What are common shares and how do they work in an Ontario corporation?

Common shares are the standard form of equity ownership in a corporation. In an Ontario corporation, common shareholders are typically entitled to vote at shareholder meetings, participate in dividends when declared by the directors, and share in the remaining assets of the corporation if it is wound up — after all creditors and any holders of preferred shares have been paid.

Common shares represent the residual ownership of the corporation. This means common shareholders benefit most when the company does well (their shares rise in value) but bear the most risk when it does poorly (their shares lose value, and they are last in line if the company becomes insolvent).

For many small Ontario corporations, a single class of common shares is the entire share structure, and all shareholders own the same type of share with identical rights. As a company grows or takes on investors, additional share classes are often created to give different investors different rights. If you're incorporating a new Ontario company or reorganizing an existing one, the design of your share structure — including the rights attached to common shares — is an important early decision. A corporate lawyer can help you understand your options.