Can a minority shareholder be forced to sell their shares even if they think the price is too low?
It depends on the mechanism being used. Where a shareholders' agreement includes drag-along rights, a majority reaching an agreed threshold can generally require minority shareholders to sell on the same terms in a sale of the whole company, specifically to prevent a minority holdout from blocking a deal the majority wants — in that situation, disagreeing with the price doesn't usually stop the sale from proceeding as to the minority's shares too.
Without a drag-along provision, a minority shareholder generally can't be forced to sell their own shares just because the majority wants them to, though the majority could still sell the company's assets, as opposed to individual shareholders' shares, through a properly authorized corporate resolution. If a minority shareholder believes the price itself is unfairly low or the process was conducted unfairly, the oppression remedy under the Business Corporations Act may provide recourse, but it requires showing the conduct was genuinely unfair, not simply that a higher number would have been preferred.
Key takeaways
- Drag-along rights in a shareholders' agreement can compel a minority sale at the majority's terms.
- Without drag-along rights, a minority shareholder's own shares generally cannot be forced into a sale.
- The majority can still sell corporate assets separately through a properly authorized resolution.
- The oppression remedy requires genuinely unfair conduct, not just disagreement over price.