Leavens et al. v Schwartz
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On June 5, 2023, the Commercial List granted an application by two minority shareholders to enforce the “shotgun” buy/sell clause in a unanimous shareholder’s agreement. Matthew Gottlieb, Philip Underwood and Maya Bretgoltz represented the Applicants in the dispute.
The minority shareholders offered to purchase the shares held by the majority shareholder. The majority shareholder refused to respond, arguing that the offer was invalid. Justice Penny of the Ontario Superior Court (Commercial List) found that the buy/sell offer made by the Applicants complied with the buy/sell clause in the company’s USA and that the Respondent had no basis to refuse to comply with the clause. The decision demonstrates that buy/sell clauses will be enforced as written and a court will not rescue a party who later regrets contractual arrangements that were carefully designed and accepted. It also importantly emphasizes that buy/sell provisions are meant to allow for an expeditious and inexpensive separation and should be dealt with by way of an application where possible.