Shopify updates its governance structure to support continued long-term growth
June 09, 2022
On June 9, 2022, Shopify Inc. implemented updates to its governance structure pursuant to a plan of arrangement under the Canada Business Corporations Act to support its continued long-term growth.
Pursuant to the arrangement, Shopify created a new class of share, designated as the Founder share, and issued such Founder share to Shopify’s Founder and Chief Executive Officer, Mr. Tobias Lütke. The Founder share provides Mr. Lütke with a variable number of votes that, when combined with the Class B shares beneficially owned by him, his immediate family and his affiliates (including any Class A shares issued in the future upon conversion of his Class B shares and certain other Class A shares acquired in the future), will represent 40% of the total voting power attached to all of Shopify’s outstanding shares, effectively setting and preserving Mr. Lütke’s voting power at that level.
The Founder share will sunset if Mr. Lütke no longer serves Shopify in certain capacities (as an executive officer, board member or consultant whose primary engagement is with Shopify) or Mr. Lütke, his immediate family and his affiliates no longer hold a number of Class A and Class B shares equal to at least 30% of the Class B shares currently held by Mr. Lütke and his affiliates. Mr. Lütke also agreed that, in the event of a sunset of the Founder share, he will also convert his remaining Class B shares into Class A shares. The Founder share is not transferable by Mr. Lütke. Mr. Lütke and his affiliates agreed that they will not transfer their Class B shares without Mr. Lütke retaining voting control over such shares, preventing an intergenerational transfer of such voting power.
The arrangement also effected a conversion of all Class B shares held by Klister Credit Corp. into an equal number of Class A shares, bringing the voting power of the Class A shares to 59% of the total voting power attached to Shopify’s outstanding shares.
Shopify, founded in Ottawa, Ontario, is a leading provider of essential internet infrastructure for commerce, offering trusted tools to start, grow, market and manage a retail business of any size.
McCarthy Tetrault advised the Special Committee of Shopify's Board of Directors with a team led by Robert Hansen that included David Woollcombe, Matt Vaughan (Business), Wendy Berman, Brittany Cerqua (Litigation), and Raj Juneja (Tax).