Area of Law: Business & Corporate Law
Answer # 222
Common and preferred or special sharesRegion: Ontario Answer # 222
If you hold common shares, you are a part-owner in the corporation. Common shareholders, however, have a higher risk of losing all or part of their investment if the company fails because the business’ creditors and preferred shareholders are ahead of the common shareholders in claiming the assets of the company. Buying and transferring shares has serious legal and tax consequences. To get help, call a lawyer now.
In both private and publicly traded companies, there may also be different classes of common shares. For example, some may have voting rights and no dividends and others may have no voting rights but do pay a dividend.
As noted, preferred shareholders have greater rights to the company’s ownership above those of the common shareholders but below creditors. In most corporations, preferred shareholders receive a higher dividend than common shareholders. As a result, preferred shares are often valued higher than common shares. However, most preferred shares do not carry voting privileges.
All shares carry a right to vote at shareholder meetings unless a corporation’s Articles state otherwise. A voting right entails the right to attend meetings where the vote could be cast as well as the right to timely and adequate notice of such meetings. A general rule is that each share carries one vote on all issues at every shareholders’ meeting unless the corporate constitution limits this right by class. Consequently, if one class of share holds two of the fundamental rights, the third fundamental right must be held by at least one other class of share.
The three fundamental rights are the rights to:
- Vote at shareholder meetings,
- Receive dividends declared by the corporation,
- Receive a portion of a corporation’s property upon its dissolution (subject to any claims against the corporation by non-shareholders, such as creditors).
NEW Ontario Business Registry
Businesses can now complete over 90 transactions online through the new Ontario Business Registry. This includes:
- register a new business name
- renew an existing business name
- dissolving an existing business
- incorporate, dissolve and change a corporation or not-for-profit or charity
- search for a business or not-for-profit corporation
- file notices and other documents under other business law statutes
Currently, mailing or emailing documents is also still available.
Registering existing business: Existing businesses and not-for-profits who wish to access their profile or file documents using the Registry will require a Company Key. Businesses can submit a request for their company key at Ontario.ca/BusinessRegistry.
New businesses and not-for-profits should visit the Ontario Business Registry: all services page for instructions on how to create and register their new business.
Anyone can do a free search of the Ontario Business Registry to get basic information about a business or not-for-profit corporation.
Some offices closed
As a result of the launch of the new Registry, six service counters across Ontario will no longer endorse articles submitted under the Business Corporations Act. As well, the ServiceOntario counter at 375 University Avenue in Toronto has closed. Visit ServiceOntario for information on what offices are still open and what transactions can be completed in-person.
Corporations Annual Returns
As of May 15, 2021, the Canada Revenue Agency no longer accepts corporations’ annual returns on behalf of Ontario. Corporations whose annual returns were due during the period of May 15, 2021 through October 18, 2021 were exempt from filing. Corporations who have an annual return due on or after October 19, 2021 must file their annual returns in the Registry.
Buying and transferring shares has serious legal and tax consequences. To get help, call a lawyer now.
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