Defending Actions Against Shareholders Of Dissolved Corporations

Originally published in Blakes Bulletin on Energy - Oil & Gas, July 2007

On January 30, 2007, the Alberta Court of Appeal released its decision in Enron Canada Corp. v. Husky Oil Operations Ltd. The Court held that a shareholder has a right to defend an action under section 227(4) of the Alberta Business Corporations Act (the Act) by defending the merits of the underlying actions against the dissolved corporation.

Section 227(4) allows a party with a valid claim against a dissolved corporation to pursue shareholders who received corporate property on dissolution, to the extent of that property. Without this provision, a corporation could simply dissolve and largely avoid its obligations to third parties. Although the Act also allows third parties having valid claims to proceed against the dissolved corporation, the dissolved corporation is merely an empty shell having distributed its assets, if any, to its