Squeezing Out Two Minority Holders the Right Way in North York

The situation

The buyer was a numbered acquisition company backed by a private equity fund, built to roll up small logistics and courier operators in the Greater Toronto Area. Its latest target was a family-run trucking and delivery company based in North York, generating steady but unspectacular margins after two decades of contracts with local retailers. After months of negotiation, the founding family agreed to sell their entire holding, which came to 96 percent of the company's shares, for a total enterprise value of roughly $6.2 million, payable mostly in cash with a small portion held back against post-closing adjustments.

Gurpreet, a director installed by the private equity fund to run the acquisition, expected a clean close once the family's shares were locked up. Then the cap table review turned up the remaining 4 percent. Two former employees, Marek and Tomasz, had each been given a 2 percent equity stake more than a decade earlier as part of a loyalty bonus when the company was smaller and cash was tight and the founders wanted to keep good drivers from leaving for competitors. Marek had since moved on to work in a warehouse; Tomasz worked as a security guard. Neither was involved in running the business anymore, and neither had been part of the sale negotiations, because neither was selling. The family's 96 percent was leaving. Marek and Tomasz's combined 4 percent was staying, unless the buyer found a way to bring it into the deal.

The legal problem

A buyer cannot simply outvote a minority shareholder out of existence, and a purchase agreement with the majority does not bind shareholders who never signed it. Under the Business Corporations Act (Ontario), a corporation can be eliminated as a distinct entity through an amalgamation, where two companies combine into one. When a buyer already controls the overwhelming majority of a target's shares, a common technique is to incorporate a shell company, amalgamate it with the target, and structure the transaction so that minority shareholders receive cash for their shares instead of shares in the surviving corporation. Done properly, this is a lawful and well-established route to consolidating ownership. Lawyers and directors sometimes call it a squeeze-out or a going-private step, even outside the public-company context where those terms originated.

The catch is that "lawful" comes with conditions, and skipping any of them turns a routine restructuring into an oppression claim. Minority shareholders being cashed out involuntarily are entitled to advance notice of the transaction, a fair value for their shares determined on a reasonable basis, and the right to dissent, meaning they can reject the offered price and instead ask a court to determine what their shares are actually worth. If the valuation looks engineered to lowball the minority, or if the notice and procedural steps are rushed or skipped, the minority holders have real grounds to challenge the transaction, and the directors who approved it can face personal exposure for failing to treat shareholders fairly. Gurpreet's instruction to Treadstone was blunt: do this correctly, because doing it quickly and doing it defensibly were not the same thing, and the fund's counsel back east had made clear which one mattered more to future deals.

What we did

1. Confirmed the cap table and share terms first. Before touching the amalgamation structure, we verified exactly what rights attached to Marek and Tomasz's shares, whether any shareholder agreement restricted a squeeze-out, and whether the loyalty bonus grant years earlier had created any side promises. It had not; the shares were ordinary common shares with no special protections, which meant the standard process applied.
2. Retained an independent business valuator. Rather than let the buyer set its own price for the minority shares, we arranged for a third-party valuation of the company as a whole, then applied that value proportionately to the 2 percent stakes. The valuation came in close to the $6.2 million deal price for the family's 96 percent, supporting a fair value of roughly $124,000 for each 2 percent holding. Using an independent valuator, rather than the buyer's internal numbers, was the single most important thing done to protect the transaction from later challenge.
3. Structured the amalgamation and gave proper notice. We incorporated the shell subsidiary, prepared the amalgamation agreement, and ensured board and shareholder approvals were obtained in the sequence the Business Corporations Act requires. Marek and Tomasz each received formal written notice of the transaction, the offered price, the valuation basis behind it, and a plain explanation of their right to dissent, well ahead of the required notice period rather than at the last possible moment.
4. Kept a complete paper record. Every step, the valuation engagement, the notice letters, the board minutes, the shareholder resolutions, was documented and dated. If the transaction were ever challenged, the buyer needed to be able to show, not just assert, that the process had been fair from the outset.
5. Responded to the dissent when it came. Tomasz accepted the offered price and was cashed out without incident. Marek did not. He engaged his own counsel and formally dissented, triggering the statutory process where, if the parties cannot agree, a court determines the fair value of the dissenting shareholder's stock. We advised Gurpreet on the buyer's options at that point: negotiate a settlement above the original offer, or proceed to a court-supervised valuation, which would take longer and cost more in legal fees on both sides.

The outcome

The amalgamation closed on schedule. The family's 96 percent transferred as planned, and Tomasz's 2 percent was cashed out for roughly $124,000 within weeks of closing. Marek's dissent kept his portion of the transaction open for close to eight months while the parties exchanged valuation positions and each side's accountants revisited the underlying numbers. Rather than proceed to a full court hearing, the buyer settled with Marek at roughly $150,000 for his 2 percent stake, about $26,000 above the original offer, plus the additional legal costs of the extended process on both sides, which added a further modest amount to the overall cost of consolidating ownership.

That was not the outcome Gurpreet had hoped for. The fund had budgeted for a fast, uncontested squeeze-out, and instead absorbed a delay and a modest premium it had not planned to pay. But the loss was contained precisely because the process had been followed correctly from the start. Because the valuation had come from an independent source, because notice had been proper, and because the paper record was complete, Marek's dissent stayed within the narrow lane the law provides: a disagreement over price, resolved through the statutory valuation mechanism rather than a fight over fairness itself. It never escalated into a broader oppression claim over how the minority had been treated, which would have exposed the buyer to far greater cost, delay, and reputational risk in future acquisitions in the same industry. Doing it by the book did not make the friction disappear. It kept the friction small, predictable, and priced in rather than open-ended.

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