Individuals who are minors (called "infants" under the
law) are frequently the beneficial owners of items of property,
including shares of companies. Often the registered ownership
is held in the name of a trustee or guardian, or by another
mechanism. What happens if it is desired, for some reason, to
have the infant become directly "registered" on the books
of the company as a shareholder?
There is nothing in the Business Corporations Act (BC) which
specifically prohibits an infant from becoming a registered owner
of shares of a company. The definitions of "shareholder"
and "registered owner" refer to "persons",
which category would include minors. However, there are a few
aspects of the status of "registered owner" of the shares
which may create some complications or risk, if this kind of
structure is desired.
Firstly, registered shareholders often need to enter into
contracts (such as shareholders agreements) or agree to waive
certain rights that arise in favour of registered owners of shares
(eg. dividend rights). Under the legislation governing
infants, there are some restrictions and risks on the general
enforceability of contracts, if those contracts are entered into by
infants. Risk averse organizations could adopt mechanisms to
address these concerns, such as arranging for guardian or personal
representative signatures when dealing with contract formalities,
but this may prove cumbersome and involve extra cost.
Secondly, as registered owners of shares infants would be
routinely exercising rights such as casting votes at shareholders
meetings or in written resolutions. It may be an open question
in British Columbia whether the infant could later purport to
refute a particular vote that they cast, or whether others could
challenge the adequacy of the corporate proceedings conducted in
reliance on the infant's exercise of registered ownership
rights. While the Business Corporations Act (BC) is silent on
this issue, many other corporate law statutes, including the Canada
Business Corporations Act (CBCA) remedy this concern directly.
Section 51(5) of the CBCA states:
"If a person who is less than 18 years of age exercises any
right of ownership in the securities of a corporation, no
subsequent repudiation or avoidance or, in Quebec, annulment or
reduction of obligations is effective against the
corporation."
Since statutory provisions are principally interpreted as being
remedial, and the British Columbia legislation contains no
counterpart to provisions such as s. 51(5) of the CBCA, there may
be some risk of repudiation for governance proceedings of British
Columbia companies which involve infants as registered
shareholders.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Specific Questions relating to this article should be addressed directly to the author.
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