Can shareholders give binding instructions to directors of an Ontario corporation about how to run the business?

Generally, no — not directly. The Ontario Business Corporations Act vests the authority to manage or supervise the management of the business and affairs of the corporation in the board of directors. Shareholders, as a group, elect directors and can pass resolutions on certain matters reserved to them by statute, but they cannot generally direct the board on day-to-day or even strategic business decisions through ordinary shareholder resolutions.

This separation of management and ownership is a fundamental principle of corporate law. Directors exercise independent judgment; they are not agents of the shareholders who elected them. A majority shareholder cannot simply instruct the board to pay a dividend, approve a contract, or hire a specific person, and expect the directors to be legally bound to comply.

The important exception is the Unanimous Shareholders Agreement. Under the Ontario Business Corporations Act, a written agreement among all shareholders of a private corporation can restrict the powers of the directors and transfer those powers to the shareholders. Where a valid USA does this, the shareholders who hold the restricted power also acquire the corresponding director duties and liabilities. This is the primary legal mechanism by which shareholders of a private Ontario corporation can legitimately exercise management authority that would otherwise belong to the board. If you want shareholders to have direct governance control, a properly drafted USA is the instrument to use.