However....It may be difficult for shareholders to sue for negligent professional advice

In Brunette v. Legault Joly Thiffault, s.e.n.c.r.l., 2018 SCC 55, the Supreme Court of Canada dismissed an action brought by a shareholder/plaintiff against the corporation’s accountants and lawyers for allegedly faulty tax advice that resulted in a $55M loss to the corporation. The court at the Superior Court level determined that shareholders have no separate cause of action against a third party (here, professional advisors) unless that third party owes a distinct legal obligation to them as shareholders, and that obligation has been breached. In this case, the court determined the corporation (as opposed to the shareholder) had suffered a loss - namely, diminished value of its assets. The Court of Appeal of Quebec unanimously agreed. The Supreme Court of Canada upheld that decision, based on the principle of a corporation’s distinct legal liability - originating in Foss v. Harbottle, a 19th century English case. Given that incorporation limits the liability of shareholders, it also restricts the ability of shareholders to recover for wrongs committed against the corporation. This is a threshold question for any cause of action: where the pleadings do not allege a breach of an independent legal obligation owed to the shareholder, the action may be dismissed. The court noted there are other possible remedies to a shareholder, such as derivative actions under corporate statutes, but a shareholder otherwise has no direct cause of action for wrongs against a corporation. 

Kenneth Kolarsky