Know Your Exit Rights: A Minority Shareholder’s Guide to Appraisal in Ontario
When certain significant corporate transactions occur, such as mergers, sale of assets, or reorganizations, minority shareholders may have the right to formally oppose the transaction and demand to be bought out at fair market value. These rights, known as appraisal rights (also known as dissent rights) allow shareholders who disagree with a fundamental corporate decision to exit the company and receive compensation for their shares instead of being forced to accept the outcome. In this article, we discuss the process of triggering one’s appraisal rights as well as the advantages and disadvantages of proceeding down this formal avenue of redress.
What Triggers Appraisal Rights?
Under the Canada Business Corporations Act (CBCA) and comparable provincial statutes like Ontario’s, appraisal rights are only triggered in specific, statutorily defined scenarios. Common examples include:
- Amendments to articles affecting share structure or restrictions
- Amalgamations or mergers
- Continuance (moving the corporation’s jurisdiction)
- Sales of all or substantially all assets
- Going-private or squeeze-out transactions
In Ontario, these rights are set out in Section 185 of the Business Corporations Act (Ontario) (OBCA). Once the right has been exercised, a shareholder may initiate a legal process to compel the corporation to pay the fair market value of their shares, enabling the shareholder to exit the company.
Who Can Exercise Dissent Rights?
Any registered shareholder (holding any class or series of shares) who objects to a proposed fundamental change can exercise dissent rights, provided they follow the statutory procedure.
Beneficial shareholders (those holding shares through a broker or nominee) must arrange to have their shares registered in their name to exercise these rights.
Payment for Shares
If the shareholder accepts the corporation’s offer or a court determines the fair value, the corporation must pay the amount within 10 days (or as otherwise ordered by the court).
Upon payment, the shareholder ceases to have any rights as a shareholder, except the right to receive payment.
Exceptions and Limitations
No Dissent Rights for Certain Shareholders: If the corporation is offering shares that are identical in all material respects to the shares held by the dissenting shareholder (e.g., in an amalgamation), dissent rights may not apply.
Insolvent Corporations: If the corporation is insolvent or paying dissenting shareholders would render it insolvent, the court may modify or deny the dissent remedy.
Public Corporations: For corporations whose shares are publicly traded, dissent rights are limited in certain cases (e.g., amalgamations where shareholders receive equivalent securities).
Procedural Roadmap in Ontario in 2025
- Notice of Meeting & Dissent Intent
Shareholders must receive a formal notice of the meeting where the transaction will be voted on. Before or during the meeting, the dissenting shareholder must send a written Notice of Dissent, a written objection to the corporation, that signals the shareholder’s intent to dissent and preserves their rights. - Confirmation of Adoption
If the resolution is passed, the corporation must notify any shareholder who objected to the transaction by issuing a Confirmation Notice, outlining the shareholder’s rights and the appraisal procedure. The dissent rights are only triggered in response to an approved corporate action. - Demand for Payment
Upon receipt of the Confirmation Notice, the dissenting shareholder has a limited timeframe to submit a Demand for Payment seeking fair value for their shares. - Offer to Pay
Within seven days after the demand or resolution adoption, the corporation must provide an Offer to Pay that includes its valuation rationale. - Acceptance or Court Proceedings
If accepted by the dissenting shareholder, payment must be made within ten days. Otherwise, the shareholder may initiate court proceedings to determine fair value.
Advantages & Limitations for Minority Shareholders in Exercising their Appraisal Rights
Advantages:
- Allows a shareholder to exit a transaction and cash out when minority interests diverge
- Permits them to obtain the fair value of shares, including a premium in some cases
- Safeguards against potential abuse by controlling shareholders or management
Limitations:
- There are strict procedural rules in exercising these rights; missteps can void rights
- There is a risk of paying costs if unsuccessful
- There may be limited rights if expressly waived in the shareholders agreement[1]
Practical Recommendations
When addressing legal and financial processes, it’s critical to verify statutory timelines and ensure the format of notices and demands complies with applicable regulations. In the context of phased transactions, strategic timing for valuation should be carefully considered to align with transaction phases and optimize outcomes. Be prepared for potential liability for litigation costs if an appraisal process does not succeed, as this could lead to financial exposure. Additionally, in related-party transactions, it’s essential to conduct a formal independent valuation that adheres to regulatory rules to ensure compliance and mitigate risks.
Final Thoughts
Appraisal rights under Ontario law offer shareholders a powerful but highly technical mechanism to exit certain major corporate transactions while seeking fair value for their shares. When properly exercised, these rights can serve as a vital safeguard for minority interests during mergers, reorganizations, or asset sales. However, the procedures are strict, time-sensitive, and missteps can lead to forfeiture of rights or financial risk.
Given the complexity and high stakes involved, especially in transactions with related parties or where fair value is contested, it is essential to consult with a qualified corporate lawyer prior to embarking on any complicated process. Legal advice can help you preserve your rights, meet statutory deadlines, and maximize your potential recovery.
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Zuzanna Kuza, B.A., J.D., Associate Lawyer
Zuzanna Kuza is an associate lawyer at Kalfa Law Firm. Zuzanna’s practice is focused in corporate-commercial and private M&A law including corporate reorganizations, corporate restructuring, mergers and acquisitions, commercial financing, secured lending and transactional law.
© Kalfa Law 2025
The above provides information of a general nature only. This does not constitute legal or accounting advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.
[1] In Husack v. Husack, 2024 ONCA 117, the Ontario Court of Appeal held that a minority shareholder could not exercise statutory dissent rights in connection with a sale of substantially all assets, due to a general waiver of statutory rights under the OBCA in the shareholders agreement.
