A plan of arrangement is a court-approved procedure under the Canada Business Corporations Act that lets a federally incorporated company carry out a major restructuring — an amalgamation, a going-private transaction, a squeeze-out of minority shareholders, or a transfer of substantially all its property — in one court-sanctioned step that binds every shareholder to the same result, including the ones who voted against it.
The CBCA defines the term broadly. Under CBCA s. 192(1), “arrangement” includes “an amendment to the articles of a corporation,” “an amalgamation of two or more corporations,” “a division of the business carried on by a corporation,” “a transfer of all or substantially all the property of a corporation to another body corporate,” “an exchange of securities of a corporation,” “a going-private transaction or a squeeze-out transaction in relation to a corporation” and “a liquidation and dissolution of a corporation.” It is a federal mechanism — a corporation incorporated provincially uses its own act's equivalent provision instead.
The route into court is deliberately narrow. Section 192(3) lets a corporation apply for an arrangement order only “where it is not practicable for a corporation that is not insolvent to effect a fundamental change in the nature of an arrangement under any other provision of this Act” — a squeeze-out of scattered minority holders is the textbook case, because no ordinary share-purchase contract can bind a holder who refuses to sign. Once an application is made, s. 192(4) gives the court wide discretion: it can set notice requirements, appoint counsel to represent shareholder interests, order a meeting of security holders, permit dissent under s. 190, and approve the arrangement “as proposed by the corporation or as amended in any manner the court may direct.”
Getting to that approval takes real evidence, not just a vote. Treadstone Law's guidance on Ontario squeeze-outs notes that “independent evidence of fairness, such as a valuation or fairness opinion from someone without a stake in the outcome, and a process that lets minority shareholders be heard, both matter to getting court approval,” and that minority holders “generally still have dissent rights, entitling them to have a court determine the fair value of their shares” even after the arrangement is approved.
An independent sponsor's holding company owns 78% of a CBCA-incorporated portfolio company; the remaining 22% is split across eleven family shareholders, several of whom won't return calls about a straight share sale. Rather than negotiate eleven separate agreements, the sponsor commissions an independent fairness opinion on the minority shares, applies to court under s. 192(3), and the court orders a meeting of the minority holders and confirms their s. 190 dissent rights. Once the court approves the plan, every minority shareholder — including the ones who never responded — is bound to sell at the approved price on the approved date.
See also: Share purchase agreement · Rollover equity · Section 85 rollover.
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