease or exchange all or substantially all its property”; or to “carry out a going-private transaction or a squeeze-out transaction”.
The list is closed. An ordinary share sale by the majority is not on it, because the corporation is not resolving to do anything. Two neighbours matter as much: s. 191(7) switches the right off for a court-ordered reorganization, while s. 192(4)(d) lets a court make “an order permitting a shareholder to dissent” in a plan of arrangement.
SECTION 02 OF 10
Subsection (3) entitles a complying shareholder, once the approved action is effective, “to be paid by the corporation the fair value of the shares… determined as of the close of business on the day before the resolution was adopted”.
Value is fixed the day before the vote, so the transaction objected to sits outside what is valued — the buyer’s control premium included. Treadstone Law states the principle for Ontario in how fair value for dissenting shares is determined: the figure reflects “what the shares were actually worth immediately before the fundamental change that triggered the dissent”. No formula is prescribed, so fair value can land above or below the deal consideration.
SECTION 03 OF 10
First, the objection. Subsection (5) requires the shareholder to send the corporation, “at or before any meeting of shareholders at which a resolution… is to be voted on, a written objection”. People miss this, because it falls due before there is anything obvious to object to — and voting against the resolution is not the same as filing it.
Second, the demand: within twenty days of the corporation’s notice of adoption, “or… within twenty days after learning that the resolution has been adopted”. A corporation that never sends its notice does not stop that clock. Third, the certificates, “within thirty days after sending a notice under subsection (7)”.
SECTION 04 OF 10
Subsection (9) is absolute, under the marginal note Forfeiture: “A dissenting shareholder who fails to comply with subsection (8) has no right to make a claim under this section.” Treadstone Law’s article on dissent rights in an asset sale warns that advice is needed “before the shareholder meeting, not after.”
Subsection (11) does something different. On sending the demand the shareholder “ceases to have any rights as a shareholder other than to be paid the fair value of their shares” — a claimant, not an owner — subject to three exits, including reinstatement if the directors abandon the transaction.
SECTION 05 OF 10
Dissent is an exit, not a veto. On a sale of all or substantially all the property, s. 189(8) says the sale “is adopted when the holders of each class or series entitled to vote thereon have approved… by a special resolution”, which s. 2(1) defines as “a majority of not less than two-thirds of the votes cast”.
Two-thirds carries it; the remaining third is paid out rather than consulted. Section 189(4)(b) is explicit: the notice must state the dissent entitlement, “but failure to make that statement does not invalidate the sale”. Treadstone Law agrees for Ontario in whether a minority shareholder can block a sale — such decisions need “only a special resolution… not unanimous consent.”
SECTION 06 OF 10
Within seven days of the later of the effective date and the demand, subsection (12) requires a “written offer to pay… in an amount considered by the directors to be the fair value, accompanied by a statement showing how the fair value was determined”. The corporation cannot simply name a number. By subsection (13) every offer for the same class “shall be on the same terms”.
Payment follows within ten days of acceptance, but an offer “lapses” if unaccepted within thirty. Failing agreement, subsection (15) gives the corporation fifty days from effectiveness to apply to court to fix fair value, and (16) gives the shareholder “a further period of twenty days” if it does not.
SECTION 07 OF 10
The court “shall then fix a fair value for the shares of all dissenting shareholders”, and subsection (19) requires that those whose shares have not been purchased “shall be joined as parties and are bound by the decision of the court”. One proceeding sets the price for everyone.
The section favours the claimant: no security for costs, a discretion to “appoint one or more appraisers”, and a discretion to allow interest “from the date the action approved by the resolution is effective until the date of payment”. Delay is not free, and the corporation’s valuation is evidence rather than an answer — though Treadstone Law’s overview of the appraisal remedy notes most dissents settle first.
SECTION 08 OF 10
Subsection (26) overrides the entitlement. A corporation “shall not make a payment to a dissenting shareholder” where there are reasonable grounds for believing it would then be “unable to pay its liabilities as they become due”, or that “the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities”.
So a dissenting shareholder in a leveraged deal can win a court-fixed price and still not be paid. Subsection (25) offers a choice: withdraw and be “reinstated to their full rights as a shareholder”, or stay a claimant who, “in a liquidation”, ranks “subordinate to the rights of creditors of the corporation but in priority to its shareholders.” A real place to stand, but not cash.
SECTION 09 OF 10
The CBCA governs federally incorporated companies. A corporation incorporated in Ontario, British Columbia, Alberta or anywhere else is not subject to section 190 at all, and every province has its own analogous provision with its own text. Confirm which statute governs before relying on a single day-count.
Ontario shows how close, and how different. OBCA s. 185 is modelled on the federal section and its intervals are identical — but s. 185(1) confers the right only on a holder “entitled to vote on the resolution”; a proxy “does not constitute a written objection”; and s. 185(12) forfeits the claim for failing the objection, demand and certificate steps, where s. 190(9) attaches forfeiture to the certificate step alone. Treadstone Law’s CBCA and OBCA comparison calls the differences “not significant in practice” — true of their shape, not a reason to work from the wrong section.
SECTION 10 OF 10
For a buyer this is a cash and timing problem, not a title problem. The transaction closes; the obligation to pay fair value stays with the corporation and can stay open for months, with interest running from the effective date. Treadstone Law puts it the same way: a fair-value dispute that drags on “can affect the seller corporation’s cash position and timeline even after the underlying sale has otherwise closed.”
Hence dissent is a closing condition, not a footnote — a cap on the shares that may validly dissent, a holdback sized to the exposure, a walk-away right above a threshold. None of that alters the entitlement; it allocates it.
Finally, separate two situations that look alike. Dissent answers what the corporation resolves to do. A shareholder who simply refuses to sign a share purchase agreement is a problem s. 190 does not reach, because nothing is being resolved; Treadstone Law notes that a holdout’s refusal is instead met contractually, by a drag-along provision, or where the conduct is unfair by the oppression remedy and its Ontario analogue.
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