A shareholders` agreement is an agreement between the owners (shareholders) of a company. They can be comprehensive, addressing a large number of problems, or can be limited in scope and designed for specific purposes. There are two types of shareholder agreements: a standard shareholder agreement can offer more flexibility than a US agreement. It is a contract between certain parties and may include all shareholders of the company, but should not include all shareholders. Future shareholders can choose whether they are bound by the agreement (the agreement would have to be amended to achieve this), but would not be automatically bound when registering as a shareholder. Reduced to its essential elements, a unanimous shareholders` agreement is a contract between all shareholders that limits the actions of directors. While it does not limit the actions of the directors, it is not a unanimous shareholders` agreement, even if it is a unanimous agreement of all shareholders. Confusing? No doubt, but the thing to remember is that the unanimous shareholders` agreement is an artistic term that specifically relates to agreements entered into under section 146 of the Canada Business Corporations Act and nothing else. A standard shareholders` agreement can be complete or limited, including non-shareholders. Large shareholders are able to operate the business without the need for unanimous agreement from all shareholders, which in some circumstances can delay the progress of the business. This is a mechanism that is normally implemented to deal with disputes between shareholders. It grants minority shareholders a set option against the majority shareholder and gives the majority shareholder an appeal option on minority shares. These rights give shareholders the right to retain their current percentage of share ownership and avoid dilution.
Key factors to consider when granting such rights include a minimum ownership threshold, the issuance of securities that do not trigger subscription rights (i.e. shares of a certain percentage or class) and the impact of the right on the founders and when they leave the company. When a shareholder holds majority shares in a capital company, it is important to determine in a contract the decisions that should not be taken by simple majority. According to Toronto-based boutique law firm Wakulat Dhirani, LLP, the U.S. “can identify a class of critical decisions that require majority and/or unanimous shareholder approval, to ensure that the majority shareholder is not able to make unilateral decisions without first obtaining the agreement of other stakeholders.” Of course, this is a very topline statement of shareholder agreements. If you are currently without a shareholders` agreement and would like to implement a structure to give structure to your company`s governance, our corporate lawyers at Duncan Craig LLP can help you assess the type of agreement that would best serve your business. Most shareholder agreements can be terminated with the agreement of all non-contractual shareholders. However, the nature of the activity and its phase should be taken into account in the economic cycle and financing. For example, it may be advantageous for a growing company if the shareholders` agreement is terminated at the company`s choice. When a company seeks financing, investors often demand the existence of a new shareholders` agreement that protects their interests. In such cases, it cannot be useful to require the unanimous agreement of all shareholders, since it is possible for financing operations to be unilaterally blocked by a single shareholder who refuses to give his consent.
Therefore, the introduction of a threshold for non-unanimous voting would be useful to avoid such a situation. Strict pre-emption rights require holders to first have a bona foit offer from a third party before the shares are offered to other shareholders of the company. . . .