Share class
A share class is a defined category of shares in a corporation, each with its own combination of rights: whether it votes, whether it receives dividends, and what it is entitled to if the company is sold or wound up. A single corporation can have several classes with very different rights.
Not all shares in a company are the same. A corporation’s articles can create several classes of shares, each with its own rules, so that different owners can hold different rights without needing separate companies.
Rights that typically vary by class
- Voting rights, including whether a class votes at all
- Entitlement to dividends, and whether they must be paid before other classes get any
- What each class receives first if the company is sold or wound up
- Whether shares are redeemable or retractable at a set price
Why this matters in a sale
Multiple share classes usually mean the proceeds of a sale do not simply split evenly among everyone who holds shares. Preferred classes may be entitled to a set amount before common shareholders see anything, or voting shares may control the decision to sell even if they represent a small slice of total value. Reading the articles is the only way to know for sure.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Treadstone LawLegal commentaryCorporate Law
- 02Treadstone LawLegal commentaryChecking Corporate Status and Good Standing Before Buying an Ontario Business
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