Shareholder Agreement Guide | Canada

Prepare a Unanimous Shareholder Agreement for a Canadian corporation with this fully editable template.

• Under this Agreement, one of the shareholders gives the corporation the right to operate a business as a distributor of certain licensed products, and grants the corporation a license to use its trade marks and other proprietary marks in connection with those products.
• Other provisions of the Agreement include:
  • restrictions on the sale and transfer of shares,
  • business of the corporation to be conducted by the directors,
  • shareholder loans to be repaid on a proportional basis,
  • annual valuation of shares, based on the net book value of the company's tangible assets,
  • shares of a deceased shareholder to be repurchased for cancellation by the company,
  • departing shareholders have a put option,
  • non-competition provisions,
  • buy-sell provisions for selling the interest of a departing shareholder.
• Available in MS Word format.
• Governed by Canadian laws and intended to be used only in Canada.

Learn how to prepare a Shareholder Buy-Sell Agreement with this checklist for Canadian companies.

• What would happen to your business if one of the owners dies or is no longer able to work? A Shareholder Buy-Sell Agreement provides for continuity of the business in those events. Topics included in the Checklist are:
  • qualification of shares for capital gains exemption;
  • provisions of any existing formal shareholder agreement;
  • terms of purchase or redemption (or both) of a deceased shareholder's shares using proceeds of life insurance policies on the life of the deceased;
  • whether life insurance policies will be held by the corporation, by the other shareholders or by a trustee.
• This is a fully editable legal form in MS Word format which can be customized to fit your circumstances.
• Governed by Canadian tax laws and ntended to be used only in Canada.

This drag along, tag along clause can be inserted into a shareholder agreement to govern how the sale of shares from a shareholder to an arm's length third party must be conducted.

• The share purchase agreement must include an offer by the buyer to purchase a pro rata share of the other shareholders' shares on the same terms and at the same time.
• The terms apply to arm's length transactions only. The clause contains a definition of which parties are not considered arm's length.

A Drag Along, Tag Along Clause is an exit strategy that protects the rights of minority shareholders while at the same time giving majority shareholders a means to force other investors to exit at the same time.

This Right of First Refusal clause can be inserted into a Shareholder Agreement to govern how a shareholder disposes of its shares.

• If a shareholder receives an arm's length offer from a third party to purchase its shares, the selling shareholder must give the other shareholders a right of first refusal to buy the shares before selling them to the third party.
• The clauses are downloadable and customizable.
• These generic clauses can be used in any common law country.
• Available in MS Word format.

A Shareholder Agreement protects the interests of a corporation's shareholders and minimizes the risks of share ownership. This Canadian template contains a buy-sell or "put" option.

• This is a Canadian legal form which can be used anywhere in Canada except Quebec.
• The Shareholder Agreement establishes the obligations of the shareholders and the corporation to each other, and sets out any restrictions on share transfers or the issue of new shares.
• The remaining shareholders have a right of first refusal to acquire the shares of a departing shareholder, before the shares can be offered to a third party.
• A departing shareholder also has a buy-sell or 'put' option, which would require the remaining shareholders to purchase his/her shares. The put option is available only after the departing shareholder has been unsuccessful in finding a third party purchaser for a period of 6 months.
• The template contains buy-sell options for both an assured buy-out and a mandatory or 'shotgun' buy-sell.
• If a shareholder dies, the surviving shareholders have the option to buy the deceased shareholder's shares, failing which they must be purchased by the corporation.
• The Shareholder Agreement can serve to avoid unnecessary conflict by having the owners agree on management issues and exit strategies at the outset.

Should your company shareholder agreement include a shotgun clause? Learn more about these provisions from an owner-manager's perspective, with this introductory article entitled "Shotgun Clauses & Owner Managers".

• A 'shotgun clause' or 'buy-sell clause' is a provision in the agreement that states if a shareholder wants out of the company, he/she can force the other shareholders to buy his/her shares.
• This article discusses the benefits and pitfalls of shotgun clauses, and the situations in which they work best.
• The author is an Ontario lawyer, with expertise in buy-sell agreements and other shareholder issues.