Why You Need a Unanimous Shareholder Agreement

Unanimous Shareholder Agreement

A Breakdown

If you are a shareholder of a corporation, you may have heard of a unanimous shareholder agreement (USA) and wondered what it is and why you need one. In this blog post, we will explain what a USA is, how it can benefit you and your corporation, and how we can help you draft one that suits your needs.

What is A Unanimous Shareholder Agreement?

A USA is a written agreement among all the shareholders of a corporation that restricts, in whole or in part, the powers of the directors to manage and supervise the business and affairs of the corporation. It is both a contract between shareholders and an instrument authorized by statute that deals with the internal governance of the corporation.

A USA can be created at any time, as long as all the shareholders agree to it. It can also be amended or terminated by unanimous consent. A USA binds future shareholders, whether or not they sign it, as long as they are aware of its existence and terms.

A USA can cover various matters that are not typically included in a corporation’s bylaws, such as:

Governance and management: A USA can specify how decisions are made, who has voting rights, how disputes are resolved, and how directors are appointed or removed.

Financing: A USA can regulate how the corporation raises capital, distributes dividends, issues shares, or deals with debt.

Pre-emptive rights: A USA can grant shareholders the right to purchase new shares before they are offered to outsiders, to maintain their proportionate ownership and control.

Shotgun provisions: A USA can provide a mechanism for one shareholder to buy out another shareholder or force them to sell their shares, in case of a deadlock or disagreement.

Non-competition provisions: A USA can restrict shareholders from engaging in competing businesses or soliciting customers or employees of the corporation.

Exit strategies: A USA can outline how shareholders can sell or transfer their shares, under what conditions, and at what price.

Why Do You Need a Unanimous Shareholder Agreement?

A USA can provide many benefits for you and your corporation, such as:

Flexibility: A USA can allow you to tailor the governance and operation of your corporation to your specific needs and preferences, rather than following the default rules of the Canada Business Corporations Act (CBCA) or provincial statutes.

Protection: A USA can protect your rights and interests as a shareholder, especially if you are a minority shareholder or have invested significantly in the corporation. It can also protect the corporation from potential liabilities or conflicts arising from the actions of the directors.

Stability: A USA can promote harmony and cooperation among shareholders by clarifying their roles and expectations, preventing misunderstandings, and providing solutions for disputes. It can also ensure continuity and smooth transition in case of death, disability, divorce, or retirement of a shareholder.

Value: A USA can enhance the value of your corporation by making it more attractive to investors, lenders, customers, and employees. It can also reduce legal costs and risks by avoiding litigation or court intervention.

How Can We Help You Draft a Unanimous Shareholder Agreement?

At Nychuk & Company Law Office, we have extensive experience and expertise in drafting USAs for corporations of all sizes and industries. We can help you:

  • Understand your legal rights and obligations as a shareholder and director under the CBCA or provincial statutes.
  • Identify your goals and objectives as a shareholder and align them with those of other shareholders.
  • Negotiate with other shareholders on the terms and conditions of the USA.
  • Draft a clear, comprehensive, and enforceable USA that reflects your agreement and complies with the law.
  • Review and update your existing USA to ensure it meets your current needs and expectations.

We are committed to providing you with personalized, professional, and practical legal advice and representation. We serve clients in Regina Saskatchewan and surrounding areas.

Contact us today to schedule a consultation with one of our lawyers.

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