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Minority shareholder in a Canadian corporation – Protect your rights.

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Being a minority shareholder in a Canadian private corporation is equal to being a hostage of the
majority shareholder. Without a market where you can sell your shares and without any means of
influence on the majority shareholders, the minority is left to the mercy of the majority. By having the
power to elect directors, appoint officers, decide whether to pay dividends or not, the majority
shareholder can completely deprive the minority of the benefits of their participation in a corporation.

Despite this vulnerability, there are certain precautions that a minority shareholder can make to protect their rights and to prevent the majority from abusing its powers. Here are some of the measures:

First and foremost – do all these precautions BEFORE you become a minority shareholder, before your investment into the company you still have some bargaining power. After the investment, all the power is in the hands of the majority.

Make sure you have veto rights regarding such matters as corporation restructuring, dilution of the
shareholdings, appointment of officers and election of directors, borrowing and lending and more.
In addition to the controlling powers, make sure you have a way out from the corporation. Provide for the compulsory purchase of your shares by a corporation, insist on a buy/sell (shot-gun) provision in the shareholders agreement.
For additional assistance and to make sure your shareholders agreement complies with the particular set of circumstances, please feel free to contact us and we will be happy to assist.

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All information provided in this video is for informational and reference purpose only. Nothing contained herein shall be considered as a legal advice or instructions to be acted upon. CBES – Canadian Business and Enterprise Services does not offer legal advice online or on its YouTube channel. Please consult a professional before you act in reliance on the information contained in our videos.
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