The general manager candidate who almost walked over one contract

The situation

What Jelena and Mirela were actually afraid of was not a lawsuit. It was a phone call, the one where the general manager candidate they had spent four months courting called to say she was taking the other offer instead. The two of them had built their landscaping company over a decade from what began as weekend work: Mirela mowed and mulched residential yards around Burlington on her days off from a full-time landscaping crew job, and Jelena, who cut hair for a living, handled the bookkeeping and the phone. What started as a side hustle between two friends grew into a company with a dozen crews, several commercial contracts, and revenue pushing past half a million dollars a year, at which point Jelena left hairdressing behind entirely to run the office full time. They had reached the point most small companies reach eventually: they needed someone to run daily operations who was not one of the founders, and they had found her.

The candidate had run operations for a larger competitor and had a reputation for being sharp about governance, the kind of person who read a company's contracts before she read its marketing material. That was exactly why they wanted her, and exactly why they were nervous about what she would find. The company's third shareholder, Arben, also owned a separate small equipment rental company, and the landscaping company had for years leased and occasionally purchased heavy equipment from Arben's business, informally, on terms nobody had ever documented carefully because everyone involved trusted everyone else.

A larger purchase was now on the table: a set of used commercial mowers and a small fleet upgrade, worth a meaningful chunk of the company's annual revenue, that Arben's rental company happened to have available at a price that seemed reasonable but had never been checked against the open market. Jelena and Mirela had approved similar, smaller purchases from Arben informally for years without a second thought. This one was too large to wave through the same way, not because either of them doubted Arben's fairness, but because they could picture exactly how it would look to someone reading the file for the first time.

If the general manager candidate discovered a significant, undocumented related-party deal sitting in the company's recent history, one negotiated by the same person on both sides of the table, they doubted she would stay to ask questions. She had other offers. The practical fear was not a future legal claim; it was losing the one person they had found to run the company they had spent a decade building.

What the law actually said

Ontario corporate law does not prohibit a director from having a personal financial interest in a contract the company enters into, but it does require the interest to be disclosed and, in most cases, requires the interested director to step back from voting on the matter. A transaction handled properly, disclosed, negotiated at arm's length by directors without a personal stake in it, and priced fairly, is entirely legitimate. A transaction handled carelessly, decided informally by everyone in the room including the person benefiting from it, is the kind of thing that can be challenged later by a shareholder, an incoming executive raising concerns internally, or an outside party doing diligence on the company for any reason, a financing application, a sale, or simply a new hire's first week reviewing the books.

The standard tool for handling this kind of conflict is a special committee: a subset of the board, excluding the conflicted director entirely, given authority to review, negotiate, and approve the transaction on the company's behalf. Where the approach commonly fails is in how the committee's authority gets written down, or does not get written down at all. A mandate drafted too broadly can look like the committee was handed open-ended power without real board oversight, inviting the argument that the process was informal window dressing. A mandate drafted too narrowly, covering only the final approval and not the negotiation that led to it, leaves the actual bargaining exposed to the same conflict the committee was meant to solve, since the interested director may still have shaped the terms before the committee ever saw them.

The task was to write a mandate for Jelena and Mirela, the two non-conflicted shareholders, that covered the full process: authority to commission an independent valuation of the equipment, to negotiate price and terms directly with Arben without him present for that negotiation, and to approve or reject the final deal, all recorded formally rather than handled the way the company had handled every prior purchase from Arben. The mandate needed to be specific enough to withstand a later reviewer asking exactly what the committee was empowered to do and confirming it had, in fact, done only that.

None of this required treating Arben as having done anything wrong. The point of the process was not to punish a conflict but to remove it from the room, so that whatever price was eventually agreed could be defended on its own terms rather than defended by pointing to years of prior trust.

What we did

1. Drafted a written special committee resolution naming Jelena and Mirela as the committee, excluding Arben entirely from its deliberations and any vote, and defining its authority precisely: to commission a valuation, negotiate terms, and approve or reject the equipment purchase, so the scope could not later be read as either a rubber stamp or an unauthorized overreach beyond what the full board had actually delegated to it.
2. Commissioned an independent valuation of the equipment from a third-party appraiser with no relationship to either company, replacing the informal price Arben had proposed with a documented, defensible market figure the committee could point to regardless of how the negotiation eventually landed and regardless of who asked to see it later. A committee that simply accepted Arben's number, however fair it might genuinely have been, would have had nothing independent to point to if the price was ever questioned down the road.
3. Ran the negotiation directly with Arben through the committee, with Jelena and Mirela handling every conversation about price and terms while Arben was kept informed of the process but excluded from shaping the committee's internal position. Even a well-intentioned conflicted party sitting in on the committee's internal discussions would have undermined the very separation the process was designed to demonstrate, so preserving that separation gave the eventual result its own independent footing.
4. Identified a title and registration complication partway through, when it emerged that part of the equipment fleet still needed a provincial safety certification and ownership transfer processed through the relevant government office before the sale could formally close, a step outside anyone's control that immediately became the pace-setter for the rest of the file no matter how quickly the negotiation itself was resolved.
5. Managed the company's timeline around the government processing delay, keeping the general manager recruitment on a separate track so the hiring decision did not have to wait on a government office's own schedule, while still ensuring the equipment deal would be fully documented and closed before her start date, not left as an open item on her first week's desk.
6. Prepared a clean governance file for the incoming general manager's review, including the committee resolution, the independent valuation, correspondence with Arben, and the final negotiated terms, organized in the order a skeptical reader would want to see them rather than however they happened to accumulate. So that when she did look, as everyone expected she would, the file demonstrated a properly handled conflict rather than one that had been avoided, minimized, or left undocumented.
7. Advised the committee on the final terms when the appraisal came in below Arben's original asking price, helping Jelena and Mirela hold firm on a figure closer to the independent valuation while acknowledging Arben's reasonable points about the equipment's condition and his own need for a timely sale, landing on a negotiated middle ground rather than either side simply taking its opening position.

The outcome

The equipment deal closed at a price roughly ten percent below Arben's original proposal but somewhat above the strict appraised figure, a genuine compromise neither side got everything from. The government processing delay on the equipment title transfer added close to two months to the timeline, pushing the closing later than the company wanted and costing a modest amount in extended rental fees paid to bridge the gap in the meantime.

The general manager candidate accepted the position and started roughly on schedule. During her first weeks she did, as expected, review the company's recent contracts, including the equipment purchase, and raised a handful of questions about the process. The committee resolution, the independent valuation, and the documented negotiation answered those questions directly, and the matter closed without becoming the credibility problem Jelena and Mirela had feared.

The compromise was not free. Arben accepted less than he had originally asked for the equipment, a real concession given the informal trust the three had operated on for years, and the company paid more in bridge rental costs than a faster closing would have cost. But the alternative, an undocumented related-party deal sitting in the company's history when its first outside executive arrived, carried a risk none of the three were willing to take for the sake of avoiding a difficult conversation. The company has since adopted the same special committee process as a standing practice for any future transaction involving a director's outside interests, rather than treating it as a one-time fix built for this particular hire.

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