Legal Blog

Disclosure

Under sections 140-146 of the Business Corporations Act, a corporation must keep specified records. Shareholders have a right to audited statements and to various other basic corporate records, such as a list of directors, articles of incorporation, and minutes of meetings. Directors are entitled to far more information, including detailed financial information. Can a shareholder get more financial information than yearly audited statements? This question was discussed in Thomas v. Thomas Health Care Corp. [2005] O.J. No. 975 (S.C.J.).

Family

The applicant was no ordinary shareholder. He was one of two siblings, along with two parents, in a family corporation. He was ousted as a director and officer, but was liable as guarantor on a $17,500,000 debt of the corporation. The rest of the family allowed him access to those records set out in the BCA for shareholders, but nothing else. The applicant wanted more; he wanted ongoing financial disclosure to ensure that his guarantee was not at risk.

The corporation argued that the applicant was entitled only to what the corporation had already given and no more. It agreed that if the applicant could make a case for an oppression remedy, he could commence an action and obtain the financial information on discovery, but argued that the applicant could not obtain it otherwise. The corporation was unable to give any reason for not delivering the information, other than an unspecified cost.

The judge’s view of all of the corporation’s arguments, you ask?

“What nonsense. The applicant should be privy to the information to know the direction in which his investment is being taken by the rest of his recalcitrant family and the liability he faces unshielded from their action.”

This case is an example of our proposition that most cases are not decided based on black letter law. For most judges, equity rules. In many cases, the smell factor is paramount.