Introduction to Shares

By Martika Ince | JD Candidate 2024, UCalgary Law 

There are several different types of classes of shares that a corporation may issue, including common shares and preferred shares.

Common Shares
All corporations must issue common shares. As a shareholder of a corporation, the holder of common shares has certain fundamental rights. In Alberta, these rights are governed by the Business Corporations Act (ABCA).[1] The three fundamental rights of holders of common shares in Alberta are the right to vote, the right to dividends, and the right to liquidating distributions.[2]

Right to Vote
Shareholders are entitled to vote on matters such as the election of directors, the approval of auditors, and major corporate decisions. Each share typically entitles the shareholder to one vote, although the articles of incorporation may provide for different voting rights for different classes of shares.

The right to vote allows shareholders to participate in the decision-making process of the corporation and have a say in how the corporation is run. This right is critical in ensuring that the interests of the shareholders are represented and that the corporation is managed in a manner that aligns with the shareholders' objectives.

Right to Dividends
The second fundamental right of a holder of common shares in Alberta is the right to receive dividends. Dividends are payments made by the corporation to its shareholders out of its profits. The right to receive dividends allows shareholders to share in the profits of the corporation. Dividends are typically paid quarterly and may be subject to the approval of the board of directors and the availability of profits.

Right to Liquidating Distributions
The third fundamental right of a holder of common shares in Alberta is the right to share in the distribution of assets. If the corporation is dissolved or liquidated, the proceeds from the sale of its assets will be distributed to the shareholders. The distribution of assets is typically made in proportion to the number of shares held by each shareholder. However, since the common shareholder only has claim to the residual after all other claims against the corporation are satisfied, the volatility risk of common shares is greater than any other corporate security.

Preferred Shares
Preferred shares are typically non-voting shares, but have certain preferences or privileges over common shares. These preferences may include the right to receive a fixed dividend before any dividends are paid to the holders of common shares, the right to receive a specified amount upon the liquidation of the corporation before any amounts are paid to the holders of common shares, and the right to vote separately on certain matters affecting the corporation.

Classes of Shares
A class of shares is a group of shares in a corporation that has certain characteristics that distinguish it from other classes of shares. The three fundamental rights discussed above must be present across the classes of shares, but do not all have to be present in each class.[3] The articles of incorporation may provide that two or more classes of shares, or two or more series within a class of shares, have the same rights, privileges, restrictions and conditions.[4]
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It is important for businesses to understand the requirements in creating classes of shares upon incorporation. If you have questions or require additional information, please reach out to the BLG Business Venture Clinic.


[1] Business Corporations Act, RSA 2000, c B-9.
[2] Ibid, s 26(3).
[3] Ibid, s 26(4)(b).
[4] Ibid, s 26(6).