Thanks for your comments. They are very helpful.
As to the first point, the jurisdiction in question has held that a shareholder who transfers shares consequent to a reorganisation immediately becomes the owner of the shares upon receipt by the secretary. The jurisdiction also has a
long line of cases that say one’s ownership is not dependent on what is written on the certificates. I`m assuming, then, it’s a question of reformation of the shareholder register.
If that is the case, are you suggesting that the fact someone else voted the shares is immaterial, and that the moment she shows up and demands to vote, she re-takes the rights that have been denied her?
Best
From: Stéphane Sérafin <Stephane.Serafin@uottawa.ca>
Sent: June 24, 2021 11:07 AM
To: Matthew P. Harrington <matthew.p.harrington@umontreal.ca>; obligations@uwo.ca
Subject: RE: Adverse Possession of Shareholder Rights
Two things here come to mind:
1) Given that the shares were issued with certificates, they should probably be viewed as documentary intangibles. Her possession of Class B certificates rather than Class A certificates would be determinative unless you can show that she
somehow had the beneficial interest in the Class A shares anyway. (Equity intervening under a prior contract to transfer the shares perhaps?) In any event I don’t think adverse possession helps her here.
2) If they are not in fact documentary intangibles, it would not really be proper to speak of “adverse possession” – the chose at issue is one that, in principle, can only be asserted by being used.
All of this is of course subject to whatever the relevant corporate law statutes say about share certificates, etc.
Best regards,
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Stéphane Sérafin Professeur adjoint | Assistant Professor Faculté de droit, Section de common law
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Faculty of Law, Common Law Section |
From: Matthew P. Harrington <matthew.p.harrington@umontreal.ca>
Sent: June 24, 2021 10:57 AM
To: obligations@uwo.ca
Subject: Adverse Possession of Shareholder Rights
Attention : courriel externe | external email
Dear Colleagues:
I hope you don’t mind this request for a bit of research help.
I`m in the midst of a piece on adverse possession, and one area that I`m beginning to explore is the question of whether one can have adverse possession of intangibles --- specifically the right to vote as a shareholder.
I`ve stumbled across a situation where a shareholder turned in shares of stock to the company in accordance with a reorganisation. She was to get “A” shares, which has a right to vote. Instead, the company issued her a certificate that
said she had “B” shares, which were non-voting. Another party had been given a certificate showing more A shares than he was entitled. There was some confusion as to how shares were to be allocated.
So, for more than 20 years, she showed up at shareholder meetings and did not vote. She was repeatedly told she was a “B Shareholder”. She accepted that. As a result, someone else essentially voted her shares.
I know there is some controversy over whether copyright can be subject to adverse possession, but my question is whether a shareholder’s voting rights can be as well. I take the position that
- She is an A shareholder regardless of the certificate issued to her, as ownership of shares is different than ownership of a certificate.
- Assuming that is the case, then it seems the question is whether she can be divested of the rights of ownership simply because she did not exercise them.
- I am skeptical of a waiver argument, if waiver is defined as the relinquishment of a known right. She relied on the company, which had a duty to give her accurate information and
it failed. How can she waive a right which she is constantly told she does not have?
- So, I think the claim has to be that somehow the voting rights can adversely possessed.
- If that is true, then the issue must be one of notice and hostility. Is there a hostile use when the owner is being told that she does not, in fact, have ownership?
Oh, and by the way, the guy voting her shares was the president of the company.
Any ideas or suggestions would be greatly appreciated.
Best
Matt Harrington