Corporations(incorporated businesses) are subject to important formalities, which make it important to distinguish between the decision-making powers of shareholders and directors. While the board of directors "exercises all the powers necessary to manage the business and affairs of the corporation or to supervise its management" (s. 112, ICA), shareholders have much more limited but still fundamental decision-making powers. The following is a non-exhaustive list of powers that are not vested in the board of directors but in the shareholders.
The way in which the shareholders will have an important influence in the company will be primarily through the election of the directors. A shareholder holding more than 50% of the voting rights through his shareholding will be able to elect the directors he wants; this is how the majority shareholder will be said to control the company. In small and medium sized companies, most of the time (but not always), the shareholders will vote (or sign a resolution) to elect themselves as directors of the company. Corporate law also provides that shareholders may at any time decide, by resolution, to remove the mandate of a director.
Each year at the annual meetings (or resolutions in lieu thereof), the shareholders may appoint an auditor, whose mandate will include auditing the financial statements and preparing an annual report to the shareholders. Companies that are not reporting issuers within the meaning of the Act may, if all shareholders consent, decide not to appoint an auditor. This decision must be made unanimously, including shareholders holding non-voting shares. In such a case, the shareholders will appoint a public accountant instead.
Any amendment to the Articles must generally be authorized by special resolution of the shareholders. The special resolution must be passed by a two-thirds vote, not a majority vote. Amending the articles allows for changes to the name of the corporation, changes to the share capital, and the addition, amendment or deletion of any other provision permitted by law. Note that certain amendments to the articles may require a vote by class of shares in order to protect the holders of those classes, whether or not their shares are voting.
Any conversion of shares enacted by the board of directors (for corporations incorporated in Quebec) must be approved by special resolution of the shareholders. For federal corporations, the conversion of shares requires in all cases an amendment to the articles, which requires the authorization of the shareholders by special resolution.
The dissolution of a corporation corporation terminates the legal existence of the corporation. Such a decision to dissolve the corporation is made by consent of the shareholders, by special resolution, unless there are no shareholders, in which case the board of directors may make the decision to dissolve the corporation.
By unanimous shareholder agreement, the shareholders of a corporation may decide that certain powers of the board of directors shall be taken not by the directors, but by the shareholders themselves. Alternatively, by unanimous agreement, the shareholders may decide that certain decisions of the board of directors will be subject to the approval of the shareholders, without the decision being taken directly by them.
The unanimous agreement is a way for shareholders to have greater control over the management and affairs of the corporation.