The British Columbia Court of Appeal upheld an oppression finding against those controlling a family investment company created through an estate freeze. A daughter who had accepted limited involvement while her father controlled the company was not required to accept exclusion, conflicted transactions and unequal dividends after her brother took charge.
The ruling is significant for family businesses passing control between generations. An estate freeze may explain a shareholder’s initial expectations, but it does not permanently determine how that shareholder must be treated.
Control Passed From Father to Son
In Smith v. Tassone, 2026 BCCA 387, Henry Smith established H.N. Co. Enterprises Inc. as a family holding company. Through an estate freeze, he retained control using preferred shares and gave each of his three children a common share. A later reorganization placed their common shares in separate classes, allowing different dividends without changing their ownership or voting rights.
After Henry suffered a stroke in 2018, his son James assumed effective control. Following Henry’s death in 2020, James remained the company’s sole director. His sister Kimberley Tassone challenged the management of the company, including her lack of financial information and transactions involving company assets.
The trial judge found oppressive and unfairly prejudicial conduct. The respondents to the petition appealed, arguing that Kimberley’s expectations should reflect the family’s long history of informal management under Henry.
Expectations Can Change With Control
Under section 227 of B.C.’s Business Corporations Act, oppression relief depends on the shareholder’s reasonable expectations and conduct that unfairly defeats them.
The Court of Appeal accepted that a child receiving shares through a parent’s estate freeze might have limited expectations of management participation while the parent retains control. But Kimberley’s position changed after James, another beneficiary of the arrangement, assumed control. Tolerating her father’s methods did not waive her right to equitable treatment under her brother.
Four findings supported the result. The company had failed to hold required annual meetings or consistently produce audited financial statements, leaving Kimberley without information needed to assess her interest. James transferred shares in two businesses to his own company without required conflict disclosure and approval. The company sold a residential property to James’s son for $675,000 without an independent appraisal. Finally, Kimberley received a $500,000 capital dividend while each sibling received $1 million, with no legitimate explanation for the difference.
Although the share classes permitted unequal dividends, the Court held that the power could not be exercised arbitrarily. The combined conduct specifically prejudiced Kimberley’s interests, and the appeal was dismissed. The trial remedies included further audits, accounting for profits and restrictions on asset dealings; final relief awaited better financial information.
What Family Shareholders Should Understand
A family company’s history does not displace corporate obligations after succession. Directors must address financial disclosure, related-party approvals and dividend decisions even if the founder previously managed the business informally.
Minority shareholders should distinguish ordinary disagreements from conduct that violates reasonable expectations and causes prejudice. Not every procedural breach amounts to oppression, but a sustained pattern of exclusion and self-interested transactions may.
Estate-freeze planning should therefore address governance after the parent’s control ends, including access to financial information, approval of transactions involving relatives and principles for distributions among siblings.
