Expertises connexes

When a person owns the majority of the shares issued by a company, it stands to reason that one or more shareholders own the minority of the shares. The latter are called minority shareholders, while the former is known as the majority shareholder. To guard against certain decisions that the majority shareholder could make, the legislation provides for specific provisions that protect minority shareholders. Adding minority shareholder protection clauses within the shareholder agreement may also be considered.

The body of corporate law, which includes the Business Corporations Act and the Canada Business Corporations Act, provides for various measures, such as class voting when major decisions are made, shareholder proposals, the right to buy back shares, recourse in the event of abuse of power, and recourse to legal dissolution.

Minority shareholders can also count on the existence of a class vote when adopting a resolution that ends equality between shareholders, infringes on the rights of shareholders, or reduces the amount of capital stock issued by the company¹. This measure allows minority shareholders to express their agreement or disagreement when voting on these resolutions.

In addition, to assert their point of view, minority shareholders may submit proposals aimed at discussing a particular subject at the annual meeting of shareholders. These proposals may concern a modification of the company’s articles of association or any other question. For corporations under provincial jurisdiction, shareholder proposals may be submitted only if the corporation is a reporting issuer, or if it has at least fifty (50) shareholders². The shareholder must respect numerous legislative criteria, i.e., they must hold shares having a minimum value of one percent (1%) of the outstanding shares, i.e., a market value of $2,000.00, and have held them for a period of at least six (6) months preceding the day the proposal is submitted. To be discussed at the meeting, the proposal must be submitted at least 90 days before the anniversary date of the notice of the previous annual meeting.

In the event of a dispute between shareholders, the protection that best safeguards the rights of the minority shareholder remains the protection clause inserted in the agreement between company shareholders. This clause may refer to the law in force or provide for specific non-legislative provisions to protect minority shareholders against decisions that could infringe on their rights or go drastically against their legal and financial interests.

The Bernier Fournier team will be able to help you in drafting this clause, which is an important step in preventing disputes between shareholders. In addition, we can guide you in the choice of a method for settling disputes within a business corporation.

¹Business Corporations Act, art. 191 and 192.
²Business Corporations Act, art. 194.