Understanding Class A and Class B Shares

When establishing a corporation, one of the important decisions to make is determining the classes of shares that will be issued. Class A and Class B shares are common classifications used to differentiate the rights and privileges attached to different categories of shares. At Falcon Law PC, we specialize in corporate law and can provide expert guidance on the intricacies of share classifications. Contact us at 1-877-892-7778 or via email at info@falconlawyers.ca to discuss your specific needs and benefit from our comprehensive legal services.

Class A Shares

Class A shares are a category of shares that typically carry certain rights and privileges. Here are some key characteristics associated with Class A shares:

  1. Voting Rights: Class A shareholders often have voting rights, enabling them to participate in corporate decision-making processes. Each Class A share typically grants the holder one vote, allowing them to have a say in matters such as electing the board of directors or approving significant corporate actions.
  2. Dividend Entitlement: Class A shareholders may be entitled to receive dividends declared by the corporation. Dividends are a distribution of profits to shareholders, and the amount received by Class A shareholders is typically determined in proportion to their share ownership.
  3. Capital Distribution: In the event of the corporation’s dissolution or liquidation, Class A shareholders may have the right to receive a portion of the remaining assets after satisfying any outstanding debts and obligations.
  4. Preemptive Rights: Preemptive rights refer to the right of existing shareholders to maintain their proportionate ownership in the corporation by having the first opportunity to purchase additional shares when new shares are issued. Class A shareholders may have preemptive rights, allowing them to protect their ownership percentage.

Class B Shares

Class B shares represent another category of shares that may have distinct characteristics and rights. The specific features of Class B shares can vary depending on the corporation’s articles of incorporation and shareholders’ agreements. Here are some common aspects associated with Class B shares:

  1. Different Voting Rights: Class B shares may carry different voting rights compared to Class A shares. They might have limited or no voting rights, or they could possess multiple votes per share, giving the holder greater influence over corporate decisions.
  2. Dividend Preferences: Class B shareholders may have preferences or priorities over Class A shareholders when it comes to receiving dividends. The articles of incorporation can specify a fixed dividend amount or a preferred dividend rate for Class B shares.
  3. Capital Distribution Preferences: In the event of liquidation or dissolution, Class B shareholders may have preferences over Class A shareholders in terms of receiving a certain amount or percentage of the remaining assets.
  4. Conversion Privileges: Class B shares might have the option to convert into a different class of shares, such as Class A shares. This conversion privilege allows the holder to switch their shares to another class, typically based on predetermined conditions or at the shareholder’s discretion.

Customizing Share Classes

The characteristics and rights associated with Class A and Class B shares are not set in stone and can be customized to meet the specific needs of a corporation. Depending on the corporate structure and objectives, additional share classes, such as Class C, D, or preferred shares, can be established with distinct rights and privileges.

Customizing share classes requires careful consideration and adherence to legal requirements. It is recommended to seek legal advice from Falcon Law PC to ensure compliance with corporate laws and regulations while tailoring the share structure to your corporation’s unique circumstances.

Seek Professional Legal Guidance

Determining the appropriate share classes for your corporation is a significant decision with legal implications. Falcon Law PC can provide expert legal guidance, ensuring that the share structure aligns with your business goals and complies with relevant laws and regulations. Contact us at 1-877-892-7778 or info@falconlawyers.ca to discuss your specific needs and benefit from our specialized expertise in corporate matters.

Conclusion

Understanding Class A and Class B shares is crucial when establishing a corporation. These share classes define the rights, privileges, and characteristics associated with different categories of shares. Falcon Law PC is here to provide expert guidance and comprehensive legal services to support your corporation’s success. Contact us to discuss your specific needs and benefit from our legal expertise in corporate matters.

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