In the recent case of Blackmore Management Inc. v. Carmanah Management Corporation, 2021 BCSC 1379 the Supreme Court of British Columbia held (in the context of a shareholder dispute) that a party can revoke a compulsory buy-out offer made pursuant to a shotgun clause before it is accepted, as long as doing so is consistent with the fundamental principles of contractual interpretation.
The parties, Blackmore Management, Carmanah Management, and Amphitrite Management owned equal shares in First Light Technologies Ltd. These parties had all entered into an amended shareholders agreement (ASA) with respect to their ownership interests in First Light. Article 5 of the ASA contained a “shotgun clause” under which any shareholder had the right to deliver to the other shareholders a “shotgun offer” to purchase their shares at a set price on certain terms, or have their own shares acquired at that same price on the same terms pursuant to a “reversal offer”. Carmanah and Amphitrite made a shotgun offer offer to Blackmore but revoked the offer a few months later. Several weeks after
the revocation, Blackmore made a reversal offer, and then sought an order that the other parties were not entitled to revoke their initial shotgun offer under Article 5 of the ASA.
While also considering the intentions of the parties and interpreting the language of the agreement, the Court found that since there was no specific wording in the ASA that clearly categorized a shotgun offer as irrevocable, the offer was open to being revoked. To find otherwise would result in the Court reading into the agreement a significant and material term that the parties did not see fit to include.
By Ty Schmidt – Supervised by Professor Maharaj
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