In its decision Mennillo v. Intramodal inc., 2016 SCC 51 (Intramodal), the Supreme Court of Canada (Court) was asked whether a corporation’s failure to comply with statutory formalities was oppressive against a shareholder. The majority ruled that based on the facts the company’s failure to comply with certain Canada Business Corporation Act (CBCA) requirements did not trigger the oppression remedy. In the words of Justice Cromwell, who provided reasons for the majority, “sloppy paperwork on its own does not constitute oppression” (para 5).
Companies, directors and their shareholders should be cautious, however, not to draw the wrong lesson from the majority’s decision in Intramodal. Compliance with corporate statutes, whether federal or provincial, is not optional. In addition to violating the law, a failure to comply with corporate statutory formalities can still trigger an oppression remedy where the violation frustrates the reasonable expectations of a company stakeholder, which includes a company’s shareholders, directors, officers and creditors.
As this post will discuss, the decision in Intramodal did not establish a precedent that statutory non-compliance on its own cannot result in an oppression remedy.