Do non-voting shares have any voting rights?
You’re the director and shareholder of a corporate body and you’ve just issued non-voting shares to new investors in your corporation. You’re of the belief that you can retain full control over the organization because you’re the sole carrier of voting shares. In some respects, you’re correct and in others, you’re not.
It is correct to say that shareholders with non-voting shares cannot vote on matters such as electing new directors, investment decisions, employee remuneration and so forth. However, the OBCA (Ontario’s corporate governance legislation) and the CBCA (Canada’s corporate governance legislation) permit non-voting shareholders to cast their votes on certain fundamental decisions of the corporation. For example, non-voting shareholders are able to vote on proposed amendments to the articles of incorporation, if the amendments seek to:
– Change the maximum number of authorized shares of non-voting share class;
– Change the restrictions relating to the transfer and ownership of non-voting shares;
– & more.
These “hidden” voting rights for non-voting shareholders are built in to the legislations for the purpose of protecting non-voting shareholders and the rights afforded to them under their share class.
It’s critical to understand the implications of onboarding new shareholders on voting rights and other respects. It may be easy to whip up your own DIY share subscription agreement and sell shares to a new investor. However, this leaves you without the foresight and legal know-how of a lawyer. It’s easier and lighter on your wallet to involve a lawyer early on – when there is no disputes or issues. It’s tougher when things turn sour between shareholders and litigation is the only resolve.
If you’re seeking assistance with any of your corporate law matters whether that be founders agreements, incorporation, shareholder agreements, issuing shares, onboarding new shareholders, & beyond, call us for a free consultation. We’re Falcon Law PC and you can get a hold of us now at info@falconlawyers.ca.
