Verbal Promise Of Shares In Ontario: When Can You Sue?

A verbal promise of shares isn’t always an enforceable contract — but if you were promised shares and did the work, Ontario law may still give you a remedy.

In Tayts v. Fox, 2026 ONSC 226, the Ontario Superior Court of Justice awarded a “sweat equity” founder $1,313,495.13 — even though the court found there was no enforceable contract fixing his ownership stake. The decision is a road map for founders who contributed sweat equity, and a warning for anyone holding a business partner’s interest on a handshake.

Amos Tayts and Maxim Zavet, a lawyer, were long-time friends. In 2013, as the federal rules governing medical cannabis were about to change, the two set out to build a licensed production business together. Through a mutual contact, they were introduced to Harvey Shapiro and Gordon Fox, experienced healthcare entrepreneurs who brought capital and business experience to the table.

The venture became KindCann. It later went public as Emblem Cannabis Corporation, and its founders’ interests were ultimately converted into shares of Aleafia through an acquisition.

Nothing about Mr. Tayts’ role was ever put in writing. As a teenager, he had been convicted of a drug offence — later pardoned — and the parties agreed, out of caution, that his name would stay off corporate documents. Mr. Zavet would incorporate a company to hold both men’s interests, with Mr. Tayts’ shares held in trust.

Mr. Tayts was not expected to invest money. He was to earn his stake through work — and he did. The court accepted that he spent roughly 3,500 hours on the venture. He recruited the experienced growers KindCann later highlighted to investors, first identified the lab that assisted with the Health Canada licensing application, contributed significantly to that application, and came up with the name “KindCann”.

Throughout 2013 and 2014, Mr. Zavet floated several proposed splits, each giving Mr. Tayts between 15% and 25% of Mr. Zavet’s portion. 

Then came the financing. In late 2014, Mr. Zavet, Mr. Shapiro and Mr. Fox — all directors of KindCann entities — divided the founder’s shares among themselves. Mr. Tayts was excluded from those discussions. As the financing closed in December 2014, Mr. Zavet offered him 7,000 founder’s shares, describing them as worth $70,000. They were actually worth about $5,000 and represented less than 2.5% of Mr. Zavet’s founder’s shares. When Mr. Tayts pushed back, he was told he could instead buy half of Mr. Zavet’s stake for $158,616.43 — payable by the end of the week. Mr. Zavet knew he did not have the money.

Mr. Tayts received nothing and therefore he sued.

Oral agreements are enforceable in Ontario. But a binding contract still requires agreement on its essential terms.

Justice Brownstone accepted that the parties agreed Mr. Tayts would receive founder’s shares in exchange for his work, and that the services he was to provide were sufficiently certain. The problem was the number. Mr. Tayts claimed a firm 25% of Mr. Zavet’s shares, but the evidence showed the two had only ever discussed a range — somewhere between 15% and 25%. Mr. Tayts conceded that the share of ownership was an essential term. Without agreement on it, there was no binding contract.

The oppression remedy — found in s. 241 of the Canada Business Corporations Act for federal corporations and s. 248 of Ontario’s Business Corporations Act for provincial ones — protects stakeholders whose reasonable expectations are defeated by unfair corporate conduct. The court rejected the argument that the oppression claim simply rises or falls with the contract claim: the remedy is equitable, and it would serve no purpose if it merely duplicated contract law. (For how oppression differs from suing on the company’s behalf, see our guide on derivative actions vs. the oppression remedy.)

Complainant status. A person who is promised shares and performs work on the strength of that promise can qualify as a “complainant” (in this case, as the claimed beneficial owner of shares held in Mr. Zavet’s name).

Reasonable expectations. Applying the framework in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, the court found Mr. Tayts reasonably expected between 15% and 25% of Mr. Zavet’s founder’s shares. The defendants had conceded he reasonably expected some founder’s shares. The close, informal relationship, the repeated assurances, and the extent of his contributions made the expectation objectively reasonable.

Corporate conduct. The defendants argued this was a private dispute between two friends. The court disagreed. Allocating founder’s shares is conducting the business and affairs of the corporation. The three directors knew Mr. Tayts was a founder, discussed shares for him, and then excluded him from the allocation. 

Unfair prejudice and unfair disregard. Squeezing out a minority stakeholder and failing to deliver property a person is entitled to are both recognized forms of oppressive conduct. 

Notably, Mr. Tayts’ failure to protect himself with paperwork did not hurt him. He trusted his friend, and each time he raised the issue, he was reassured that his shares were protected.

None of the KindCann entities or their successors still existed, so the real question was whether the individual directors would pay.

Under Wilson v. Alharayeri, 2017 SCC 39, a director can be personally liable for oppression where they were implicated in the oppressive conduct and a personal order is appropriate in all the circumstances.

The court held Mr. Zavet personally liable. He knew the details of Mr. Tayts’ expectations, the shares were always to come from his allocation, and by withholding them he kept the benefit for himself. The court also found he acted in bad faith.

Mr. Shapiro and Mr. Fox were not held personally liable, even though they took part in the oppressive conduct. They gained nothing from Mr. Tayts’ exclusion — his shares were always going to come out of Mr. Zavet’s portion — and they would have issued whatever number Mr. Zavet requested. (For directors’ exposure more broadly, see Breach of Fiduciary Duty: When Can You Sue Directors?).

The court reached the same award through quantum meruit and unjust enrichment. Mr. Tayts worked with Mr. Zavet’s encouragement, acquiescence and constant reassurance, and every task he took on was one Mr. Zavet did not have to perform. Mr. Zavet’s holding company, MZ Prime Holdings, received the founder’s shares, including those that should have gone to Mr. Tayts. With no contractual or other juristic reason for that enrichment, MZ Prime was held liable alongside Mr. Zavet.

The court fixed Mr. Tayts’ entitlement at the low end of the range, 15% of Mr. Zavet’s founder’s shares, recognizing that the other founders had capital at risk and that Mr. Zavet ended up with a smaller share of the venture than he had hoped. 

The harder question was when Mr. Tayts would have sold. He said he would have sold everything as soon as the company went public; the defendants said he would have held on until well after an acquisition. The court rejected both positions as conjecture.

Given his financial circumstances and the escrow restrictions on founder’s shares, the court found he would most likely have sold each tranche as it was released from escrow. Applying the closing price on each release date, the court assessed his proceeds at $1,313,495.13.

The court also rejected the argument that Mr. Tayts failed to mitigate by refusing the 7,000-share offer. His entitlement was more than six times what he was offered. He was not obliged to accept it.

 An unenforceable contract is not the end of the road. Where an oral share promise fails as a contract for uncertainty, the oppression remedy and unjust enrichment may still protect the founder’s reasonable expectations.

A lowball offer does not defeat the claim. Turning down an offer worth a fraction of your entitlement is not a failure to mitigate.

Put it in writing. A short founders’ or shareholder agreement setting out percentages, how shares are held, and what happens on a financing would likely have avoided more than a decade of litigation.

At Pinto Shekib LLP, we represent shareholders, corporations, and directors in derivative actions, oppression remedy applications, and corporate disputes across Ontario. Contact us at 416.901.9984 or info@pintoshekib.ca.