What is a squeeze-out or going-private transaction using a plan of arrangement?

A squeeze-out, or going-private transaction, is a deal where a controlling shareholder (or a small group) eliminates the remaining minority shareholders, typically by exchanging their shares for cash or other consideration, so the corporation ends up wholly owned by the controlling group. A plan of arrangement under the Business Corporations Act is a common vehicle for this because it lets the corporation implement the buyout in one court-sanctioned step and bind all shareholders to the same result, including minority shareholders who don't want to sell.

Because this kind of transaction puts the controlling shareholder's interests directly at odds with the minority's, courts scrutinize it more closely than an ordinary arrangement. 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. Minority shareholders who disagree with the price generally still have dissent rights, entitling them to have a court determine the fair value of their shares instead of accepting the deal terms.

Given the conflict of interest built into these deals, both controlling shareholders and minority shareholders should get independent legal advice before a vote.