Holder of Canadian shares has right to audited results

Shareholders in Canada have some rights that are unique to Canada. Commentators most frequently point to the “oppression” remedy, which has been described as “the broadest, most comprehensive and most open-ended shareholder remedy in the world”. But other shareholder rights are viewed as being just as fundamental.

In January, the British Columbia Court of Appeal declared that the rights to have an auditor and to receive audited financial statements were two such fundamental shareholder rights. In the case of Li v Global Chinese Press Inc, the court held that any company incorporated under the federal Canada Business Corporations Act (CBCA) must appoint an auditor, and thereafter produce annual audited financial statements. A court has no discretion in this respect, and the particular financial circumstances of the company are irrelevant.

The CBCA provisions

Section 162 of the CBCA states in mandatory terms that shareholders of a corporation “shall”, by ordinary resolution, at the first annual meeting of shareholders and at each subsequent annual meeting, appoint an auditor to hold office until the close of the next annual meeting. If an auditor is not appointed at the meeting of shareholders, the incumbent auditor continues in office until a successor is appointed.

Derek Bell and Jason Woycheshyn are partners at Bennett Jones LLP, a law firm with offices in Calgary, Toronto, Edmonton, Ottawa, Dubai and Doha, and representative offices in Washington DC and Beijing.