Shareholder Agreements Ontario
Prevent conflict, ensure your business runs smoothly, and set rules for orderly share transfers with a solid, legally binding shareholders’ agreement.
A shareholder agreement is a formal pact between shareholders of a corporation. The document establishes the rules on how the business will be run and what the shareholders’ duties, responsibilities, and rights will be.
Once assented to by all the parties involved, the agreement becomes a legal document. Though it is not a legal requirement to have one, a shareholder agreement is essential to have in place as it protects shareholder interests and limits the potential for conflict.
A well-crafted shareholder agreement is a product of wide consultation between shareholders, which unites them around a common goal and vision for the business.
When presented to potential partners and financiers, some of whom may request it, a shareholders’ agreement can help paint the image of stability and strength.
What does a shareholder agreement cover?
Starting a business as partners without a clear, watertight shareholders’ agreement sets a weak foundation for the company, as does a vague agreement that skirts around critical matters.
In theory, the idea of two more people coming together to start a business is an appealing one. The more shareholders there is the more capital you can pool together. There is also the potential for more, better quality ideas, expertise, and talent that can advance the business.
But the more shareholders there are, the greater the potential for conflict. However motivated you may all be to work for the success of the business, you will not always agree on the best path to follow. A shareholder agreement sets rules on how to proceed in every scenario.