Question

The company ABC Inc. has been created under CBCA, on April 24th 2000 and is having its head office in Toronto, Ontario.

This company operates a business of production of electronic devices and is having a BOD composed of 4 directors. Also, this company is having 5 shareholders, as follows:

- Shareholder A- detaining 20 shares containing the right to vote

- Shareholder B- detaining 15 shares containing the right to receive dividends

- Shareholder C- detaining 40 shares containing the right to vote and 10 shares containing the right to receive dividends

- Shareholder D- detaining 15 shares containing the right to vote and 30 shares containing the right to receive the remaining property in case of dissolution of the company

- Shareholder E- detaining 25 shares containing the right to vote

The company will be dissolved and therefore a meeting of the shareholders has been called.

Answer to the following questions:

1. Indicate which are the shareholders having the right to decide the dissolution of the company. Explain why (minimum 2 sentences).

2. By their votes, shareholders A, B, C approved the dissolution and they appointed one of directors to sign the articles of dissolution.

Shareholders D and E are against the dissolution and they are pretending that the decision of shareholders A, B, C is not respecting the legal requirements regarding the minimum number of votes necessary for the dissolution.

In this situation, indicate if the decision of shareholders A, B, C is legal and explain why (minimum 2 sentences).

Answer 1

1.

Shareholders who hold shares with a right to vote , can vote in the meeting to decide on the dissolution.

Shareholders A, C, D , E have the share with a right to vote. and that is why they are allowed to vote and decide in the meeting on matter of dissolution of company.

Shareholder B have shares with right to receive dividend only .thus he is not allowed to vote and decide.

2.

A, B and C decide for dissolution. Although B do not have right to vote or decide on the matter , still the decision of dissolution is legally valid even if D and E are against the decision,

Reason:

A and C together hold 60 % of total voting rights i.e. ( 20 + 40 ) out of total 100 shares of right to vote, which is more than 50 % votes. thus majority of votes are in favour of decision of dissolution.

where as D and E together hold only 40% of total voting rights ( 15 + 25 ) out of total 100 shares of right to vote , which is only 40% votes against the decision of dissolution.

Thus Decision of dissolution is legal.

Finish.