Becoming a shareholder
A person becomes a shareholder by buying shares, either from the corporation or from an existing shareholder. Specifically, a person can:
- purchase shares not previously issued by the corporation (referred to as “buying shares from the treasury”)
- buy shares from an existing shareholder (according to the terms set out in the articles) and have the corporation register the transfer.
Transfer of shares
Share owners can transfer, that is sell their shares and the rights that go with them (also called “rights attached to the shares”). Transfers must conform to any conditions or restrictions that apply to the corporation’s shares and their transfer. For example, directors could have to approve all transfers of shares.
Rights and responsibilities of shareholders
After paying for their shares, shareholders have the right to:
- 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 shareholders’ liability in a corporation is limited to the amount they paid for their shares; shareholders are usually not liable for the corporation’s debts.
Shareholder agreements
A shareholder agreement is an agreement entered into by some, and usually all, of the shareholders of a corporation. The agreement must be in writing, and must be signed by the shareholders who are party to it. While shareholder agreements are specific to each corporation and its shareholders, most of these documents deal with the same basic issues.
The CBCA allows shareholders to enter into written agreements that restrict the powers of the directors to manage or supervise the management of the corporation in whole or in part. However, when shareholders sign an agreement to assume the rights, powers and duties of directors, they should be aware that they are also agreeing to assume the liabilities of those directors to an equal degree.