Question

The share-capital of the company ABC Inc. contains the following classes of shares:

1-                             Common Shares

An unlimited number of common shares subject to the following rights, privileges, conditions and restrictions.

A-                            Right to vote

                                Holders of common shares shall be entitled to be called and to vote at all shareholder’s meetings, each ordinary share conferring one (1) vote.

B-                            Participation

                                Subject to the rights and privileges attached to other classes of shares, holders of common shares shall have the right to participate in the company's assets, profits and assets and to receive the remaining property in case of liquidation or dissolution of the company.

C-                            Restriction

                                The company will not be able to pay any dividend on the common shares.

2-                             Class "A ‘’- Preferred Shares

                                An unlimited number of class A preferred shares, subject to the following rights, privileges, conditions and restrictions.

A-                            Dividend

                                Holders of Class "A" preferred shares will be entitled to receive, by priority on class ’’B’’ and ‘’C’’, preferred shares, an annual dividend of 3.5% percent calculated on the funds applicable to the payment of dividends, when the dividends are declared by the corporation.

B-                           Participation

                                In the case of distribution of the company's assets, as a result of its dissolution, of its voluntary or forced liquidation, or otherwise, the holders of shares Class "A" preferred shares shall be entitled to the payment of the remaining property of the company, by priority the class "C"and the common shares of the company, but after class ‘’B’’ preferred shares.

C-                           Right to vote

The holders of class "A" preferred shares shall not have the right to vote at the meetings of shareholders of the company, nor any right to receive notices of convening or attending such meetings, all subject to the provisions of the Canada Business Corporations Act.

3-      Class "B" Preferred shares

An unlimited number of class "B" preferred Shares, subject to the following rights, privileges, conditions and restrictions.

A-                           Dividend

          Holders of Class "B" preferred shares will be entitled to receive, by priority on the company's class "C" but after the class ‘’A’’ preferred shares, from the funds applicable to the payment of dividends, when declared and as declared, an annual dividend of 1.5% calculated on the funds applicable to the payment of dividends.

B-                           Participation

                                In the case of distribution of the company's assets, as a result of its dissolution, of its voluntary or forced liquidation, or otherwise, the holders of shares Class "B" preferred shares shall be entitled, by priority on common shares, class ‘’A’’ and class ‘’C’’ preferred shares, to the payment of the remaining property of the company.

C-                           Right to vote

The holders of class "B" Preferred shares shall not have the right to vote at the meetings of shareholders of the company, nor any right to receive notices of convening or attending such meetings, all subject to the provisions of the Canada Business Corporations Act.

4-      Class "C" Preferred shares

An unlimited number of class "C" preferred Shares, subject to the following rights, privileges, conditions and restrictions.

A-                           Dividend

          Holders of Class "C" preferred shares will be entitled to receive, after the company's class "A" and class ‘’B’’ preferred shares, from the funds applicable to the payment of dividends, when declared and as declared, an annual dividend of 1% calculated on the funds applicable to the payment of dividends.

B-     Participation

          In the case of distribution of the company's assets, as a result of its dissolution, of its voluntary or forced liquidation, or otherwise, the holders of shares Class "C" preferred shares shall be entitled, after the class "A" and ‘’B’’ preferred shares and by priority on the common shares of the company, to the payment of the remaining property of the company.

C-     Right to vote

The holders of class "B" Preferred shares shall not have the right to vote at the meetings of shareholders of the company, nor any right to receive notices of convening or attending such meetings, all subject to the provisions of the Canada Business Corporations Act.

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You are the director of the company ABC INC. and the shareholders ask you the following questions.

Question A) : One of the directors of the Board of Directors of the company resign and a special meeting of the shareholders must be called in order to proceed to the election of a new director .

Indicate which are the shareholders having the right to be called to this special meeting. – 5 points

Answer 1

The board of directors has the power to call general meetings and the majority of general meetings will be called by the directors (S302 of the Companies Act 2006).

The members also have the ability to demand a general meeting. Section 303 of the Companies Act 2006 requires the directors to call a general meeting once the company has received requests from members representing 5% of the paid up share capital those entitled to vote at general meetings of the company.

Under S304, the directors must call a general meeting within 21 days of receiving such a valid request and provide for the general meeting to be held on a date not more than 28 days after the date of the notice of the meeting.

If the directors do not call a meeting as required to do so, under S304, the members who requested the meeting, or any of them representing more than one half of the total voting rights of all of them, may themselves call a general meeting.

The Companies Act 2006 also gives the court the ability to order a meeting and where a resigning auditor has given a statement of the circumstances connected with his resignation, that auditor is also entitled to call on the directors of the company to convene a general meeting for the purposes of receiving and considering an explanation of those circumstances.