Words and Phrases - "full voting rights under all circumstances"

The common shares of Opco carry one vote per share at all meetings of the shareholders, except at a meeting where the right to vote is restricted to shareholders of another class. Although the preferred shares are non-voting, where there is a proposed amendment to the articles that would affect the rights, conditions or privileges attached to the preferred share, such amendment must first be approved by the vote of at least 3/4 in value of the preferred shares represented by the holders present at a special meeting called for that purpose. In addressing whether the common shares should be considered to have “full voting rights under all circumstances,” CRA first noted that the proviso regarding the voting rights of the common shares appeared problematic, and then stated:

[I]t may be found that the common shares of the capital stock of Opco would indeed have full voting rights in all circumstances, although the corporation could not make an amendment affecting the rights, conditions or privileges of the preferred shares without first obtaining the consent of a number of the preferred shareholders. In and of itself, the fact that the holders of the preferred shares have such a "veto right" in relation to amendments to Opco's articles would not normally result in the common shares being considered as not having full voting rights in all circumstances for the purposes of subsection 186(2) and subparagraph 186(4)(b)(i).

In that regard, we understand that under certain corporate statutes applicable in Canada, this type of "veto right" is automatically granted by law to shareholders. In our view, the application of subsection 186(2) or subparagraph 186(4)(b)(i) should not vary depending on whether such a "veto right" is granted to shareholders by statute or by the articles of incorporation.