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Voting vs. Non-voting shares
One of the most important attributes of the shares of a corporation are whether they carry the right to vote.
As the name implies, holders of voting shares are entitled to receive notice of and vote on certain decisions made by the corporation. Voting shares are the most common shares to be issued by a small private corporation at the time of incorporation, and are typically the only shares issued unless there are specific circumstances warranting the issuance of different shares, such as one shareholder wanting greater control over the corporation. Voting shareholders are required to make certain decisions on an annual basis, such as approving the financial statements of the corporation.
Holders of non-voting shares are not entitled to vote on the vast majority of decisions made by the corporation, but they may be entitled to vote on certain decisions, such as the decision waive the requirement for the corporation to prepare audited financial statements each year, and to sell all or substantially all of the assets of the corporation. If non-voting shares are issued to provide greater control to the voting shareholders, it’s important to remember that holders of non-voting shares will still be able to vote on certain prescribed decisions.
Unanimous Shareholder Agreement
If the shareholders of the corporation are interested in modifying the level of control given to one or more shareholder, it is generally best for the shareholders to enter into a Unanimous Shareholder Agreement which sets out the various rights and responsibilities of the shareholders and can modify by way of contract how certain decisions of the corporation (such as the appointment of directors, payment of dividends, entering into major contracts) are to be made.
If you have any questions about whether to issue voting or non-voting shares or Unanimous Shareholder Agreements, please let us know in the “Additional Information” section of our incorporation form, or request a free consultation with an Alberta business lawyer by clicking on the Free Consultation button below.
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