What Is It?
A shareholders agreement is a contract entered into by all of the shareholders of a corporation. It forms the foundation of the relationship among the shareholders of the corporation, addressing both the operation of the business and the ownership of shares. Any Ontario or federal Canadian corporation that has more than one shareholder should always have a shareholders agreement in place to ensure that the shareholders of the corporation have considered how the business should be managed and the rights of each shareholder. All shareholders of Ontario and federal Canadian corporations have rights under corporate law, even minority shareholders and non-voting shareholders, so it is also critical for founding shareholders to have a shareholders agreement in place prior to issuing any additional shares (whether voting or non-voting shares), including when shares are issued to employees under option plans or other incentive plans.
What Goes In It?
There is no “one size fits all” template for a shareholders agreement for Ontario or federal corporations. Every business, and the relationship among its shareholders, is unique and it’s important that the shareholders agreement properly address such uniqueness. The following is a sample list of just some of the terms that should be considered:
- Board of director nominees. Which shareholders are entitled to a seat on the board of directors. Each board member gets one vote regardless of how many shares they own.
- Signing authority for contracts and cheques.
- What happens in the event of shareholder death, disability, bankruptcy, resignation or termination of employment?
- Buy-Sell agreement.
- Non-competition, non-solicitation and confidentiality restrictions.
- Dispute resolution.