Browse Corporation

11.2.2 Private And Public Corporations

Learn the differences between private and public corporations, their by-laws, voting rights, and shareholders' meetings. Understand the importance of voting by proxy, voting trusts, and more in the Canadian context.


Corporations can be categorized as either private or public, each defined by certain characteristics and regulations.

Private Corporations

  • Private Corporation Characteristics:
    • Restrict the right of shareholders to transfer shares
    • Limit the number of shareholders to no more than 50
    • Prohibit members from inviting the public to subscribe for their securities

Public Corporations

  • Public Corporation Characteristics:
    • Shares are listed on a stock exchange or traded over the counter

Corporate By-Laws

Both private and public corporations are governed by several regulations:

  • Legislation: Federal or provincial act under which its charter is issued
  • Charter: The corporation’s foundational documents
  • By-laws: Govern conduct within the corporation and are prepared at the time of incorporation

Common By-Law Provisions:

  • Shareholders’ and Directors’ Meetings: Schedule and conduct
  • Directors: Qualification, election, and removal
  • Officers: Appointment, duties, and remuneration
  • Dividends: Declaration and payment
  • Fiscal Year End: Date determination
  • Signing Authority: For company documents

Voting Rights

The common shareholders of publicly traded companies have vital voting rights, influencing corporate governance effectively.

What Shareholders Vote On:

  • Board of Directors: Election
  • Corporate Matters: Sales, mergers, business liquidation
  • Charter Amendments: Stock splits, executive compensation packages

Shareholders’ Meetings

For shareholders’ engagement and corporate decision-making.

  • Eligibility: List prepared before regular or annual shareholders’ meeting
  • Notification: Shareholders notified within a specified period


  • Electing directors
  • Appointing independent auditors
  • Financial statement reviews
  • Auditors’ report
  • Other corporate affairs

Voting By Proxy

Many shareholders choose proxy voting to cast their votes without attending meetings.

  • Proxy Statement: Document detailing voting issues
  • Proxy: Typically a member of management empowered through power of attorney
  • Completion: Signed by shareholder, specifying voting intentions


Can shareholders vote by attending in person?

  • Yes, shareholders are encouraged to attend annual meetings but can also vote via proxy.

What happens if a shareholder doesn’t vote?

  • Their votes might automatically align with management’s viewpoint.

Voting Trusts

Voting trusts entrust voting control in restructuring situations.

  • Purpose: Control transfer during corporate financial difficulties
  • Mechanism: Shares are deposited with a trustee under a voting trust agreement

Key Takeaways

  1. Understanding Corporations: Key differences between private and public corporations.
  2. Corporate Governance: The role of by-laws and the importance of regulations.
  3. Voting Rights: Empowerment of shareholders via voting on crucial matters.
  4. Proxy Voting: Easier participation for shareholders remotely.


  • Private Corporation: Shares are held by a limited number of people, not traded publicly.
  • Public Corporation: Shares are publicly traded on a stock exchange or over-the-counter markets.
  • By-laws: A set of rules governing the conduct of the corporation’s affairs.
  • Proxy Statement: A document detailing issues on which shareholders are to vote.
  • Voting Trust: An arrangement where shares are transferred to a trustee to secure new capital and control management temporarily.

CSC® Exams Practice Questions

📚✨ CSC Exam Questions ✨📚

Welcome to the Knowledge Checkpoint! You'll find 10 carefully curated CSC exam practice questions designed to reinforce the key concepts covered. These questions will help you gauge your grasp of the material, identify areas that need further review, and ensure you're on the right track towards mastering the content for the Canadian Securities certification exams. Take your time, think critically, and use these quizzes as a tool to enhance your learning journey. 📘✨

Good luck!

## What is a defining characteristic of a private corporation? - [ ] Its shares are listed on a stock exchange - [ ] It has an unlimited number of shareholders - [ ] It can publicly invite people to subscribe for its securities - [x] It restricts the right of shareholders to transfer shares > **Explanation:** A private corporation restricts the right of shareholders to transfer shares, limits the number of shareholders to no more than 50, and prohibits inviting the public to subscribe to its securities. ## What governs the conduct of a corporation besides federal or provincial acts and the corporation's charter? - [ ] Corporate bonds - [x] Corporate by-laws - [ ] Corporate shares - [ ] Corporate dividends > **Explanation:** Corporate by-laws, passed by the board of directors and approved by shareholders, govern the conduct of a corporation along with federal or provincial acts and the corporation's charter. ## Which of the following is NOT typically included in a corporation's by-laws? - [ ] Election and removal of directors - [x] Stock prices - [ ] Shareholders’ meetings - [ ] Payment of dividends > **Explanation:** Corporate by-laws cover aspects like shareholders’ and directors’ meetings, election and removal of directors, appointment and remuneration of officers, and dividend payment, but not stock prices. ## Who has the right to vote at a company's annual general meeting? - [ ] Only members of the board - [ ] Only the CEO - [ ] Only preferred shareholders - [x] Registered common shareholders > **Explanation:** Registered common shareholders have the right to vote at the company's annual general meeting on important matters such as the election of directors, mergers, and other significant corporate events. ## What is the purpose of a proxy statement sent to shareholders before an annual meeting? - [ ] To provide financial advice - [ ] To announce corporate dividends - [x] To outline what is to be voted on at the meeting - [ ] To declare bankruptcy > **Explanation:** The proxy statement outlines the issues to be voted on at the shareholders' meeting, and allows shareholders to delegate their voting rights to designated proxies. ## What happens if a shareholder does not vote or leaves items unmarked on the proxy statement? - [ ] Their vote is considered invalid - [ ] Their shares are sold - [x] The ballot is cast with management's viewpoint - [ ] Their voting rights are revoked > **Explanation:** If a shareholder does not vote or leaves items unmarked on the proxy statement, the ballot is automatically cast according to management's recommendations. ## Why might a corporation be placed under a voting trust? - [ ] To sell off all shares - [x] Due to financial difficulties and restructuring - [ ] To merge with another company - [ ] Due to internal fraud > **Explanation:** A corporation may be placed under a voting trust in case of financial difficulties and restructuring, to put the control under a few individuals until the organization recovers. ## Who issues a voting trust certificate in a voting trust agreement? - [ ] The board of directors - [x] A trustee or trust company - [ ] CEO of the corporation - [ ] Federal government > **Explanation:** A trustee, usually a trust company, issues a voting trust certificate under the terms of a voting trust agreement. This document provides the shareholder with the rights of the original shares but the voting privileges remain with the trustee. ## What must happen for a shareholder to vote at an annual meeting? - [x] Shares must be registered in their name - [ ] Shares must be sold first - [ ] They must own at least 10% of shares - [ ] They must become a member of the board > **Explanation:** Shares must be registered in the shareholder's name, or they must possess a completed proxy form, to vote at an annual meeting. ## In what scenario might a contest for control of a corporation happen? - [ ] If the company goes public - [ ] If dividends are high - [x] If a disagreement arises between management and challengers for shareholder support - [ ] If the company celebrates its anniversary > **Explanation:** A contest for control of a corporation might arise if there is a disagreement between the current management group and challengers who seek shareholder support to take control.

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Sunday, July 21, 2024