What Rights Do Shareholders Have?
April 24, 2023
Investing in a company can be a rewarding experience, but it also comes with certain obligations and rights. As a shareholder in Ontario, Canada, it is imperative that you understand your rights to ensure that you get the most out of your investment.
The business lawyer at Matthew R Harris Law P.C. helps shareholders understand and protect their rights. Matthew Harris also has extensive experience in helping shareholders resolve disputes through litigation and alternative dispute resolution methods. With an office in Toronto, Ontario, the law firm also provides legal counsel to shareholders and businesses in Ottawa, Hamilton, and London.
Main Rights of Shareholders in Ontario
According to the official website of the Government of Canada, shareholders have a number of rights ranging from the right to vote on major issues to the right to sue. Let’s focus on the main rights of shareholders in Ontario, Canada:
1. The Right to Vote on Major Issues at Shareholder Meetings
One of the basic rights of shareholders is the right to vote on major issues that impact the company. These issues may include the election of board members, executive compensation, mergers and acquisitions, and other significant changes to the company’s operations.
2. The Right to Attend Shareholder Meetings
Shareholders also have the right to attend shareholder meetings, provided that they hold voting shares. Shareholders can gain valuable insights into the company’s operations and meet fellow investors at these meetings.
3. The Right to Access Company Information and Inspect Corporate Records
By law, shareholders have the right to access certain company information and inspect corporate records. This includes financial statements and other documents relevant to the company’s operations.
4. The Right to Receive a Share of the Profits of the Company
As shareholders, investors are entitled to a portion of the profits the company earns. The amount of this share may be stated in the company’s by-laws or subject to distribution among shareholders by the board of directors. Shareholders may receive these profits in the form of dividends or through the appreciation of the company’s stock.
5. The Right to Receive or Transfer a Share of the Property of the Company When the Business Is Dissolved
When businesses are dissolved, shareholders have the right to receive or transfer a share of the company’s property. This may be distributed in cash or assets such as land, buildings, or equipment. Shareholders are typically ranked according to their position in the company’s capital structure, which helps determine the allocation of assets.
6. The Right to Elect and Dismiss Directors
Another critical right of shareholders is the ability to elect directors who oversee the company’s management, strategy, and operations. Shareholders can vote for candidates nominated by the board or nominate their directors. Shareholders can also vote to remove existing directors from their positions.
7. The Right to Approve By-Laws and Changes in By-Laws
Shareholders must also approve the company’s by-laws and any significant changes in by-laws. These changes may include modifications to voting rights, shareholder liability, or other key provisions. Shareholders receive timely notice of any proposed amendments and have the opportunity to vote on them at a meeting.
8. The Right to Sue
Finally, shareholders have the right to sue if the company or its directors engage in misconduct or violate shareholder rights. This can include fraudulent activity, mismanagement, or other breaches of duty.
Shareholders can also initiate a lawsuit to prevent directors from taking certain actions or to pursue remedies such as monetary damages.
Resolving Shareholder Disputes
Shareholders frequently come across disputes that may arise out of differences in their opinions or interests. There are several ways in which shareholders can resolve disputes:
Negotiation. Negotiation is an informal process that involves open discussion, brainstorming options, and active listening to reach a mutually-beneficial solution.
Mediation. With mediation, both parties will have a mediator who will help facilitate the discussion between the parties involved.
Arbitration. This involves an arbitrator appointed by the parties involved, which is different from a mediator. The arbitrator will make a binding decision to resolve the dispute.
Litigation. As a last resort, litigation is available to resolve shareholder disputes. Litigation may become beneficial when shareholders do not respond to other alternative dispute resolutions outside the court system.
A skilled business lawyer can provide a clear perspective on the legal remedies available for different disputes.
Skilled Guidance for Shareholders & Businesses
The knowledgeable business lawyer at Matthew R Harris Law P.C. provides skilled guidance for shareholders and businesses in Toronto and surrounding areas in Ontario. Matthew Harris can offer personalized legal solutions tailored to your specific issue. Call today to schedule a consultation.