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Unanimous Shareholders Agreements

What is a Unanimous Shareholder Agreement?

A Unanimous Shareholders Agreement, or “USA” as it is commonly referred to, is a formal written agreement between all of the shareholders of a corporation. All of the shareholders must unanimously agree to restrict the authority of the directors of the corporation and create a different set of rules from the baseline rules established by The Business Corporations Act (Saskatchewan) or the Business Corporations Act (Canada).

Is it advantageous to have a USA?

Whether that corporation is a closely held Saskatchewan corporation or federally registered corporation a USA restricts the rights of the directors to manage the corporation and may move those rights to the shareholders of the corporation. In corporations whereby there are two or more shareholders with equal or similar shareholdings a USA can provide a mechanism for decision making where there is a deadlock between the parties, when important or material decisions need to be made, how the corporation will be funded and any shareholder rights of first refusal or any other buy/sell considerations. A USA may also provide for formulas to set out the method of valuing the corporation in situations where a shareholder needs to exit the corporation or new shareholders wish to join the corporation.

Are there any reasons not to have a USA?

In instances where the shareholders are the same people as the directors in a corporation there are not many drawbacks to having a USA. However, in situations where the directors and the shareholder differ, shareholders may become subject to some of the liabilities normally assigned to directors to the extent that a USA moves those responsibilities from the directors to the shareholders.

To USA or not to USA – is that still the question?

Clarifying the expectations between shareholders at the initial stages of organizing the corporation or before a dispute arises can be the best way for the corporation to avoid drawn out and expensive disputes or litigation down the road.

If your still not sure a USA is right for your corporation, please contact Matthew Park of our business law team to discuss the ins and outs of Unanimous Shareholders Agreements and the various terms and conditions which can be found therein.

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Should I Be Incorporating My Business?

Although it is often written that there are two primary reasons to incorporate; namely, limiting personal liability and utilizing tax advantages (and these are good reasons to incorporate), there may be other equally good reasons for you to incorporate. For example, a corporate structure can be the best model for a business with more than one owner, or an owner who wants to involve others – including possible creditors – as participants on some level. Additionally, ease in transferring ownership where a shareholder wishes to move on from the corporation, or passes on, are available with a corporation.

Depending upon your specific situation, incorporating your business or venture may yield important advantages for you. A corporation exists as a separate legal entity from both the directors and shareholders of a company. (The terms “corporation” and “company” can be used interchangeably in our context.) As such, a company can be liable for what it owns or undertakes, and is taxed separately from its directors and shareholders.

Among other things, we will help you:

  • Understand the roles and responsibilities of directors and shareholders.
  • Choose and confirm the availability of your corporate name.
  • Ensure that the share classes and articles of the corporation are tailored for your circumstances.
  • Incorporate the company online.
  • Assemble and maintain your corporate minute book.

Contact Us

At Olive Waller Zinkhan & Waller LLP we work with you and your accounting professional to ensure that every angle is considered in building the most appropriate and best business model for you. We have the experience and expertise to review your business needs and help determine whether incorporation – either now, or at some point in the future – makes sense for you. Contact us to discuss your options.