Learn about the concept of shareholders and how they relate to your corporation.
A corporation is owned by its shareholders. The number of shares owned by each shareholder reflects the proportion of the corporation they own. When you form a new corporation with Goodlawyer, you choose your corporation’s shareholders, allocate ownership interests among, and assign voting or non-voting rights to each shareholder.
1. Initial Subscription
When you incorporate a business corporate law in Canada requires that your initial shareholders actually buy their ownership stake in the business.
This is a legal requirement and is NOT facilitated by Goodlawyer. After your business is incorporated, it’s up to you to ensure your corporation gets paid for the initial share subscriptions and issuances.
The easiest way to collect payment is by having the shareholders write cheques to the corporation for the value of their respective initial share allocations, or e-transfers which are directly deposited. Paying for shares with cash is highly discouraged as it’s difficult to track. Learn more about paying for your initial share subscription here.
2. Common Shares
Common shares are the most common form of ownership interest for most businesses, and that’s why they’re standard for all Goodlawyer Incorporations. They are created under your corporation's articles of incorporation and typically give their holders certain rights, like voting rights, the right to dividends, and the right to a distribution of the corporation's assets on a liquidation or dissolution.
Common shares do not have any special priority or “preferred rights” over your corporation’s assets. So when you decide to wind down your corporation, the holders of common shares will be paid out in a manner that reflects the number of common shares they own. The holders of your voting common shares and non-voting common shares will be treated equally with respect to the distribution of your corporation’s assets on dissolution.
3. Voting and Non-Voting Shares
Typically, voting common shares are suitable for issuance to those shareholders who have the right to actively participate in your corporation’s decision-making process (like the founders, directors, senior managers, etc.).
Your non-voting common shares are suitable for passive shareholders who wish to benefit from your corporation’s long-term growth, but aren’t involved in making key management decisions for the business.
There are certain matters where even the non-voting shareholders get to vote, but these instances are rare and prescribed under corporate law statutes. Talk to a Good Lawyer for more information.