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Digest of the Week – Limits on Obligations Imposed on Shareholders

Digest of the Week – Limits on Obligations Imposed on Shareholders

Limits to the obligations corporations can impose on shareholders

Barry v. Kamloops Hangars Ltd.
2016 CarswellBC 264
British Columbia Supreme Court

Business associations --- Specific matters of corporate organization — Shares — Miscellaneous

Each of ten shares issued by respondent company entitled shareholder to designated space in company's airplane hangar — Each shareholder paid equal share of cost of maintaining hangar, including cost of insurance — At annual general meeting in 2012 or 2013, one shareholder proposed each shareholder should be required to obtain personal insurance to supplement company's policy — Motion was approved by majority of shareholders — In March 2015, directors of company passed resolution requiring each shareholder to obtain separate general liability insurance policy for $2 million for stated purpose of ensuring adequate funds were available to ameliorate any nuisance — Failure to provide proof of insurance was to be sanctioned by fine of $200 — Petitioner, who had owned share in company since 1985, delivered written objection and asked for extraordinary general meeting — Company refused to call meeting and forfeited petitioner's share with result petitioner was not permitted to speak or vote at company's next annual general meeting — Petitioner brought application for declaration resolution was ultra vires — Application granted — While s. 26.4 of company's articles prohibited any shareholder from creating or causing any fire hazard or nuisance that interfered with another's use of their designated space, and s. 26.7 gave directors power to make rules or regulations to control, prevent or abate any nuisance, provisions did not permit directors to require each shareholder to obtain personal liability insurance — There was nothing to suggest petitioner had done anything to create or cause nuisance, or that his refusal to obtain insurance interfered with any other shareholder's quiet enjoyment of their designated space — Insurance resolution of no force and effect and could not be imposed on any shareholder — Petitioner's share had not been forfeited and was in good standing.
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