If your business is structured in the form of a corporation, you need to consider having a Shareholders’ Agreement in place. A Shareholders’ Agreement can be in place between yourself as the corporation’s owner and shareholder and your corporation. Shareholders’ Agreements can also be in place among a corporation’s various shareholders. If your corporation is operated by more than one individual who owns an interest in your corporation, you should have a Shareholders’ Agreement in place. Such an agreement can help ensure basal protections and principles of fairness for the various shareholders as they conduct themselves in the course of business. Further, a Shareholders’ Agreement can help govern business relationships beyond what is provided in corporate articles, bylaws, and governing statutes including the Canada Business Corporations Act, and the Ontario Business Corporations Act.
When You Might Consider a Shareholder’s Agreement
There is a myriad of circumstances where having a Shareholders’ Agreement in place is good practice. These circumstances vary according to your business’ needs and operations, however, good business judgement and caution dictates that the rule of thumb be for you to have a Shareholders’ Agreement in place. What we see is that Shareholders’ Agreements are a good idea when:
- Establishing shareholders’ voting rights
- Establishing how shares may be transferred or issued
- Establishing restrictions on directors’ powers to manage your corporation and its affairs
- Establishing what rights and options remaining shareholders have following your death, incapacity or insolvency
- Establishing what happens to the shares of your private corporation following matrimonial conflicts
- Establishing business stability in a manner that allows your company’s private information to stay private (unlike Articles of Incorporation, Shareholders’ Agreements are confidential and generally inaccessible by the public)
In order to address the above circumstances and considerations, Shareholders’ Agreements can get quite complex and sophisticated. In order to successfully navigate such complexities, you should seek legal advice. Sections we often see in Shareholders’ Agreements include, but are not limited to: finance, transfer rights, insurance, transfer of shares in case of death, and the buy and sell options clause.
An even more stringent form of shareholder’s agreement exists, known as a Unanimous Shareholder Agreement. These Shareholder’s Agreements can be more restrictive than regular Shareholder’s Agreements, and it’s always best to consult a lawyer in drafting such agreements.
Graphene Business Law was founded with your small and medium-sized business needs in mind. Small and medium-size businesses can always benefit from a strongly drafted Shareholders’ Agreement. Graphene is here to draft such agreements for you, in a manner that prioritizes your interests as business owner and operator, and the interests of your business. We can also assist with a wide range of corporate and commercial documents, including partnership agreements, collaboration agreements, vendor agreement, buy and sell agreements, non-disclosure agreements, non-compete agreements, etc. For any business law inquiries you may have, you may reach out to us at Graphene by filling out the booking tool on our web page graphenebusinesslaw.ca, or sending a direct inquiry to info@graphenebusinesslaw.ca. You may also text us at 647-466-5985.
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This blog post does not constitute legal advice, and does not create a solicitor-client relationship between author and reader. For inquiries, please contact Graphene via the above listed platforms.