A shareholder is a legal or natural person who holds a fractional unit of the capital of a corporation. In other words, it is a person who holds at least one share of the share capital of a corporation.
For the shareholder, the acquisition of shares means the purchase of a right or interest in a corporation. The right or interest varies depending on the type of share acquired.
A director of a corporation is a natural person who:
- has at least 18 years of age,
- is not found to be incapable of managing property by the law or by a court of Canada or another State, and
- has not the status of bankrupt.
A director is responsible for managing the affairs of the corporation. Any director is elected by the shareholders of a corporation at the first meeting of shareholders or at any succeeding annual shareholders’ meeting, and holds office for a maximum of 3 years.
It is the articles and regulations of the corporation that state the number of directors to be elected. Typically, this number depends on the size of the corporation and its holdings. When more than one director is elected, a Board of Directors can be formed.
Except in rare instances provided by law, a Board of Directors that is composed of:
- 4 or more directors, must be composed of at least 25% Canadian residents,
- less than 4 directors, must be composed of at least 1 Canadian resident, and
- a sole director who is a Canadian resident.
Directors have a duty of care, competence and loyalty in favour of the corporation they administer. Thus, every director must act with honesty, in good faith and in the best interests of the corporation. In the performance of their duties, directors have the power to delegate part of their tasks while maintaining a duty of supervision over the delegated tasks. Directors are not liable for the obligations incurred by the corporation. However, they may retain a personal liability that is dual under the CBCA and common law or the Quebec civil Code.
An officer is a natural person who is responsible for the day-to-day management of the company. An officer has to:
- perform his or her duties,
- respect the law and
- act honestly and with loyalty in the performance of his duties.
Similarly to directors, officers are not responsible for obligations incurred by corporation. However, they retain a personal liability under the CBCA and civil responsibility under the Civil Code of Quebec or the general common law in the rest of Canada.
Individuals with significant control
Since June 2019, any business incorporated under the CBCA must maintain a registry of individuals with significant control in the corporation. The purpose of this registry is to increase public and investor confidence in Canadian businesses, to provide a greater degree of transparency and to help government authorities counter money laundering and tax evasion. In fact, a financial institution with which you conduct business may inquire about this registry.
A person with significant control is defined as a person who “owns, controls or manages a significant number of shares, or a person who does not own shares but nevertheless has a significant influence on the company, or a person who enjoys any combination of these factors”. A significant number of shares represents a minimum of 25% of the voting shares or a minimum of 25% of all shares based on the fair market value of the shares.
The register must be available for inspection by shareholders of the corporation, creditors of the corporation, government agencies and Corporations Canada. In addition, the registry must contain specific information about the persons having significant control and must be kept up to date.