Shareholder, director and officer : explanations

Within a corporation (company) there are different titles and functions. Often these titles and functions are all held by the same person, especially for smaller companies, but this is not always the case. Here is an overview of the differences between the shareholders, directors and officers of a company.

Shareholders

A shareholder is the owner of shares in a company corporation. His shares confer certain rights on the company, depending on the class of shares he holds. So-called "ordinary" shares confer the three basic rights provided for by law: the right to vote, the right to any declared dividend, and the right to the residue in the event of the company's liquidation. It can therefore be said that shareholders are the "owners" of the company, through their shareholding.

Strictly speaking, the shareholder does not necessarily have any power in the affairs and management of the company. His or her only power in relation to the corporation is the right to vote at annual shareholder meetings or special meetings. Shareholders may vote on matters provided for by law or by a unanimous shareholder agreement. In general, the shareholder will have influence on the corporation by voting on the election of directors.

directors

The directors (directors) are elected by the shareholders and form the board of directors of the corporation. Section 112 of the Quebec Business Corporations Act states that "the board of directors exercises all the powers necessary to manage the business and affairs of the corporation or to supervise its management. The powers of the board of directors are exercised at meetings of directors, where directors vote on resolutions. For example, the directors can vote to authorise the sale of a property, or to hire a new employee.

The powers of directors can be withdrawn or restricted by a unanimous shareholder agreement. All the shareholders can enter into an agreement to make certain decisions of directors subject to their approval, or withdraw certain powers so that they are exercised directly by the shareholders. This is a way for the shareholders to increase their influence and power over the company.

officers

The function ofdirector should not be confused with the function of officer (officer), although in practice the two are very often combined. The main functions of officers are: chairman, vice-chairman, treasurer and secretary. In the Companies Register, a officer who is not director must appear in the section " officer not a member of the board of directors". In addition, a director who does not hold the position of officer will only have the position " director " in the register.

By law, officers are appointed by the board of directors, which may delegate powers to them. The company's bylaws sometimes stipulate the responsibilities of each function of officer. The company's officers manages the company in a practical, day-to-day way, as opposed to directors , which exercises its power at meetings, or in written resolutions in lieu of meetings.

Note that there are limits to what directors can delegate to officers. For example, the law provides that it is prohibited to delegate to officers the power to declare dividends or to authorise share issues, as these powers are exclusive to directors.

Cumulation of titles and functions

In small companies, it is common for these three titles and functions to be combined. For example, the founder of the company will be a shareholder first, and will then appoint himself asdirector and officer. It is still important to exercise these powers through proper documentation to determine which decisions have been made as shareholder anddirector. For example, a resolution to authorise an amendment to the articles of association should be signed and passed as a shareholder, notdirector.