What is a Shareholder Resolution in Ontario?

Some decisions can be made by the director or directors of a corporation, without consulting with the shareholders. Other decisions require the approval of a majority of a corporation’s shareholders. A shareholder resolution is the way in which the shareholders show approval for a particular decision.

Our Richmond Hill business lawyers may be able to provide you with more information on what constitutes a shareholder resolution in Ontario.

For What is a Shareholder Resolution Used? 

A shareholder resolution is not needed for decisions that relate to a corporation’s daily business. For example, if a corporation is in the business of supplying shipping boxes to other businesses, a shareholder resolution would not be needed for the corporation to enter into a new agreement to supply boxes to a particular customer. That would be a decision that the directors are authorized to make without shareholder approval.

Shareholder resolutions are necessary when a decision affects the nature of the corporation itself. A few examples of matters that may require shareholder approval include:

  • Passing a particular by-law
  • Appointing or replacing a director
  • Amending the articles of incorporation
  • Appointing or replacing an auditor
  • Winding up (dissolving) the corporation
  • Amalgamating with another corporation.

Ordinary Resolutions and Special Resolutions

In Ontario, the Business Corporations Act sets out the difference between an ordinary resolution and a special resolution. The legislation requires that some decisions be made by ordinary resolution and others be made by special resolution. Typically, more routine matters are passed by ordinary resolution.

An ordinary resolution is one that is submitted to a meeting of the shareholders and passed, with or without amendment, by at least a majority of the votes cast. That means that for the resolution to pass, 50% plus one vote must be cast in favour of the resolution.

A special resolution is one that is submitted to a meeting of the shareholders and passed, with or without amendment, by at least two-thirds of the votes cast.

Votes that are not cast for whatever reason do not count in the total number of votes.

Resolution in Lieu of a Meeting

Sometimes decisions need to be made quickly, and arranging a meeting is not convenient. The Business Corporations Act provides for a resolution to be passed in writing, in lieu of holding a meeting of the shareholders. In the case of an offering corporation, the resolution must be signed by all the shareholders entitled to vote, in order to pass.

In the case of a privately held corporation, a decision that would be passed by ordinary resolution at a meeting can be passed by resolution in lieu of a meeting if it is signed by a simple majority of the shareholders entitled to vote. This rule enables private corporations with only a small number of shareholders to deal with routine matters affecting the corporation without having to hold meetings.

Contact our Richmond Hill Business Lawyers Today for a Consultation

From drafting shareholder’s agreements to navigating the relationship between business and shareholders, there can be many matters to consider when running a business. A range of circumstances may determine what kind of shareholder resolution is required, and in what way voting may be conducted.

Our Richmond Hill business lawyers may be able to help clarify questions you may have related to what constitutes a shareholder resolution in Ontario, and more. Contact us for more information and to book a consultation.

* Please note that the information in this article is meant as a general overview of shareholder resolutions and does not constitute legal advice. For legal advice, please speak with a lawyer.