When starting a corporation, one of the important decisions to make is the type of shares to issue. In Canada, corporations can issue two types of shares: voting and non-voting. In this blog post, we will explore the differences between these two types of shares and what they mean for shareholders.

Voting Shares

Voting shares give shareholders the right to vote on important decisions of the corporation, such as electing directors, approving bylaw changes, and approving mergers or acquisitions. Each voting share typically entitles the shareholder to one vote. Shareholders with more voting shares will have more say in the decisions of the corporation.

In Ontario, the Canada Business Corporations Act requires corporations to have at least one class of voting shares. This means that every shareholder must have the right to vote on at least some matters, such as electing directors.

Non-Voting Shares

Non-voting shares, on the other hand, do not give shareholders the right to vote on the matters of the corporation. However, non-voting shareholders still have some rights, such as the right to receive dividends and the right to receive a share of the assets if the corporation is dissolved.

Non-voting shares can be a good option for investors who are more interested in receiving dividends and potentially capital gains, rather than having a say in the decisions of the corporation.

Differences between Voting and Non-Voting Shares

The main difference between voting and non-voting shares is that voting shares give shareholders a voice in the decisions of the corporation, while non-voting shares do not. However, there are other differences to consider as well.

For example, voting shares typically have a higher value than non-voting shares. This is because voting shares give shareholders more control over the corporation and its decisions, which can be more valuable to investors.

Another difference is that voting shares may be subject to more regulations than non-voting shares. For example, in some cases, a certain percentage of voting shares may need to be held by Canadian residents to comply with the Investment Canada Act.

Conclusion

In conclusion, understanding the differences between voting and non-voting shares is important for anyone looking to invest in a corporation. While voting shares give shareholders a say in the decisions of the corporation, non-voting shares can still be a valuable investment option for those looking for dividends and potential capital gains. When deciding on the type of shares to issue, it’s important to consider the needs and goals of both the corporation and its shareholders.