The content of this article is intended to be informational only. We caution you against using or relying upon any information contained in this article without first seeking legal advice regarding your particular matter. All matters arising from the use of our website, including this article, shall be governed by Alberta law and shall be within the exclusive jurisdiction of the courts of Alberta.

A unanimous shareholder agreement ("USA") is an agreement between all the shareholders of a corporation.

USA's typically contain provisions in 2 main areas: decision making and share transfers. Without a USA in place, the provisions of the legislation govern.

In the areas of decision making for example, under the legislation:

1. directors are elected by majority vote of the voting shareholders;

2. directors control the corporation;

3. director decisions are made by a simple majority vote;

4. certain fundamental decisions, such as the sale of all of a corporations assets, require a 2/3 majority of the shareholders.

A USA can alter one or more of these matters. For example, a USA can provide who the directors are. In this way a minority shareholder can be assured of a director position. A USA can limit the powers of the directors and can require unanimity for certain decisions. In the area of decision making, a USA generally enhances the rights of minority shareholders and limits the rights of the majority.

The issue of share transfers can arise in a number of different circumstances including: voluntary transfer; death of a shareholder; bankruptcy of a shareholder; and buyout by other shareholders. Without a USA voluntary transfers may be unrestricted. In a closely held corporation this may not be desirable. Shareholders may be particular about who the other shareholders are.

Conversely, sometimes voluntary share transfers in a closely held corporation are restricted by the corporation's articles. This may prevent a shareholder from transferring his or her shares.

A USA can provide for the circumstances where a voluntary transfer will be permitted. A USA can also provide for what happens to the shares of a shareholder upon death, bankruptcy or other events where, but for the USA, the shares will transfer by operation of law.

USA's generally provide a mechanism whereby shareholders who are not getting along can part ways. "Shot-gun" provisions are one such mechanism.

USA's can provided for many other important matters pertaining to the financing of the corporation; key man insurance and so on.

Where there are 2 or more shareholders in a closely held corporation, we generally recommend that a USA be entered into.

If you are interested in purchasing a form of Unanimous Shareholder Agreement, please visit our corporate online services page.

For more information regarding Unanimous Shareholders Agreements, contact Tim Platnich.