The Redemption Formula That Owed One Number and Said Another

The situation

The number in the share certificate said thirty-eight thousand dollars. The number Valentina remembered agreeing to, a decade earlier, was closer to one hundred and fifty thousand. Both numbers came from the same clause, read two different ways, and closing that gap is what brought Diego to our office.

Diego worked as a pharmacy technician and, in his off hours, ran the small equipment repair shop his mother Valentina had built and handed to him gradually over several years. Valentina had spent much of her working life as a forklift operator before starting the business, and when she retired from active involvement, the two of them had restructured her ownership so that instead of holding common shares like Diego, she would hold a class of special shares carrying a fixed right to be redeemed, bought back by the company, for a set payout once Diego took over full control. The company itself was modest, generating somewhere between two hundred and fifty thousand and one million dollars a year, enough to support one family comfortably but not enough to absorb a large, unexpected payout without real strain.

The redemption clause had been drafted a decade earlier by an accountant using a template, not a lawyer, and it set the redemption price using a formula tied to the company's net book value at the time of the redemption, a figure that, because of how the equipment on the balance sheet had been depreciated over the years, worked out to a small fraction of what the business and its accounts receivable were actually worth. Valentina and Diego had both assumed, without ever rereading the clause closely, that it would produce something close to a fair value payout, roughly what an appraiser would say the business was worth. It did not.

The gap surfaced only because Diego wanted to formally trigger the redemption so Valentina could fully retire, and the company's accountant, running the calculation for the first time in years, flagged that the formula produced a number far below what anyone in the family remembered intending. Diego brought the numbers to our office within a week, worried that either honouring the clause literally would shortchange his mother after everything she had built, or that ignoring it and simply paying what felt fair would leave the company without a properly documented basis for the payment at all.

Where it went wrong

The clause itself was not ambiguous in the way people usually mean when they say a contract is unclear. It was precise, and it was precisely wrong. It defined the redemption price as net book value per share, a specific accounting figure calculated from the balance sheet, when what the family had actually discussed and agreed to, according to Diego, Valentina, and even the accountant who remembered the original conversation, was a fair market value figure based on an independent appraisal. Net book value and fair market value are not interchangeable ideas. Net book value reflects what assets are worth on paper after years of depreciation; fair market value reflects what a buyer would actually pay for the business as a going concern, including things like customer relationships and ongoing revenue that never appear on a balance sheet at all. For an equipment-heavy repair business old enough to have most of its machinery mostly depreciated, the difference between the two numbers was enormous.

The second problem arrived almost as soon as the first one was identified. Valentina had, until recently, been in a long-term relationship with Burak; the two had lived together for years but had never married, and they separated a little over a year before the redemption issue surfaced. Because they were common-law rather than married, Burak had no automatic claim to a share of property held solely in Valentina's name. Ontario's equalization regime, the rule that splits the growth in a married couple's property roughly down the middle on divorce, applies only to spouses who married each other; it does not extend to unmarried couples no matter how long they lived together. What Burak asserted instead was a claim in unjust enrichment: that he had contributed money and unpaid labour to the household over the years they were together, that those contributions had indirectly supported Valentina's role in the business and the value her shares had accumulated, and that it would be unfair for her to keep the full benefit of the redemption without compensating him for it. That is a real claim under Ontario law, but it is not automatic. It succeeds or fails on evidence of an actual contribution linking Burak to the value in dispute, not merely on the fact that the shares existed while the two of them were a couple.

That claim meant the redemption could no longer be treated as a private matter between Diego and his mother. Any agreement to fix the formula and set a corrected payout now had to account for the possibility that a portion of whatever Valentina received might end up owed to Burak if his unjust enrichment claim succeeded, and Burak, understandably, wanted to be part of the conversation about what that number would actually be before it was finalized, rather than trusting Valentina and Diego to settle it between themselves first.

Two separate legal problems, a badly drafted corporate clause and a personal separation dispute, had landed on the same set of shares at the same time, and neither could be resolved in isolation from the other. Fixing the formula without addressing Burak's claim risked producing a corrected payout that immediately became the subject of a fresh dispute. Addressing Burak's claim without first fixing the formula meant negotiating over a number, thirty-eight thousand dollars, that everyone involved already agreed was wrong.

What we did

1. Reviewed the original share rights and the surrounding correspondence. We pulled the corporate records from a decade earlier, including emails and notes from the accountant who drafted the original clause, to establish what the family had actually intended, since a court or a negotiation is far more persuaded by contemporaneous evidence than by someone's current memory of a conversation many years after the fact.
2. Confirmed the drafting error was genuine, not a change of heart. The accountant's old notes and an early draft of the clause supported Diego and Valentina's account that fair market value had been the intended standard, which mattered because it meant we were correcting a mistake, not asking the company to simply pay more than it had ever promised anyone.
3. Obtained an independent business valuation. To put a real number behind the fair market value standard, we arranged for a qualified valuator to assess the business, including its equipment, customer contracts, and recent revenue trends, producing a defensible figure both families could rely on rather than continuing to argue over competing estimates each side had reason to favour for its own purposes.
4. Brought Burak into the conversation early rather than later. Rather than finalizing a number with Diego and Valentina and then facing a separate fight with Burak's unjust enrichment claim over it, we treated both disputes as part of the same negotiation from the start. That avoided relitigating the same valuation twice, once with Valentina and Diego and again with Burak, and let everyone work from a single agreed set of facts.
5. Drafted the amendment to the share rights. Once the intended standard and the valuation were settled, we prepared formal articles of amendment to correct the redemption clause going forward, replacing the net book value formula with a fair market value standard tied to periodic independent appraisals, so the price would track the business's real worth, not a depreciation schedule. Anchoring the formula to appraisals meant the same gap could not resurface the next time the company redeemed a class of shares.
6. Negotiated a reduced settlement figure with Burak. Rather than the full appraised value, the three parties agreed on a payout to Valentina that split the difference between the strict letter of the old clause and the full appraised amount, with a portion earmarked for Burak's claim, reflecting what the company could actually afford to pay without endangering its cash flow.
7. Structured the payout over time. To avoid straining the company's finances, we arranged for the corrected redemption amount to be paid in installments over roughly eighteen months rather than as a single lump sum, with the schedule written directly into the amended share terms rather than left as an informal understanding between family members that could later be forgotten or disputed.
8. Documented a full release for all three parties. Once the amendment and the payment schedule were agreed, we prepared a release confirming that Valentina's redemption claim and Burak's unjust enrichment claim against the shares were both fully and finally resolved, so the correction could not resurface as a dispute later if the business grew in value, which mattered to Diego most of all.
9. Filed the amendment with the corporate registry and updated the ledger. The final step was administrative but important: filing the articles of amendment formally, cancelling Valentina's old special shares on the company's securities register once the first installment was paid, and issuing a clear paper trail so no future buyer or lender reviewing the company's records would find an unexplained gap.

The outcome

The redemption clause was corrected to reflect fair market value going forward, closing the gap between what the paperwork said and what the family had actually meant a decade earlier. But the final number Valentina received was not the full appraised value of her original special shares. It landed at roughly ninety-five thousand dollars, below the one hundred and fifty thousand she had originally expected, once Burak's separation claim and the company's limited ability to pay were both factored into the negotiation.

Burak received a portion of that amount directly as part of the separation settlement, resolving his unjust enrichment claim without a formal court proceeding over the shares themselves. Diego kept full operating control of the business, and the payout schedule, spread over a year and a half, let the company continue running without a cash crunch that a lump sum of that size would likely have caused. The company's cash flow through the following two repair-season quarters showed no measurable strain from the payments, which is roughly what the installment structure was designed to achieve and Diego was able to keep both of the shop's part-time technicians on staff throughout the transition.

Nobody came away with exactly what they had first asked for. Valentina accepted less than the business was independently appraised at, in exchange for certainty and a faster resolution than a drawn-out separation dispute would have allowed. Diego paid more than the flawed clause technically required, but far less than the full appraised value, and kept the business intact. It was a negotiated compromise built out of two overlapping problems, not a clean win for either side, and it closed a file that could otherwise have dragged through a family dispute and a corporate dispute running in parallel for a year or more, at real cost to all three people involved.

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