No Transfer Means No Transfer!

Previously published in the Canadian Lawyer magazine.

In Frye v. Frye Estate, the Ontario Court of Appeal held that a bequest of shares was valid, notwithstanding that such bequest was clearly contrary to the explicit terms of a unanimous shareholder agreement and letters patent. The decision (wrongly) emasculates broadly drafted share-transfer restrictions, reducing them to near meaningless effect.

Four siblings equally inherited the shares of a family business on the death of their father. All of the siblings entered into a shareholder agreement. The agreement contained a "family consensus" provision as follows: "The fixed purpose and intent of [the father] was and is to preserve the Frye group as a family business and for all his children to share equally therein." The agreement contained provisions typically found in shareholder agreements restricting the transfer of shares including a covenant not to "sell, assign, transfer, grant options in respect of, or