Shareholders’ Rights in Ontario
Igor Ellyn and Karine de Champlain
In Canada, a company may be incorporated under either federal or provincial legislation. Although the statutes cover broadly the same categories of rights and remedies of shareholders, there are minor variations between the statutes. For the purposes of this article we will use the Ontario Business Corporations Act (the "OBCA") as the model.
The rights provided to shareholders under corporate statute can be broadly divided into three categories: Voting rights, rights with respect to meetings, and rights pertaining to access to information.
The right to vote is the most fundamental right accorded to shareholders under Canadian corporate law statutes. Through voting, shareholders can control the makeup of the board of directors, which is by statute responsible for the management of the corporation, and participate in major business decisions affecting the company. Further, the articles of incorporation and by-laws may impose limits on corporate and intra-shareholder activities.
Resulting from the right to vote is the right of the shareholder to attend at meetings. Corporate statutes provide for the calling of an annual meeting of shareholders not later than fifteen months following the last held annual meeting, as well as special meetings at any time.
The annual meeting typically involves the election of directors, the appointment of the auditor and the presentation of the company financials, although other business may also be transacted.
Business requiring shareholder approval can be transacted between annual meetings by the calling of a special meeting of shareholders. The statutes also provide for shareholders who hold not less than 5% of the voting shares of a corporation to request the directors to call a meeting for any purpose stated in the requisition.
Access to Information
Key to a shareholder's ability to exercise the right to vote is access to information about the business and affairs of the company. The OBCA, as with other corporate statutes, provides that a corporation shall prepare and maintain in a designated place certain types of records. These include:
- the articles and by-laws of the corporation and all amendments thereto;
- copies of any unanimous shareholders agreements known to the directors;
- minutes of meetings and resolutions of shareholders;
- a register of directors setting out specified information; and
- a securities register setting out certain specified information
In addition, the corporation is to prepare adequate accounting records and a record of directors' meetings and meetings of any committee thereof. Shareholders and creditors and their agents and legal representatives are to be provided access to the books and records maintained by the corporation during the usual business hours of the corporation and are permitted to take extracts of the records where appropriate.
Shareholders are also entitled to be provided with notice of meetings and related information. Such notices and materials, including proxy forms and circulars, must describe the nature of the business to be conducted at the meeting "in sufficient detail to permit the shareholder to form a reasoned judgment thereon".
Igor Ellyn is a Specialist in Civil Litigation and a past president of the Ontario Bar Association. He has practiced as a business litigation lawyer for more than 30 years. He is a chartered arbitrator and mediator and the author of many legal articles, some of which may be downloaded from the firm’s website. Contact Igor Ellyn by sending an email
Karine de Champlain is a lawyer with Chaitons LLP in Toronto. She has experience in a variety of corporate law matters, including bankruptcy and insolvency, mergers and acquisitions and securities.