The contents of a Shareholders’ Agreement

As we discussed in our last blog post, incorporated businesses in Canada must create a Shareholders’ Agreement to protect their shareholders and avoid disputes.  Here are the typical contents of a Shareholders’ Agreement:

• Company structure
• Division of equity among shareholders
• Parties in the agreement
• Officers and directors of the corporation
• Right of first refusal and pre-emptive rights to acquire shares
• Buy-out provisions for voluntary/involuntary withdrawal of shareholders
• Option to purchase on death/disability of shareholder
• Restrictions on transfer of shares
• Key decision-making processes
• Dispute resolution
• Shareholder rights, obligations and commitment
• Management contracts or key-person agreements
• Ongoing shareholder financial obligations
• Compensation issues
• Company’s professional advisors
• Provisions for termination of the agreement
• Shotgun clause
• Share valuation and business valuation
• Insurance requirements

Tune in next week when we talk about the perks and snags of incorporated businesses!