Shareholders are the owners of a company. Share ownership entitles a shareholder to certain rights and entitlements. Those rights are protected by a range of remedies available to a shareholder in the event that disputes arise as to the way the company is run.
Shareholders’ rights
Generally speaking, share ownership comes with certain basic rights:
- The right to notice of shareholders’ meetings;
- The right to vote at shareholders’ meetings, including the annual general meeting (see here for our recent discussion of AGM requirements);
- The right to participate in the profits of the corporation when distributions of profits (known as “dividends”) are made;
- The right to a portion of the assets of the company on dissolution, after creditors are paid; and
- The right to transfer shares, subject to any transfer restrictions.
Different classes of shares
The company may have different classes of shares that come with different rights. For example, one class of shares may entitle its owner to dividends but not the right to vote at a meeting (known as a “non-voting” share).
Any special rights attached to a class of shares should be set out in the company’s articles or agreed to in a shareholders’ agreement. (Check out our discussion of the importance of a well-drafted shareholders’ agreement).
For companies incorporated in BC, the Business Corporations Act is also a source of shareholder rights and entitlements, including the right to requisition a general meeting and the right to submit a proposal setting out a matter the shareholder wishes to be considered at the next AGM.
Shareholders’ remedies
A shareholder has legal remedies if their rights are violated, or if a dispute arises with respect to the company’s finances, operations, or management. Available remedies will depend on the nature of the dispute and the effect of any shareholders’ agreement. The company’s articles and the BC Business Corporations Act should also be consulted as they may specify how a particular dispute must be resolved. Depending on the circumstances, shareholder disputes may be dealt with by:
A shareholder has legal remedies if their rights are violated, or if a dispute arises with respect to the company’s finances, operations, or management. Available remedies will depend on the nature of the dispute and the effect of any shareholders’ agreement. The company’s articles and the BC Business Corporations Act should also be consulted as they may specify how a particular dispute must be resolved. Depending on the circumstances, shareholder disputes may be dealt with by:
- Application to the Court for relief from unfair prejudice or disregard of the shareholders’ interest (known as the oppression remedy).
- A derivative action in the name of and on behalf of the company to enforce rights or obligations owed to the company, or to obtain damages for breach of those rights or obligations.
- Dissent proceedings, by which a shareholder who disagrees with a proposed corporate action can seek a Court order requiring the company to purchase their shares for “fair value.”
Protect your rights as a BC shareholder
If you are looking to get a strong shareholder agreement in place to avoid future disputes or have questions about how to proceed in the face of a current shareholder dispute, contact Invicta Law Corporation today for legal advice.
