In a recent British Columbia Supreme Court decision – Emadi v. Soleymani, 2025 BCSC 1178 – the Court had to determine the appropriate remedy in a shareholder dispute as to the future ownership of a company.
Under a “shotgun” sale order, the judge ordered the petitioner to make the first offer to buy out the respondent – the silent partner.
Facts
The petitioner, Mr. Emadi, was the President of the company and had managed the company since its founding. The respondent, Mr. Soleymani, was a silent partner.
Emadi and Soleymani were the only directors and equal shareholders in VanEx Currency Exchange Inc. – a currency exchange business facilitating money transfers between Iran and Canada.
They agreed that the solution to the dispute was the sale of the company from one shareholder to another.
Mr. Emadi argued that he was more closely attached to the corporation. He expected the respondent, Mr. Soleymani, to make him an offer to sell his shares.
Mr. Soleymani disagreed, and argued that Mr. Emadi should make the offer to him, since Mr. Emadi has a greater knowledge of the business. Further, Mr. Soleymani argued that an offer to sell assets instead of shares should be made.
An asset sale does not work well where a business is a going concern and has goodwill flowing towards it.
Issues
- Is a “shotgun” sale an appropriate remedy?
- Who should make the first offer?
Decision
The Court held:
1. One shareholder should buy out the other, and that an asset sale was not appropriate, agreeing with the petitioner that an asset sale would not bring finality to the dispute.
Further, an asset sale could create uncertainties for employees, as well as for landlords, who, for instance, could refuse a transfer of the leases. Such uncertainties could lead to further litigation.
A “shotgun” sale, while not always an appropriate solution, is the best solution.
Both parties agreed to a “shotgun” style sale. The Court “should be slow to second guess the business decisions of sophisticated parties with legal advice”.
2. The petitioner should make the initial offer to purchase the respondent’s shares.
The petitioner has a closer affiliation with the company, and is able to understand the fair value of the corporation better, since he is involved in day-to-day operations of the company.
Typically, in a “shotgun” offer, a party makes an offer to sell its shares first. However, it is not always the case. The parties’ conduct and reasonable expectations matter.
Here, the parties had already contemplated the petitioner as the purchaser, and the respondent as the seller.
The Court ordered for the petitioner to make an offer to purchase the respondent’s shares. If the respondent declines to sell his shares, on the terms offered, then he will have to purchase the petitioner’s shares at the same prices and on the same terms.
Conclusion
A “shotgun” order for sale of a company’s shares is often a preferred solution to a shareholder’s dispute as to the ownership of a company. It is less costly and more efficient.
However, where there is a lack of knowledge about the value of the business, the shotgun procedure can work unfairness.
Here, the Court identified other scenarios in which other remedies should be considered, including a scenario, 1) where there is a significant dispute about the value of the shares; or 2) where a company does not have assets that the parties can evaluate.
The parties, especially those with equal decision-making authority, should consider how potential disputes should be addressed at early stages of their business relationship. A well-drafted shareholder agreement, with a clear path forward in case of a dispute, could be a solution.
Link to decision
https://www.canlii.org/en/bc/bcsc/doc/2025/2025bcsc1178/2025bcsc1178.html
