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Shareholder Agreements in Ontario | ClearWay Law

Business law in Ontario can be complicated. Sometimes it gets tricky when you’re establishing a new business. One of the things you need to make sure you get right is to draft a shareholder agreement. This should be done before you start your business.

What is a shareholder agreement? Why is it important? And how do I draft one properly? Find out in the next sections.

If you want to hire a lawyer in Ontario to do your shareholder agreement, you can reach out to us by booking a time below. A business lawyer will call you. Further, you can fill out the form on the side of this page. Lastly, you can call us. Our intake team will take your information and pass it to one of our business lawyers. The Ontario lawyer will then call you.

Our lawyers can do shareholder agreements for anyone in Ontario. It doesn’t matter which city you live in. Also, if things have gone wrong with your shareholders, we have business lawsuit lawyers who can help you. They can try and resolve the issues without going to court. However, if need be, they can also go to civil court.

The Purpose of Shareholder Agreements

Shareholder agreements are required if you are starting a company with more than two shareholders. If there are only two shareholders, you can learn more about partnerships in Ontario.

If you didn’t get the shareholder agreement done properly, one of our lawyers can help you with dispute resolution. Sometimes the existing shareholders will become unhappy with the management of the corporation. They might want to explore ways to get their money back. If you want to sell the shares, first ask the management if they will buy back your shares. If not, you will have to hire an affordable business lawyer to review the shareholder agreement. The business lawyer will look for clauses that allow you to sell the shares.

You can see the main reasons to create a shareholder agreement below:

  • Define the rights and obligations of shareholders
  • Protect the investment of shareholders in the company
  • Govern how the company will be run
  • Set rules regarding the relationship between shareholders

General shareholder agreement vs unanimous shareholder agreement

A general shareholder agreement sets the obligations of shareholders between themselves.

A unanimous shareholder agreement is a specific type of shareholder agreement, wherein:

  • All shareholders sign upon initial completion of the agreement
  • All future shareholders are bound by the agreement, whether they agree to or not
  • Powers of directors are removed fully or partially

Shareholder agreements are boring but are super important. Let’s say you partner with three other people to start a gym chain. Each of you put in $100K. You open your first gym and hire employees. You will need to hire a business lawyer to do your employment agreements.

You then work hard to grow your business. One of the owners wants to move away. The other three shareholders are upset because they are doing all the work. Where is the shareholder agreement? What are the terms? If you don’t have one, you would hire a business lawyer to send demand letters. If that doesn’t work, you will have a challenging and expensive court battle ahead of you.

Drafting a shareholder agreement in Ontario

The shareholder agreements set out the rules in appointing directors or officers for the company.

It also makes sure that you are complying with Ontario law.

The usual provisions present in a shareholder agreement are:

  • Share prices and valuation
  • Terms and conditions for share issuance
  • Rules on share transfers
  • Buy/sell guidelines
  • Dispute resolution
  • Special approvals
  • Pre-emptive rights
  • Right of first refusal

Always have a lawyer assist you in drafting a shareholder agreement. Consult with one from ClearWay law today.

Get a lawyer to draft your shareholder agreement in Ontario

Find a lawyer with experience in Ontario’s business law. Lawyers often charge a flat fee for shareholder agreements. Lawyers charge an hourly rate for business lawsuits.

The role of the lawyer is to counsel you regarding your rights and obligations. For a small business, a business lawyer helps owners create bylaws, articles of incorporation, NDAs, and partnership agreements. Take care of legal documents needed in establishing a new business.

The Business Corporations Act is the set of rules that govern businesses in Ontario. There are different classes of shares, so business law can get complicated.

Without a shareholder agreement, you will have to go through emails and texts to find the terms. If you never discussed it, you are in big trouble. Shareholder agreements are long documents that cover many different situations.

Consult with a ClearWay lawyer for your shareholder agreement in Ontario

Use the online contact form on our website.

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  • FAQ

    Why do I need a shareholder agreement?

    It's important that the shareholders agree on the terms before the business starts. If not, you find yourself much more likely to get into a lawsuit in the future. You also want to make sure it's clear on what requires shareholder approval.

    How can a lawyer help when it comes to shareholder agreements?

    There are different types of shareholders' agreements. It's important to make sure that you select the correct one. Once you have received legal advice on the correct type of shareholder agreement, the lawyer will draft it.

    Can shareholder agreements be changed or terminated?

    This would be agreed upon by the shareholders in the agreement. If you don't have these important terms agreed to, the management of the corporation becomes very difficult.