Canada Business Act: Defaulting Shareholder

The Canada Business Act provides a guideline for businesses.

The Canada Business Corporations Act is a Canadian law created to represent and regulate the dealings of businesses and corporations based in Canada. It provides legislation on issues such as shareholders' liability and defaulting.

Shareholder Liability

Section 45 (1) of the act states that shareholders are subject to limited liability in most cases from any act of default by a corporation. Therefore, if such a situation happens, they will only lose what they had personally invested--the liability would not touch their personal wealth. Other sub-sections of the act detail cases--often occurring when shareholders themselves default--where this section becomes void.

Corporation Rights

If a shareholder defaults, section 38 (4) gives a corporation the power to seek what it is entitled to through a court of law. This can be an amount equal to the total liability of the shareholder, or it can also be for the price of property distributed to the shareholder.

Director Rights

Under section 118 (4) and (5), an individual director is able to wield the same powers as a corporation when trying to receive payment from a defaulting shareholder. Under part 5, a court can decide to request that a shareholder pays the director the amount that is owed.

References

• Department of Justice: Canada
• Department of Justice: Canada