There are two ways to incorporate your business in Canada: provincially or federally. The Ontario Business Corporations Act provides shareholders with certain rights and responsibilities that protect their interests and ensure proper corporate management. This article gives a general overview of the main shareholders’ rights under Ontario law.
1. Voting Rights
Their fundamental right to vote is at the core of a shareholder’s rights. They use their right to vote on matters affecting the corporation, such as electing the board of directors or approving significant corporate transactions. By exercising their voting rights in alignment with their class of shares and their holding percentage, they contribute to the decision-making process of the corporation.
It is important to note that not all shareholders have the right to vote. This type of rights might be limited to certain shares in the Articles of Incorporation and corporate by-laws.
2. Access to Information and Inspection Rights
Shareholders have the right to inspect corporate records, including financial statements, minutes of meetings, and shareholder lists. Section 140(1) of the Ontario Business Corporations Act (OBCA) outlines the corporation’s obligation to prepare and maintain a designated corporate minute book, which includes essential documents such as articles and by-laws of the corporation, any amendments made to them, copies of Shareholders Agreements or Unanimous Shareholders Agreements known to the directors, minutes of meetings and resolutions of both directors and shareholders, as well as copies of the director’s register, officer’s register, shareholder’s register, and shareholder’s ledger.
A well-maintained corporate record will provide transparency and facilitate shareholders’ access to crucial information they need to make well-informed voting decisions. If you are denied access to corporate or financial information, your shareholder right might be violated, and you might be entitled to an oppression remedy.
3. Audited Financial Statements Rights
A crucial right held by shareholders is that they can request the corporation to undergo an audit of its financial statements. According to Sections 155 and 159(1) of the Ontario Business Corporations Act (OBCA), a corporation’s annual financial statements must be audited by a qualified auditor unless all shareholders agree to waive the audit requirement. If a shareholder disagrees with exempting the corporation from the audit, the corporation must conduct the audit and allow the shareholder to review the audited financial statements.
4. Meetings and Attendance
A corporation is required to convene an annual meeting of shareholders within fifteen months following the previous annual meeting under the Ontario Business Corporations Act (OBCA). Additionally, the corporation can hold special meetings at any time as needed. Generally, shareholders’ meetings are scheduled annually, occurring every 12 months. However, in some instances, shareholders may opt to adopt an annual resolution instead of holding a physical meeting, which is a more common practice in small business corporations. This resolution serves as a substitute for a formal shareholders’ meeting and allows shareholders to fulfill their obligations and make decisions regarding the corporation’s annual matters in a streamlined manner.
You can see a list of rights and responsibilities of shareholders at https://ised-isde.canada.ca/site/corporations-canada/en/business-corporations/share-structure-and-shareholders
If you need more information on your rights and responsibilities as a shareholder, contact us today and learn how a Toronto business shareholder lawyer can help you!
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.