Understanding Share Classes and Shareholders in Alberta: A Guide for Business Owners

What are shares?

Shares are units of ownership in a corporation. If a company were a big pie, shares are the slices. The more slices you hold, the bigger your ownership. Each slice has its own rights. Shares come with rights such as:

• Voting power — helping make decisions

• Dividends — getting a portion of the company's profits

• Value growth — your shares become worth more as the company grows

Different types of shares give different combinations of these rights. Your ownership percentage is your total number of shares ÷ the total number of shares.

What is a Share Class?

A share class is simply a category of shares that comes with its own set of rights. A great analogy is different types of concert tickets. For example:

🎟️ Regular Ticket = Common Shares. A regular concert ticket gets you into the show and lets you enjoy everything, but nothing extra. That is just like common shares, which allow for basic ownership and voting rights.

🎟️✨ VIP Ticket = Non-Voting Shares. A VIP ticket gives you perks like early entry or better seating, but you still do not control the show. That matches non-voting shares, which allow for financial benefits but no say in decisions.

🎟️🌟 Backstage Pass = Preferred Shares. A backstage pass gives you priority access, special treatment, and guaranteed perks. That is exactly how preferred shares work, allowing the shareholder to be paid first and have priority over others.

In a corporation, share classes work in the same way, and each share class defines what a shareholder can or cannot do.

The Most Common Share Classes in Alberta

Alberta's Business Corporations Act gives corporations a lot of freedom. You can create almost any share class structure you want, but most small businesses stick to three main classes:

1. Common Voting Shares (Class A)

These are the standard shares most founders hold. The typical rights include:

• Voting power — elect directors and approve major decisions

• Dividends — a portion of the company's profits

• Growth — value increases as the company grows

Who usually holds these shares? Founders, active business owners, and key decision-makers.

2. Non-Voting Shares (Class B)

These shares are used when you want someone to share in profits but not have control.

Typical rights:

• No voting

• Can receive dividends

• Often redeemable or retractable (the company or shareholder can cash them out)

Who usually holds these shares? Spouses, children, passive investors, and employees receiving bonuses.

3. Preferred Shares (Class C)

Preferred shares are like the "premium" version of shares.

Typical rights:

• Priority for dividends

• Priority if the company is wound up or dissolved

• Often fixed dividend rates

• Sometimes no voting rights

Who usually holds these shares? Investors who want stability, people involved in estate freezes, or those who want predictable returns.

Understanding Types of Shareholders in an Alberta Corporation

Common Shareholders

Common shareholders are the basic owners of the company. They usually get to vote and share in the company's profits.

Preferred Shareholders

Preferred shareholders get special treatment. They are paid dividends first and get their money back before others if the company shuts down. They may not get to vote (preferred voting and preferred non-voting).

Non-Voting Shareholders

Non-voting shareholders own part of the company but do not get a say in decisions. They can still receive dividends.

Redeemable / Retractable Shareholders

Redeemable or retractable shareholders hold shares that can be "cashed out" either by the company or by the shareholder at a set time or price.

Special Class Shareholders

Special class shareholders have custom rights created by the company. For example, they may have access to shares that only receive dividends or only carry votes.

Learn how our shareholder agreements and business planning services can help owners define rights, responsibilities, and plans for future changes.