A buyer of shares acquires the shares that exist plus every enforceable promise to issue more. The securities register an Ontario corporation keeps records only what has been issued, and OBCA section 266(3) makes an entry in it proof of ownership only “in the absence of evidence to the contrary”. Options, pre-emptive rights and a unanimous shareholder agreement sit outside it.
Key takeaways
SECTION 01 OF 10
OBCA section 140(1) lists the six records every Ontario corporation must keep, and clause (d) is the securities register. Section 141(1), marginal note Securities register, defines it as “a securities register in which it records the securities issued by it in registered form”, showing each holder, the number and class held, and the particulars of each issue.
Section 266(3) fixes how much that proves: an entry is “in the absence of evidence to the contrary, proof that the person in whose name the security is registered” is the owner. CBCA s.257(3) repeats it federally. Treadstone Law calls the register “the definitive ownership record and critical in disputes or sales” — right about its role; the statute’s wording is what a buyer prices.
SECTION 02 OF 10
Read section 141(1) for its omissions. It reaches persons who “are or have been within six years registered as shareholders of the corporation”, and excludes warrants “other than warrants exercisable within one year from the date of issue”. CBCA s.50(1) is wider: “each person who is or has been a security holder”, with no cut-off.
Neither Act asks a register to record an unexercised right to acquire a share, so a register can be accurate, current and compliant and still be silent about every claim below. Treadstone Law warns that “A cap table built on an out-of-date register will give you wrong answers.” The reverse holds: a register read without the cap table gives a right share count and a wrong percentage.
SECTION 03 OF 10
OBCA section 27(1), marginal note Conversion privileges, etc., lets a corporation issue warrants evidencing “options or rights to acquire securities of the corporation”, with the conditions set out on the certificates for the underlying securities or “in separate certificates or other documents”. That last phrase is the diligence problem. CBCA s.29(1) is drafted the same way.
The one trace an option leaves is a reservation: section 27(3) requires that where the articles limit authorized shares, the corporation “shall reserve and continue to reserve sufficient authorized shares”. Where they are unlimited, the Ontario default, it leaves none. An option is a claim on the buyer’s percentage, not a debt; the tax sits in what happens to employee stock options when the company sells.
SECTION 04 OF 10
Neither Act grants one by default. OBCA section 26: “If it is so provided in the articles or a unanimous shareholder agreement, no shares of a class or series shall be issued unless the shares have first been offered to the shareholders”. CBCA s.28(1) names only the articles, and supplies the mechanics itself: “a pre-emptive right to acquire the offered shares in proportion to their holdings”.
The difference matters: an Ontario pre-emptive right can live inside a unanimous shareholder agreement, a private contract no public filing reveals. Treadstone Law is blunt — shareholders “do not automatically have pre-emptive rights” under the OBCA.
SECTION 05 OF 10
A unanimous shareholder agreement under OBCA section 108(2) is a written agreement among all the shareholders restricting the directors’ powers, and subsection (4) attaches it to the shares: “A transferee of shares subject to a unanimous shareholder agreement shall be deemed to be a party to the agreement.” Subsection (8)(a) removes knowledge from it: an acquirer is “deemed to be a party to the agreement whether or not that person had actual knowledge of it”. CBCA s.146(3) says the same federally.
The minute book is weaker than it looks: section 140(1)(a) requires only “a copy of any unanimous shareholder agreement known to the directors”. Treadstone Law draws the consequence: “a transferee of shares takes those shares subject to the USA, whether or not they read it”. Measure one against what belongs in a shareholder agreement.
SECTION 06 OF 10
Section 108(9) gives Ontario’s exit, and it is narrow: only a purchaser for value without notice, whose transferor’s certificate carried no reference to the agreement, may object “within 60 days after he or she actually receives a complete copy of the agreement”, then under subsection (10) rescind or “demand that the transferor pay the transferee the fair value of the shares”.
The federal route starts elsewhere: under CBCA s.146(4) a purchaser not given notice may act “no later than 30 days after they become aware of the existence of the unanimous shareholder agreement”, and rescission is the only remedy. Awareness starts the federal clock; a complete copy starts Ontario’s.
So the numbering is read, not translated. The familiar practice rule — note the agreement on the certificate — is a CBCA mechanism: section 49(8) makes a transfer restriction, a lien or a unanimous shareholder agreement ineffective against a transferee with no actual knowledge of it “unless it or a reference to it is noted conspicuously on the security certificate”. Ontario has no equivalent: section 56(8) reaches only the section 42(2)(c) and (d) ownership restrictions.
SECTION 07 OF 10
The Act names the two places a transfer restriction lives, and neither is the register. Section 67(2) opens: “A corporation whose articles or unanimous shareholder agreement restrict the right to transfer its securities”. Articles are filed; the agreement is not, so a buyer who has read the articles has read half the constraint. The version that most often reaches a live deal is a right of first refusal, which Treadstone Law describes as requiring a seller to offer the shares to existing holders first. Waivers from every holder belong on the closing checklist.
SECTION 08 OF 10
The power to issue is already fenced by documents the register does not hold: section 23(1) makes it “Subject to the articles, the by-laws, any unanimous shareholder agreement and section 26”, and subsection (3) adds that “A share shall not be issued until the consideration for the share is fully paid”. CBCA s.25(3) matches it.
The commonest unrecorded claim in a small Canadian company is not a drafted option. It is a sentence said to an early employee about equity, repeated in an offer letter, never taken to a board. Treadstone Law’s answer on a promise the seller made gives the instruction: “review employee compensation arrangements carefully during due diligence rather than relying only on formal written plans”.
So the minute book is read against the seller’s account. Treadstone Law’s red flags for reviewing a minute book include “No record of share issuances or transfers that the seller describes as having happened”, and its cap-table article states the test: “Discrepancies between the minute book and the cap table are a red flag in due diligence.” Where the book is incomplete, reconstruction precedes pricing.
SECTION 09 OF 10
The corporation may ignore the difference. Section 67(4) says a corporation is “not required to inquire into the existence of, or see to the performance or observance of, any duty owed to a third person by a registered holder”. A holder may hold in trust, and the register shows only the trustee. Ontario’s significant-control register targets that gap: section 1.1 captures anyone at 25 per cent of votes or value who is a registered holder, a beneficial owner, or has “control or direction over the shares”.
A buyer cannot compel it. Section 145(1) excludes it from the records a holder or creditor may examine; section 140.3 confines requests to police, tax officials and regulators. Federally this reverses: CBCA s.21.1 requires the register and s.21.303(1) provides that “The Director shall make available to the public the following information”. On a federal target a buyer looks it up; on an Ontario one the buyer asks the seller.
SECTION 10 OF 10
Build the request from the statute: all six section 140(1) records; the register of transfers; the stated capital accounts under section 24(1); every issued certificate; the resolutions authorising each issuance; and every option, warrant and subscription agreement section 27 could have produced.
One request is worth making by name: section 146(5), marginal note List of option holders, lets a person requiring a shareholder list also require “the name and address of any known holder of an option or right to acquire shares of the corporation”. Two limits: only holders, beneficial owners and creditors may require a list, and only option holders it knows of are disclosed. It is a seller covenant, not a buyer’s right.
Then reconcile four numbers that should agree and often do not: shares in the register, shares on the certificates, the authorised capital in the articles, and the stated capital accounts. A cap table reconciling to all four is diligence; a representation that it does is a remedy. As Treadstone Law puts it, “A strong set of representations is meant to back up thorough diligence, not stand in for it.” A capitalisation representation is capped and time-limited. It cannot give back the percentage the buyer thought it had bought.
Outside this page: OBCA s.130(1) director liability; dissent rights and the oppression remedy; registering share transfers. Ontario and federal law only.
No. Under both the Ontario and federal corporate statutes, a register entry is proof of ownership only in the absence of evidence to the contrary — it is prima facie proof, not conclusive, and it can be displaced by evidence such as an unregistered agreement or a beneficial owner standing behind the registered holder.
Yes. An acquirer is deemed a party to a unanimous shareholder agreement whether or not they had actual knowledge of it — a transferee takes the shares subject to it regardless of whether they ever read it, and the minute book is only required to hold a copy known to the directors, so it may not even be there to find.
No. The register records only issued shares, so an unexercised option appears nowhere in it — the one trace it can leave is a share reservation, and even that exists only where the articles limit authorized shares, which is not Ontario’s default.
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