The right to dissent lets a shareholder who votes against certain fundamental corporate changes force the corporation to buy their shares at fair value instead, rather than being carried into the transaction on its terms.
“Appraisal right” is the term U.S. corporate law — Delaware’s in particular — uses for this mechanic; the Canada Business Corporations Act, s. 190 and its provincial equivalents call it the right to dissent, and that is the term to use for a Canadian transaction. Under s. 190, dissent is triggered by an amalgamation other than a short-form one, a continuance to another jurisdiction, a sale of substantially all the corporation’s assets outside the ordinary course of business, or a going-private or squeeze-out transaction. The statute runs on a strict clock: fair value is fixed “as of the close of business on the day before the resolution was adopted”; the corporation must give the dissenting shareholder notice within ten days of the resolution passing; the shareholder then has twenty days from that notice to send a written demand for payment; and the corporation must send an offer to pay, with a statement of how fair value was determined, within thirty days — and that offer lapses if not accepted within thirty days of being made. A shareholder cannot dissent on only part of their holding, and once the demand is sent, they cease to have any rights as a shareholder except to be paid. One Ontario firm’s guidance for shareholders facing this is blunt about the risk: missing any one of the procedural steps — objecting before or at the meeting, then following through with the notices after the vote — can forfeit the right entirely.
A fund holds 15% of a portfolio company whose board negotiates a going-private amalgamation the fund believes undervalues the business. It votes against the resolution at the meeting, and once the resolution passes anyway, the corporation has ten days to send the required notice. From there the fund has twenty days to send its written demand for payment, and the corporation thirty more to offer a fair-value price with its reasoning — failing which the disagreement moves to a court application to fix fair value, decided as of the day before the vote, not the deal price the other shareholders accepted.
Oppression remedy · Fiduciary duty of a director · Drag-along right.
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