Canada: It Stays In The Family – Dual Voting Share Structures For Family Businesses

Last Updated: May 3 2019
Article by Dierk Ullrich

For many family businesses, control of long-term direction and management of the family corporation are key issues, particularly during times of growth or periods of succession. The Institute for Governance of Private and Public Organizations ("IGOPP") recently published a new policy paper that should be of interest to family businesses and their advisors in planning the capital structure for their enterprises: The Case for Dual-Class of Shares, Policy Paper No. 11 (2019). The paper revisits[1] the state of dual-class public corporations in Canada, emphasizes their value to entrepreneurs, family businesses and Canadian society as a whole and makes a number of structuring recommendations, which are outlined below.

What is a Dual-Class Share Structure?

Canadian corporate statutes generally permit companies to adopt capital structures with multiple classes of shares with different rights or attributes (for example voting and non-voting shares or shares with preferential dividend, conversion or redemption rights). While the default approach is one vote per share, the flexibility of corporate laws permits the creation of several share classes with multiples votes, no voting rights or differential voting rights on certain matters (such as the election of the board of directors).[2] In this context, IGOPP's paper focuses on share structures with two classes, one of which is given multiple votes per share. Among publicly traded Canadian corporations with dual class structures, voting ratios can range from 1:0 (a class of voting shares and a class of non-voting shares) to 100:1 (a class of superior voting shares with 100 votes per share and a class of subordinate shares with one vote each). The central feature of a dual-class share structure is that ownership and control over the corporation can be decoupled. Or, to put it differently, a minority ownership position in the corporation's equity may still hold the majority of the votes.

Benefits of a Dual Class Share Structure for Family Businesses

Dual-class share structures for public companies are controversial and the debate has been raging for a considerable time.[3] The principal arguments against such structures are based on notions of shareholder democracy and protection of minority rights. Perhaps as a result, the number of publicly traded companies in Canada with a dual-class share structure has dropped from 100 in 2005 to 69 in 2018.[4]

Nevertheless, the benefits of such structures identified by IGOPP and other commentators may be of particular interest to family-run businesses. Superior voting rights permit families to plan and manage their businesses in the long term and facilitate generational change, while, at the same time, being able to access outside investor capital to support the growth of the business. The dual-class structure affords protection against hostile take-overs and what IGOPP perceives as shareholder activism driven by short-term (and perhaps short-sighted) profit maximization. Or, as put by IGOPP: "... the coupling of dual-class and family ownership brings about longer survivorship, better integration the social fabric of host societies, less vulnerability to transient shareholders and more resistance to strategic and financial fashions."[5]

Recommended Features for a Dual Class Share Structure

In order to balance the advantages of a family controlled business, access to outside capital and the interests of minority shareholders, IGOPP recommends a number of features, including the following:

  • A voting ratio of 4:1 – This ratio retains a voting majority for family business at an ownership level above 20% and a blocking minority with respect to fundamental changes with an ownership interest of 11.1%. Reflecting research indicating that increasing variances between voting power and ownership level tends to negatively affect the quality of overall governance and favour self-interested, rather than business focused decision-making, this recommendation aims to balance legitimate family and overall business interests.
  • Minority Board Representation – One third of board members should be elected by the single-vote share class. This measure would give non-family investors a substantial indirect say in the management or supervision of the family business. To ensure continuity and compatibility with the family vision and values, IGOPP further proposes that minority directors be elected from a candidate pool nominated by the existing board.
  • "Coat Tail" Provisions – A major point of criticism of dual share structures has been price premium placed on multiple voting shares in case of a sale. The "uniquely Canadian" response to this issue is to treat all share classes equally on a sale.[6] IGOPP's recommendation that family corporations adopt such "coat tail" provisions in their articles or bylaws to guarantee that all shareholders can participate in a sale of the family business on the same terms and conditions at the same price, would thus overcome the "private benefit" concerns.
  • Dilution Sunset Clauses – In the context of dual share structures, a sunset clause would trigger the abolition of superior voting rights if the justification for their existence has fallen away. For family businesses, this would typically be the case when the business loses its essential character as a family enterprise. There is a wide range of possible triggers. Examples are time-based (e.g. 20 years after an IPO) or event-based (e.g. on the exit, retirement or death of the founder). However, these approaches typically do not meet the needs of a multi-generational family business. On the other hand, as family involvement the business may diminish over the years, a sunset clause could be tied to a level of family ownership interest. This notion is connected to the proposed voting ratio and its rationale. For example, at a 4:1 voting ratio, the dilution sunset could be triggered if and when the controlling shareholders' equity dropped below the blocking minority of 11.1% – the point when self-interest may typically outweigh the overall business interests.

There are, of course, many possible variations and combinations on how these basic recommendations could be implemented to meet the specific goals and needs of each family business. If you have any questions about corporate share structures, legal issues affecting family businesses or wish to learn more about Fasken's private client services, please see here: Fasken Private Client Services.


[1] IGOPP first examined dual-class corporations in 2006: see Dual-class share structures in Canada:Review and Recommendations, Policy Paper No. 1 (October 2006).

[2] See, for example, ss. 24(3) and (4) and 140 of the Canada Business Corporations Act or ss. 58 and 173(1) of the Business Corporations Act (British Columbia).

[3] See, for example, Ryan Modesto, "The case for investing in companies with dual class shares" The Globe and Mail (April 16, 2016, last updated June 19, 2017) or Shannon Bond and Nicole Bullock, "Lyft IPO revs up debate on dual class shares structures", Financial Times (February 25, 2019).

[4] IGOPP, Policy Paper No. 11, p. 15.

[5] IGOPP, Policy Paper No. 11, p. 12.

[6] The Toronto Stock Exchange has, for over 30 years, listings for classes of "restricted securities", that do not provide "takeover protective provisions", which in effect ensure that these securities would be acquired for the same price as common securities. For more detail, please see s. 624 of the TSX Company Manual.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions