(Mikelsteins v. Morrison Hershfield Limited, 2019 ONCA 515) tells us that with most shareholders agreements, the shareholder is deemed to have sold his shares back to the company 30 days after termination. That is the standard valuation date and remains so.
The Court of Appeal has determined that the shareholder agreement governs parties as shareholders, regardless of what the law says about the party as employee.
Previous to Mikelsteins, courts regularly ignored the shareholders agreement if there was some other legal relationship (employment) between the parties.
The motion judge in Mikelsteins, and other courts had ignored this 30 day redemption requirement and has consequently, extended the full envelope of shareholder’s rights (dividends, meetings, notice, voting etc.) to the end of the notice period.
The importance of Mikelsteins is that the Court of Appeal properly asserts the dominance of a written agreement between the parties (shareholders agreement) which speaks to the precise event in exact terms.
The logical error made by previous courts, including the Mikelsteins motion judge was to act as though all written agreements, between the parties, are subservient to and are to be interpreted mutatis mutandis to a common law notice extension.
At its narrowest, the court of appeal simply said that the motion judge mis-interpreted this particular shareholders agreement, which can be read consistent with the extended notice award, without doing violence to the shareholders agreement: (without keeping the terminated employee as shareholder through the notice period).
The court of appeal decision is consistent with common sense: a common law notice award does not extend the continuation of the employment contract qua contract. The employee does not get to come to work, use the company car, park in his own spot, go to the employee meetings etc. The only thing that a notice award does is provide money damages for notice. It is not theoretically unsound that he be deemed out off of the shareholders register.
The proper consideration of a common law notice award is as an exception to the matrix of written contracts between the parties.
