Please note that this is not legal advice. The information provided in this document is for educational purposes only. If you want to contact an attorney to help you draft, interpret, negotiate, or resolve a dispute over a shareholder agreement or shareholder agreement, we recommend that you seek out a professional.
For the purposes of this article, I will discuss shareholder-to-shareholder agreements in the context of the Canadian Business Corporations Act.
What is a Unanimous Shareholders Agreement?
A unanimous shareholders’ agreement is defined under the Act (s. 146) as a written legal agreement between the shareholders of a corporation (some or all of them) that restricts, in whole or in part, the powers of the directors to manage or supervise the corporation. management of the business and affairs of the corporation. So a shareholders agreement is basically an agreement that allows shareholders to usurp and override the powers of the directors (eg shareholders become directors or agree to each appoint 1 director on the board of directors etc.).
Violation of the agreement by a shareholder may give rise to a claim for breach of contract. As long as the shareholders assume the power of the directors to manage the corporation, the Law grants them the same rights, powers, duties and responsibilities as a director of the corporation. This is important because, in general, the liability of the shareholders is limited by Law (in other words, unless one of the parties can pierce the corporate veil, the personal liability and personal assets of the shareholders cannot be exposed). to have to pay for damages from the corporation, its representatives, agents, employees, directors, etc.).
It is important to have unanimous shareholder agreements early in the life of the corporation because it spells out the rights and obligations of each shareholder, including management issues and stock transfer provisions. Put expectations on the table from the start. Unanimous shareholder agreements are much more difficult to conclude between shareholders later when progress has been made (leading to political jealousy and possible infighting).
Finally, it is worth mentioning that the Law makes certain requirements and corporate powers subject to a shareholders’ agreement, including:
* Special majorities for votes of directors or shareholders (art. 6(3));
* The power to borrow and give security (art. 189);
* Issuance of shares (s. 25(1));
* Capacity of the directors to manage or supervise the administration of the business and affairs of the corporation (s. 102);
* The elaboration, reform or derogation of statutes (art. 103);
* The appointment of officers (art. 121);
* Compliance of directors and officers with a unanimous shareholders’ agreement (s. 122(2)); Y
* Remuneration of directors and officers (art. 125).
A copy of the shareholders’ agreement must be kept at the registered office (along with the other documents in the minute book).
How much does a Shareholders Agreement cost?
Shareholder agreements vary in cost (for example, from $2,500 to $10,000), depending on the complexity of the shareholders’ agreement provisions. For example:
* What will be the business of the corporation? Will this be restricted?
* Who are the parties (eg voting and non-voting shareholders)?
* What mechanism will shareholders use to elect or promote board members?
* What mechanism will shareholders use to vote their shares?
* What mechanisms will be in place for shareholders to sell or transfer their shares (eg shotgun, put/call, sales consent, auctions, piggy back, drag a long, etc.)?
* What about compensation for shareholders who become working shareholders/directors?
* What about working shareholders who become inactive? How will your shares be treated when they are inactive?
* What about confidentiality, non-solicitation, and proprietary information provisions? They are needed?
* How will the agreement be terminated? Can dissolution result from a shareholder complaining of a breach of the agreement?
* General provisions such as notice, entire agreement, currency, assignment, separability, waiver, independent legal advice, etc.
