Under the OBCA, the Ontario Business Corporations Act, shareholders have rights that broadly relate to the following categories: voting rights, rights to receive notice of meetings and attendance, and rights to access information. More specifically, shareholders have the right to the following:
- vote at the shareholders' meeting (if their shares have a right to vote)
- receive a share of the profits (dividends) of the corporation
- receive a share of the property of the corporation when the corporation is dissolved
- be notified about shareholders' meetings and attend them
- elect and dismiss directors
- approve by-laws and by-law changes
- appoint the auditor of the corporation (or waive the requirement for an auditor)
- examine and copy corporate records, financial statements and directors' reports
- receive the corporation's financial statements at least 21 days before each annual meeting
- approve major or fundamental changes (such as those affecting a corporation's structure or business activities).
The right to vote is one of the most fundamental rights a shareholder has. Through the voting process, shareholders exercise control over the corporation’s constitution of the board of directors, and major business decisions affecting the corporation. That being said, voting rights vary in accordance with the class of shares and a shareholder’s holding percentage. Generally speaking and unless your articles provide otherwise in section 7 of the Articles of Incorporation, each share in the corporation entitles the shareholder to one vote. The larger the number of shares a shareholder holds, the larger the number of votes the shareholder can exercise.
It is a requirement of law that a corporation appoint an auditor and produce audited financial statements in every fiscal year. However, shareholders may consent under section 148 of OBCA to exempt the corporation from the requirement of an audit in respect of that year’s financial statements and reporting. This type of resolution exempting the corporation from audit expires each year and must be signed by all shareholders in each year if the corporation wishes to be exempt from its statutory audit requirements.
Under the OBCA, the corporation must call for an annual meeting of shareholders no later than fifteen months following the last held annual meeting, in addition to any special meetings which can be held at any time. Typically, shareholders’ meetings are held once every 12 months. In lieu of a shareholder’s meeting, the shareholders may instead resolve to prepare an annual resolution, which is most common in small business corporations.
Under normal circumstances the right to call shareholders’ meetings is vested in the board of directors. In certain situations however, shareholders have the right to requisition shareholders’ meetings. Under section 105 of the OBCA, holders of at least 5% of the shares who are entitled to vote at meetings may require the directors to call a meeting. If directors do not do so within 21 days following receipt of the shareholders’ written requisition, any shareholder who made the original request may call the meeting in the usual way. However this is subject to specific circumstances as the right to requisition a meeting is not absolute. It is crucial for you to seek professional advice to ensure your rights are protected.
It is important for shareholders to have access to information about the business and affairs of the corporation prior to exercising their right to vote. Generally speaking, shareholders have a right to the following:
- Corporate Minute books, which includes the articles and by-laws of the corporation and any amendments thereto
- A copy of any shareholders agreements or unanimous shareholders agreement known to its directors
- Minutes of meeting and resolutions of directors and shareholders
- A copy of the director’s registrar
- A copy of the officer’s register
- A copy of the shareholder’s register and ledger
- Accounting records
