Shares
| Author | J. Anthony Vanduzer |
| Pages | 191-213 |
CHAPTER
6
A.
INTRODUCTION
A
share
is a
bundle
of
rights against
a
corporation. Although
a
share
is
personal property,
the
claim
it
represents
in the
corporation
is not a
property
right
in the
corporation's
assets,1
nor is it a
proportionate
ownership interest
in the
corporation
itself.2
The
particular rights,
privileges,
restrictions,
and
conditions
of
each
class
of
shares
(referred
to
here collectively
as
"characteristics")
are set out in the
articles
of the
corporation,
as
discussed
in
Chapter
4.
Subject
to a few
statutory
and
common
law
limitations,
the
characteristics that
may be
given
to
shares
are
restricted only
by the
imagination
of the
person
drafting
the
arti-
cles.
The
characteristics
of a
share determine
the
risks associated with
the
holder's investment,
the
degree
of
control
she has
over
the
corpo-
ration,
and her
right
to
share
in its
profits
and to
receive
the
corpora-
tion's property when
it
dissolves.
In
this chapter,
we
will
set out the
statutory scheme relating
to
shares,
as
well
as the
most important com-
mon law
rules. Some
of the
more common practices
in
drafting
share
provisions will also
be
described.
The
basic rights associated with shares
are as
follows:
• to
vote
at any
meeting
of
shareholders;
1
Macaurav.
Northern Assurance
Co.,
(H.L.).
2
Bradbury
v.
English Sewing
Cotton
Co.
(H.L.).
191
SHARES
192 THE LAW OF
PARTNERSHIPS
AND
CORPORATIONS
• to
receive dividends declared
by the
board
of
directors; and,
• on
dissolution
of the
corporation,
to
receive
the
property
of the
cor-
poration remaining
after
creditors
and any
other persons with claims
against
the
corporation
are
paid.
Where
a
corporation
has
only
one
class
of
shares,
the
rights
of the
holders
of
shares
of
that class
are
equal
in all
respects
and
must include
each
of the
three
basic
rights
listed
above
(CBCA,
s.
24(3)).3
If the
arti-
cles provide
for
more than
one
class
of
shares, then each
of the
basic
rights must
be
possessed
by at
least
one
class
of
shares, although
all
three rights
are not
required
to be
attached
to the
same class
(CBCA,
s.
24(4)).
For
example,
if a
corporation
has
three classes
of
shares, Class
A,
Class
B, and
Class
C,
each
of the
basic rights would have
to be
pos-
sessed
by at
least
one of
these classes.
A
single class,
say
Class
A,
might
have
all
three rights
and the
other
two
none,
or the
rights might
be
dis-
tributed across
the
classes
in
some other way.
If the
articles
are
silent
on the
right
to
vote, then each share
has one
vote
(CBCA,
s.
140(1)).4
Where
a
corporation
has
multiple classes
of
shares,
all
such shares
are
presumed
to
have equal rights, regardless
of
class, except
to the
extent
specifically
provided
in the
articles.
Each
owner
of a
share
is
entitled
to a
share
certificate
and,
if a
cor-
poration
is
authorized
to
issue more than
one
class
of
shares,
or
more
than
one
series
of
shares
of a
class
as
discussed
below,
the
characteris-
tics
of the
class
or
series must appear
on the
certificate
or a
notice must
appear
stating that there
are
particular characteristics
and
that copies
of
the
text
of
such characteristics
may be
obtained
from
the
corpora-
tion
(CBCA,
ss.
49(1)
&
(13)).5
Unless
a
shareholder requests one,
however, there
is no
need
for a
corporation
to
issue
a
share
certificate
and,
in
order
to
minimize paper work, many smaller corporations
do
not
bother.
In any
event,
a
record
of
ownership
of
shares, called
a
secu-
rities register, must
be
maintained
as
part
of the
corporate records
at
the
registered
office
of the
corporation
or any
other place
in
Canada
Most
statutes
based
on the
Canada
Business
Corporations
Act,
R.S.C.
1985,
c. C-
44
[CBCA],
follow
this approach. E.g.,
Alberta
Business
Corporations
Act,
R.S.A.
2000,
c. B-9
[ABCA],
s. 26. The
Ontario
Business
Corporations
Act,
R.S.O.
1990,
c.
B.16
[OBCA],
only requires that shares have
the
right
to
vote
and to
receive
the
remaining property
of the
corporation
on
dissolution
(s.
22). This issue
is
not
addressed
in the
Companies
Act,
R.S.B.C.
1996,
c. 62
[BCCA].
Provincial
rules based
on the
CBCA,
ibid.,
follow
this model. E.g.,
OBCA,
ibid.,
s.
102(1);
and
ABCA,
ibid.,
s.
139.
The
BCCA,
ibid.,
has no
such rule.
Provincial
rules based
on the
CBCA,
ibid.,
follow
this model. E.g.,
OBCA,
ibid.,
ss.
54(1),
56(2);
and
ABCA,
ibid.,
s. 48. The
BCCA,
ibid.,
has a
similar
rule
(s.
51).
3
4
5
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