Can a shareholder sell their shares without the other shareholders agreeing?

There is no single rule that lets every shareholder sell alone or stops every one from doing so. What binds you sits in the company’s own documents: the articles, any shareholders’ agreement and the wording on your share certificate. This page covers a corporation under the federal Canada Business Corporations Act (CBCA). It does not cover a corporation formed under a provincial Act, so confirm which statute governs yours.

Start with the articles

CBCA s.6(1)(d) says that if the issue, transfer or ownership of shares is to be restricted, the articles must include a statement to that effect and a statement of the nature of the restrictions. Corporations Canada says transfers must conform to any conditions or restrictions that apply to the corporation’s shares, and gives the example that directors could have to approve all transfers. If the articles state no restriction, a limit could still come from an agreement, so read those next.

Agreements among the shareholders

Corporations Canada says shareholder agreements can set rules for the transfer of shares when certain events occur, such as a shareholder’s death or resignation, so read yours for any clause on transfers. Section 146(1) makes valid a lawful written agreement among all the shareholders, or among all of them and one or more non-shareholders, that restricts, in whole or in part, the directors’ powers to manage, or supervise the management of, the corporation’s business and affairs; the Act calls this a unanimous shareholder agreement. A buyer of shares subject to one is deemed a party to it (s.146(3)). The related answer on selling a minority stake covers the sale from the seller’s side.

What the certificate and the buyer’s knowledge change

Under s.49(8), a restriction on transfer (other than a constraint under s.174) or a unanimous shareholder agreement is not effective against a transferee who has no actual knowledge of it, unless it or a reference to it is noted in the way the section sets out. That does not free you to ignore a restriction. Ask your lawyer how s.49(8) applies to your shares and what follows if a transfer ignores a restriction. Under s.146(4), a buyer who was not given notice may rescind within 30 days after becoming aware of the agreement.

Securities law is a separate check

Selling shares can also engage securities rules. National Instrument 45-106 defines a private issuer as one that is not a reporting issuer or an investment fund, and whose securities are subject to restrictions on transfer contained in its constating documents or security holders’ agreements, among other conditions. Ask a securities lawyer whether your sale needs an exemption.