Canadian Startup and Video Game Law Blog

When Non-Voting Shares CAN Vote

I frequently encounter a misconception that non-voting shares in British Columbia companies do not have a right to vote.  Unfortunately, this is not the case as, in certain circumstances, non-voting shares DO have voting rights.

The obvious circumstances where non-voting shareholders can exercise a right to vote are, for example, alterations to company articles that impact rights held by non-voting shareholders or a company’s decision to amalgamate.

The often forgotten voting right held by all shareholders, including non-voting shareholders, is the annual right to vote on whether the company appoints an auditor and, separately, whether the company produces and publishes annual financial statements.  This vote can be made through a consent resolution (by all shareholders) or through a majority vote at the company’s AGM.   Barring a Shareholders’ Agreement or other voting trust that takes control of how each non-voting share votes, your company will need to seek the approval of non-voting shareholders on an annual basis.

When you sell non-voting shares it is important to understand that these non-voting shareholders do have certain, limited, voting rights to exercise in relation to the company, its structure and direction.  Therein, contrary to the mistaken belief of some founders, the non-voting share class is not entirely passive and can, in fact, take a limited active role in the company.