Canadian Court Halts Share Buyout Pending Sanctions Ownership Review

The Ontario Superior Court has ruled that a court-ordered share buyout cannot proceed until Global Affairs Canada (GAC), the country's sanctions authority, determines whether the selling shareholder is under the control of RESO — a Russian entity designated under the Special Economic Measures (Russia) Regulations. The decision was issued in CLR Invest Ltd v Kondratiev, 2026 ONSC 3832.

CLR, an investment company incorporated in Malta, owns a 14.5% stake in UCT, a medical technology firm based in Ontario. Following a dispute between shareholders, CLR turned to the court seeking an order requiring UCT to buy out its shares under Ontario corporate law and to set the price. CLR also filed an oppression application in an attempt to secure a higher buyout valuation. The court dismissed that application and ordered the buyout to proceed at ordinary fair value.

Both sides had separately asked GAC to rule on whether CLR is "controlled" by RESO — a claim CLR rejects — and whether a "no prohibition" letter confirming the absence of such control would be appropriate. If the regulator concludes that CLR is indeed controlled by the designated Russian company, the shareholding would fall within the scope of Canada's Russia sanctions under s2.1(2) of the Special Economic Measures Act (SEMA). In that case, any payment or transfer of funds to CLR in exchange for the shares would amount to a sanctions breach.

The court noted there was evidence suggesting CLR might be controlled by RESO, but deliberately left this question to the regulator. As a result, no money can change hands and no shares can be transferred until GAC issues its determination.

The case is a clear illustration of how sanctions-related ownership and control questions can freeze even routine corporate transactions — and why counterparty screening should extend to indirect Russian links.