The SCC Reconsiders Shareholder Oppression Under the CBCA

In Mennillo v. Intramodal inc.¹, the Supreme Court of Canada considered whether a corporation’s non-compliance with the corporate formalities of the Canada Business Corporations Act (“CBCA”) can constitute shareholder oppression.

The claimant, Mr. Mennillo and his associate Mr. Rosati were together the sole shareholders and directors of Intramodal, a small privately run company. Upon Mennillo’s resignation as officer and director in May 2005, Intramodal filed an amending declaration with the corporate registry removing him as a director and as a shareholder. The corporation, however, did not follow the legal formalities under the CBCA before registering the share transfer to Rosati. Notably, Mennillo did not properly endorse or deliver the transferred shares.

Five years later, Mennillo brought an oppression claim under s. 241 of the CBCA, arguing that he had been unjustly deprived of his shareholder status. The trial judge’s decision dismissing the claim was confirmed on appeal. Finding no found no palpable and overriding error in the trial judge’s factual findings, the SCC found that Mennillo could have no reasonable expectation of being treated as a shareholder. While the corporation may have failed to observe certain requirements of the CBCA, this does not, in and of itself, give rise to an oppression remedy. This decision does not exclude the possibility that an oppression remedy be triggered where such non-compliance does in fact frustrate a shareholder’s reasonable expectations.