Ontario Barrister and Solicitor Practice Exam

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What is a defining characteristic of a squeeze out?

All shareholders receive new shares.
It is a form of share dilution.
The controlling shareholder ends up as the sole shareholder.
Minority shareholders gain controlling interest.

The correct answer is: The controlling shareholder ends up as the sole shareholder.

A squeeze out occurs when a controlling shareholder forces minority shareholders to sell their shares at a predetermined price, resulting in the controlling shareholder becoming the sole shareholder. This involves the forced transfer of shares and does not involve a new issuance of shares, making options A and B incorrect. Option D would only be true in a reverse squeeze out, which is when minority shareholders gain controlling interest in a company. Therefore, the defining characteristic of a squeeze out is the controlling shareholder ending up as the sole shareholder.