A Shareholder, A Director, and An Officer walk into the Boardroom…

• Zoë
  Beckett

  Zoë
  Beckett

  view bio

Under Part 3 of the Business Corporations Act (Alberta), a corporation is a body corporate with many of the rights, powers and privileges of a natural person. This gives rise to one of the benefits of incorporating, which is that the Corporation itself can sue and be sued, significantly limiting the liability of the business owner. It can be one person or many, but a corporation can only operate with human bodies to control it. This blog post will briefly outline the roles and responsibilities of a shareholder, director, and officer and who can hold those titles. 

Shareholders

Shareholders are the corporation’s owners, and they become owners by purchasing the corporation’s shares. However, being the owner of a corporation by virtue of holding shares in it is not the same thing as being the owner of a house, car or other tangible assets. A shareholder’s level of ownership and control can vary depending on the structure and size of the company as well as their shareholdings. Still, their general rights are set out in the Business Corporations Act (Alberta).  

1. A shareholder has a right to examine certain records of the corporation, including the organizational documents, past minutes of shareholders’ meetings, financial statements, and registers of the corporation. 
2. At least one class of shareholder will have the right to vote at shareholders’ meetings and to elect the directors of the corporation; and
3. A shareholder has a right to share in the profits earned by the corporation or a share of the corporation’s assets should it be dissolved. 

Note that each of these rights is subject to other factors, and in order to determine your own rights, you are encouraged to consult a lawyer. 

Keep in mind that a shareholder does not have day-to-day control over the operation of the business, but a shareholder may influence that control through the directors they vote for. Further, a shareholder’s liability is generally limited to the amount of their investment. 

Directors

Directors are the people who manage and oversee the affairs of the corporation. A director or group of directors makes the day-to-day decisions to operate the business. For this reason, and unlike a shareholder, a director can not be another corporation or legal entity. A director must be a person. In a small company, there may be just one director, who is also the sole shareholder and officer. In a larger company, there may be a board of directors that is separate from the officers appointed to handle different aspects of the business’ operation. In all sizes of operations, a director is placed in a position of trust. Because of this, directors have certain duties and obligations, which are set out in the Business Corporations Act (Alberta).  

1. A director shall act honestly and in good faith with a view to the corporation’s best interests while exercising reasonable care, diligence and skill.
2. A director must disclose in writing any personal interest in a proposed contract or proposed transaction of the corporation.
3. A director must assess the corporation’s financial viability in voting to issue dividends or enter into contracts with financial obligations for the corporation.

In addition to understanding the rights and obligations of the position, a director should also know that they may be held personally liable as a director under Alberta law. This includes potential liability to pay employees wages for up to six months in the event the business goes bankrupt or closes down as well as under some environmental and regulatory statutes.

Officers

The directors of the corporation appoint officers to handle different aspects of the corporation’s business. As with shareholders and directors, the Business Corporations Act (Alberta) provides for certain rights and obligations of a corporation’s officers, but the corporation’s organizational documents define their roles and responsibilities. Officers can be given a variety of titles, including President, Vice-President, Secretary, Treasurer, etc. Which titles are used and what role each play will often be set out in the Corporation’s Bylaws passed shortly after incorporation. In a small business, the definition of these roles may be ceremonial, but as the business grows, they can take on increased significance. Therefore, it is important to set up your corporation for success and turn your mind to the roles shareholders, directors, and officers play in managing a corporation right from the start. 

_{This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.}