Question

The company ABC Inc . is having three shareholders as follows:
- A = owner of 30 ordinary shares, containing the right to participate to the remaining property in case of liquidation of the company and the right to vote
- B = owner of 35 shares, class A containing the right to receive dividends and the remaining property in case of liquidation of the company
- C = owner of 40 shares, class B containing the right to receive dividends and the right to vote

Question A: Indicate which are the shareholders having the right to decide not to appoint an auditor for the company. Explain the reasons of your answer- minimum 2 sentences

Question B: Indicate which are the responsibilities of the shareholders of the company ABC Inc.

QUESTION C:                              
Explain the unanimous shareholders agreement and its effects (2 sentences minimum)

Answer 1

Ans A.

As per the classification of shareholders, shareholder A & shareholder C have the right to vote. The decision on not to appoint an Auditor is taken in Annual General Meeting and the sharholders having voting rights take that decision. Therefore, shareholders A & C are having the rights to decide not to appoint an Auditor for the company.

Ans B.

The shareholders responsibilities are the following :

1. Attend the General Meeting of the company and exercise voting rights to approve or disapprove on various ordinary resolutions or special resolutions related to ;

a. Appointment of Diectors

b. Appointment of External Auditors

c. Review and approval of Financial statements

d. Take Legal Action against Directors

e. Change in Article of Association

f. Change in ahreholding patterns and rights.

g. GDR issue

h. Loan and investment by company

i. Related party transactions

j. Voluntary winding up of the company

2. Shareholders have the responsilibility to approve or disapprove dividend declared by borad, merger or acquisitions decisions and winding up decisions.

3. It is the responsibility of the shareholders to review and question on  financial information which are important for the performance of the company.

Ans C.

Unanimous Sharholders Agreement (USA ) under the Canada Business Corporations Act is an agreement among all the shareholders of a Corporation that restricts partially or as a whole, the powers of the Directors to Manage or Supervise the Management of the Corporation.

Major provisions under unianimous shareholders agreement are related to governance and management, financing, pre-emptive rights, non-competiotion provision and many other powers that the shareholders wish to take control of.

USA is useful to resolve and setlle disagreements between shareholders as it lays out the procedure that will be followed for dispute resolution in such cases.