Three basic rights: Quebec/Federal differences

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The three "basic" rights attached to a company's shares are the right to receive any dividends declared, the right to vote at any shareholders' meeting, and the right to share in the remaining property in the event of dissolution or liquidation. The Canada Business Corporations Act (CBCA) and the Quebec Business Corporations Act (QBCA) govern the existence of these three basic rights in different ways. Here is an overview.

Mandatory basic rights

Under both the CBCA and the QBCA, the three basic rights mentioned above must each be present in at least one class of shares, without the three rights having to be attached to shares of the same class. Furthermore, where the articles of incorporation do not provide for any description of share capital, the company will be deemed to have a single class of shares with all three basic rights.

Deemed right unless otherwise specified (LSAQ)

Under the QBCA, unless otherwise stipulated in the articles, each share of capital stock is deemed to have the three basic rights. For example, if the objective is for a class of shares to be non-voting, the articles must expressly provide for this, failing which the shares of that class will be voting. The CBCA has no equivalent provision. Vigilance is therefore required when drafting the rights and restrictions of classes of shares under the QBCA , since failure to provide for the desired restrictions can have significant consequences.

Basic rights must be attached to issued shares (LSAQ)

Under the provisions of the QBCA, each basic right must be attached to shares that are issued. Otherwise, until a share with the basic right in question is issued, all issued shares of the company will have the basic right in question, notwithstanding any restriction to this effect in the articles. For example, if only Class B shares are issued and outstanding, and these shares are non-voting, they will have the right to vote until a voting share is issued. Again, there is no equivalent provision in the CBCA.


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