Can I make my teenage child a registered shareholder of my company?

teenage minor shareholder of company

Individuals who are minors (called “infants” under the law) are frequently the beneficial owners of items of property, including shares of companies. Often the registered ownership is held in the name of a trustee or guardian, or by another mechanism. What happens if it is desired, for some reason, to have the infant become directly “registered” on the books of the company as a shareholder?

There is nothing in the Business Corporations Act (BC) which specifically prohibits an infant from becoming a registered owner of shares of a company. The definitions of “shareholder” and “registered owner” refer to “persons”, which category would include minors. However, there are a few aspects of the status of “registered owner” of the shares which may create some complications or risk, if this kind of structure is desired.

Firstly, registered shareholders often need to enter into contracts (such as shareholders agreements) or agree to waive certain rights that arise in favour of registered owners of shares (eg. dividend rights). Under the legislation governing infants, there are some restrictions and risks on the general enforceability of contracts, if those contracts are entered into by infants. Risk averse organizations could adopt mechanisms to address these concerns, such as arranging for guardian or personal representative signatures when dealing with contract formalities, but this may prove cumbersome and involve extra cost.

Secondly, as registered owners of shares infants would be routinely exercising rights such as casting votes at shareholders meetings or in written resolutions. It may be an open question in British Columbia whether the infant could later purport to refute a particular vote that they cast, or whether others could challenge the adequacy of the corporate proceedings conducted in reliance on the infant’s exercise of registered ownership rights. While the Business Corporations Act (BC) is silent on this issue, many other corporate law statutes, including the Canada Business Corporations Act (CBCA) remedy this concern directly. Section 51(5) of the CBCA states:

“If a person who is less than 18 years of age exercises any right of ownership in the securities of a corporation, no subsequent repudiation or avoidance or, in Quebec, annulment or reduction of obligations is effective against the corporation.”

Since statutory provisions are principally interpreted as being remedial, and the British Columbia legislation contains no counterpart to provisions such as s. 51(5) of the CBCA, there may be some risk of repudiation for governance proceedings of British Columbia companies which involve infants as registered shareholders.

<< Back to Business Law