What share claims can a buyer not see on the corporate register?

Under the Canada Business Corporations Act (CBCA), a corporation keeps a securities register. Ask to see it early in a share purchase, but it is narrower than it looks. Provincial corporations statutes set their own record rules, so the references below are to the federal Act; check the Act that governs the corporation you are buying.

What the register does show

CBCA s.50(1) requires the register to record securities issued in registered form, showing for each class or series the names and latest known address of each person who is or has been a security holder, the number of securities each holds, and the date and particulars of each issue and transfer. It does not record what each class carries. Where there is more than one class, the rights, privileges, restrictions and conditions of each must be set out in the articles (s.24(4)), so read the articles with the register.

Rights that sit outside it

Section 29 lets a corporation issue certificates, warrants or other evidence of conversion privileges, options or rights to acquire its securities, with the conditions set out in those documents or in the certificates for the securities they are attached to. The securities register does not list them, so ask for them by name. A unanimous shareholder agreement is kept with the articles and by-laws among the corporate records (s.20(1)), and under s.146(3) a purchaser of shares subject to one is deemed a party to it. If the purchaser was given no notice of it, s.146(4) allows rescission no later than 30 days after becoming aware of it.

People the register may not name

The oppression remedy is open to a complainant, and s.238 defines that to include a registered holder or beneficial owner, and a former one, so someone holding through a trustee or nominee can have standing without appearing as a holder. Corporations Canada also describes a separate register of individuals with significant control, which is not the securities register. Ask the seller to confirm in the agreement that no other person holds, or has been promised, securities or rights, and have your lawyer check the records against that statement.