Ontario court orders company buyout but freezes payout over Russia sanctions

Justice W.D. Black was not persuaded. He found the investor knew, or should have known, about the overlapping ownership from the outset, having been shown a corporate chart when it invested and having helped draft the very agreements it later attacked. The oppression claim was not made out, he ruled, and there was no basis for personal liability against the individual respondents. He found nothing approaching deceit, dishonesty, or bad faith. 

What makes the ruling useful for advisors and firms with private-company clients is what came next. Both sides agreed the company should buy out the investor’s shares. The buyout then collided with Canada’s Russia-sanctions regime. 

The respondents argued the investor was effectively controlled by a sanctioned Russian insurer, whose founders sit on Canada’s sanctions list, so any court-ordered payment could breach the rules under the Special Economic Measures Act. The investor said it was not sanctioned, its owners were not sanctioned, and the concern was raised only to sideline it. 

The judge accepted that the timing looked tactical. Even so, he said the motives did not matter. Pointing to a series of regulatory “red flags,” including the owners’ senior roles at the sanctioned insurer, he found a real issue over whether the investor is caught by the sanctions rules. He declined to clear it and left that question to Global Affairs Canada, which is already weighing submissions from both sides. 

The practical result was that the court set a price but withheld the cash. Using the midpoint of competing expert valuations, the judge pegged the firm at US$11,944,500 and the investor’s stake at US$1,731,952.50 before any discount. Because no oppression was found, he directed a 10% minority discount. No money can move until Global Affairs Canada rules.