Shareholder Agreements
Contact Neufeld Legal PC for contractual legal matters at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com
A unanimous shareholders agreement is a contract amongst the corporation's shareholders, which is potentially the most significant legal protection that a shareholder can rely upon to advance their interests in the corporation and optimize the realizable return from their investment in the corporation's future. A shareholders agreements typically deals with some or all of the following issues: (i) governance, particularly how to resolve deadlocks on major decisions; (ii) operational issues, such as imposing limits on the decision-making authority of shareholders working in the day-to-day management of the corporation; (iii) how and subject to what conditions shares can be transferred to other shareholders or outside of the corporation; and (iv) what happens when major events occur, i.e. a need to raise additional capital, the receipt of an offer to purchase from third parties, a shareholder ceasing to be an employee, and the death or disability of one of the shareholders.
Due to the flexibility associated with shareholders agreements, arising from the manner in which they are negotiated and drafted, it is crucial that a shareholder have personal legal representation to ensure that their interests are adequately represented and protected within the shareholders agreement. Far too many shareholders have allowed inadequate or inappropriate shareholders agreements to be foisted upon them, and thereby lose invaluable rights and protections that could have otherwise been attained through a properly negotiated shareholders agreement.
Important aspects that are frequently dealt with in a shareholders agreement, include:
- scope and nature of the shareholders' relationship
- conduct of the affairs of the corporation
- appointment and specification of duties for directors, officers and employees
- specifications related to directors meetings and shareholders meetings
- identification of major decisions requiring unanimous approval, extraordinary or special approval of directors and/or shareholders
- financing specifics including initial financial contributions and subsequent borrowing procedures
- shareholder loans
- distribution of net profits
- restrictions on share transfers up/ right of first refusal
- compulsory buyout provisions
- shotgun clause
- obligation to join in a sale
- piggyback rights
- other buy sell provisions, including put and call options
- indemnification and discharge of guarantees
- insurance policies
- sale on death and disability
- wills / alter ego trusts
- family law considerations
- default scenarios resulting in a mandatory share sale
- valuation procedures for determining share value.
For knowledgeable and experienced legal representation in negotiating, drafting and reviewing business contracts, contact contract lawyer Christopher Neufeld at at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com.
