Shareholder rights

Question 1

Generic SH rights

Answer 1

s103 - pass bylaws amendment and propose amendment
s106 - elect directors
s137 - registered holder or beneficial owner may submit SH proposals
- add to the agenda of AGM
- even if accepted by a majority, still not binding on directors
- can be persuasive, since SH have the power to elect/remove directors

Fundamental changes require special resolution = super-majority/ 2/3

• s173 - amend articles
• s183 - amalgamation
• s189 - sell all or substantially all of assets
• s211 - dissolve corp
• Even classes of shares that don’t normally receive voting rights will have voting rights in ss 183, 188, 189, 211 votes
• s 190 - dissent SH are entitled to have their shares purchased at an appraised value

All powers are subject to limitation of s102.

Question 2

SH residual powers

Answer 2

s102 - Normally, SH do not manage the corp
s146 - SH can remove authority from directors by USA
- Automatic Self-Cleansing Syndicate v Cunninghame

Question 3

Automatic Self-Cleansing Syndicate v Cunninghame [1906 CA]

Answer 3

Leading case on authority of BoD against SH in meetings

Facts: M wants to sell the company, called special meeting; Proposal passed by SH but refused by directors - SH brought action to compel directors to carry out the resolution.

Court: director’s power to manage cannot be limited or directed by SHs UNLESS there is a USA

• SH argued that it is absurd that principal be managed by agent - Court: It is by consensus of ALL SH that director became agents; the majority at a meeting is not the principal - the corp as a whole is. - seems to suggest that 100% of SH vote would be effective
• Codified in s102.

Question 4

Unanimous Shareholder Agreements [USA]

Answer 4

s146 - Absolves directors from managerial duties and statutory liabilities and transfers them to the shareholders
- Overwrites the common law rule that SH could not fetter the discretion of directors even when acting unanimously.

Question 5

Class voting rights

Answer 5

Class voting rights generally apply where proposed change is change in rights/restrictions on class of shares or where change can have significant impact on particular class of shares.

s176 - holders of shares of a class or of a series are entitled to vote separately as a class or series on a proposal to amend the articles to changes regarding #of shares, rights and privileges of a class of shares, etc.

• Even classes of shares that don’t normally receive voting rights will have voting rights
• special resolution

Question 6

Distribution of voting rights

Answer 6

NO requirement that shares have voting rights - There must be at least 1 class of shares that has a vote right.

Question 7

Cumulative voting

Answer 7

s107
• Number of shares owned x number of directors to be elected (assuming one vote per share)
• Allows SHs to divide their vote among the different candidates in any way they wish.
• Purpose: guarantee that minority SHs will be able to elect some memebrs of Bd
• In Canada, corporations that permit cumulative voting are not allowed to stagger their Board elections, as this dilutes benefit of cumulative voting by reducing # of directors to be elected