Beyond the entitlements set out in shareholder agreements and corporate bylaws, shareholders have certain rights spelled out in the Business Corporations Act of British Columbia (BCA). Under the BCA, shareholders have the right to vote at an annual general meeting on: resolutions governing the activities of the company; the election of members to the board of directors; and, whether to have the company’s financial statements audited.
Anyone who is a registered or beneficial owner of shares for at least two years may submit a proposed resolution to be voted upon by shareholders. In the BCA this person is known as a “submitter.”
Arising out of these rights, shareholders may petition the court to make appropriate orders where a company fails to:
- call a shareholder meeting
- process a shareholder resolution, or
- provide an audited financial statement.
Accordingly, the court has authority under the BCA to:
- set a shareholder meeting
- issue directions on the conduct of a meeting
- review rejected shareholder proposals or order a company to refrain from processing a proposal
- appoint an auditor and set the auditor’s compensation.
Only a “submitter” of a proposal – owning shares for at least two years – may apply to the court for review of a company’s decision if the company refuses to process a proposal, while any shareholder or director may petition the court to order a shareholder meeting. Any person who claims to be aggrieved by a proposal – such as a creditor – may seek a court order requiring the company to refrain from processing the proposal.
The court may also order the company to reimburse the submitter of a proposed resolution for all reasonable legal expenses. The BCA does not expressly provide for cost recovery by a shareholder or director who seeks a court-ordered shareholders’ meeting. Where a shareholder is successful in seeking a court order for the appointment of an auditor, the BCA, again, does not expressly provide for recovery of the applicant’s legal costs from the company.
Aggrieved shareholders should seek the professional legal help for advice on the best course of action to address corporate disputes.