Wednesday, 9 May 2012

Oppression Remedy Does Not Protect Directors' Access to Corporate Records

It is trite law that directors, as the persons wholly responsible for management of a corporation, are entitled to access all corporate records, including all financial and accounting records of a company.  Under the BCA, this right is enshrined in s. 196(3), which provides that:

(3) A company must make its accounting records available for inspection by any director during statutory business hours and must, on request, provide to the director a copy of any of those records.
What happens, however, when a director is denied access to these records, for example, by majority or de facto managing directors?  As the court explained in Brown v. Dee Lake Resort Ltd., 2012 BCSC 647, albeit without any substantive analysis, such denial does not provide a valid basis for an oppression claim under s. 227 because this remedy only protects shareholders', and not directors' rights:
... what the petitioners are really seeking is a declaration that the company’s acts have been oppressive or unfairly prejudicial to the petitioner/directors because the director/petitioners were not being given access to those data.

The fatal flaw in that submission is that these complaints have to do with rights, interests or positions that accrue to the petitioners in their capacities as directors. In short, the complaints have to do with directors’ rights, not shareholders’ rights. Therefore, whether the petitioners’ complaints about access to financial and reservations data are founded in fact or not, they cannot bottom a proceeding under s. 227.
Fortunately, directors are not without a recourse.  As mentioned in yesterday's post, also dealing with the oppression remedy, s. 228(2) should allow the court to issue an injunction to direct a company, shareholder, or director to comply with the Act, including compliance with s. 196: