What are non-voting shares and why would an Ontario company issue them?

Non-voting shares are a class of shares that do not carry the right to vote at shareholder meetings. Holders of non-voting shares have an economic interest in the corporation — typically the right to receive dividends and a share of remaining assets on wind-up — but cannot participate in decisions about management, director elections, or major corporate changes.

Ontario corporations issue non-voting shares for several reasons. One common use is to bring in passive investors or equity partners who are providing capital but are not involved in running the business, and where the founders want to preserve control through the voting shares they retain. Another use is in family succession planning, where shares are transferred to family members who are to benefit financially from the business but are not expected to manage it.

Non-voting shares must be clearly authorized in the articles of incorporation, and the terms of the class — including the specific rights regarding dividends and liquidation proceeds — must be set out there as well. Note that even non-voting shareholders have certain rights that cannot be stripped away, including the right to vote on certain fundamental changes that directly affect the rights of their class. A corporate lawyer can advise on how to structure non-voting shares to achieve your objectives within these constraints.