Are a company’s by-laws the same as its shareholder agreement?

This page sets the rules for by-laws beside the rules for shareholder agreements, federally and in Ontario.

How by-laws are made

Under the CBCA, unless the articles, by-laws or a unanimous shareholder agreement otherwise provide, the directors may by resolution make, amend or repeal by-laws that regulate the business or affairs of the corporation. Ontario’s OBCA has the same default, unless the articles, the by-laws or a unanimous shareholder agreement otherwise provide. Under the CBCA, the directors must submit a by-law made this way to the shareholders at the next meeting, and the shareholders may by ordinary resolution confirm, reject or amend it. Under Ontario’s OBCA, where the directors make, amend or repeal a by-law, they must likewise submit it to the shareholders at the next meeting for confirmation, rejection or amendment by ordinary resolution.

Under the CBCA, a by-law made this way is effective from the date of the directors’ resolution until the shareholders confirm it, confirm it as amended or reject it. This applies to a by-law made, amended or repealed under s. 103(1), which the directors must submit to the shareholders at the next meeting; it stops being effective if the shareholders reject it, or if the directors do not submit it as required.

What a shareholder agreement is

Corporations Canada says a shareholder agreement is an agreement entered into by some, and usually all, of the shareholders of a corporation. It also says the agreement must be in writing and must be signed by the shareholders who are party to it.

When it becomes a unanimous shareholder agreement

The CBCA validates an otherwise lawful written agreement among all the shareholders that restricts the directors’ powers to manage the business and affairs in whole or in part. The CBCA defines a unanimous shareholder agreement as an agreement described in subsection 146(1) or a declaration of a shareholder described in subsection 146(2). Under Ontario’s OBCA, a written agreement among all the shareholders may restrict the directors’ powers in whole or in part, and Ontario’s OBCA defines the term by reference to subsections 108(2) and 108(3).

Where both are kept

Under the CBCA, a corporation must prepare and maintain, at its registered office or at another place in Canada designated by the directors, records containing the articles and by-laws and all amendments, and a copy of any unanimous shareholder agreement. A shareholder is entitled, on request and without charge, to one copy of the articles and by-laws and of any unanimous shareholder agreement.

For what a unanimous shareholder agreement can take from directors, see what a unanimous shareholder agreement can take away from directors.