SHAREHOLDER’S AGREEMENT
Shareholders’ Agreement
Protecting Shareholders and Their Families
- A shareholder’s agreement is essential for anticipating unforeseen events and safeguarding the interests of owners and their loved ones. It also ensures the ability to monetize the company’s value when needed.
Shareholder Disability: An Often-Overlooked Risk
- Prolonged disability of a shareholder can create tensions. A buyback clause in case of disability, funded by insurance, protects the company by repurchasing shares without impacting its assets.
Estate Planning and Share Buyback
- A buyback clause clarifies the management of shares in the event of death. This ensures control for remaining shareholders and provides heirs with fair market value. These provisions must align with each shareholder’s estate plan.
Active Contribution and Shareholder Conflicts
- Reduced Effort: A clause allows the buyback of an inactive shareholder’s shares to maintain balance.
- Shotgun Clause: Quickly resolves disputes by requiring shareholders to sell or buy offered shares at a specified price.
Share Sales and Tax Exemptions
- The agreement must specify sale conditions and include mechanisms to determine fair market value. It can also optimize tax benefits, such as the capital gains exemption.
Review and Corporate Structure
- The agreement should be updated after changes in the company’s structure, such as an estate freeze or the addition of shareholders. It must also include a clear valuation method to avoid disputes during transactions.
Tax Opportunities and Restrictions
- The agreement must consider
- Shareholders’ tax residency and citizenship.
- Family ties as defined by the Income Tax Act.
- Mechanisms to minimize tax losses, particularly through life insurance for share buybacks.
Personal Planning and Strategy
- Shareholders should align their wills and powers of attorney with the agreement’s provisions, consulting legal advisors to optimize their personal plans.
Business Contingency Plan
- While separate from the agreement, a contingency plan ensures operational continuity in case of a key executive’s death or disability. Life insurance for these employees can help maintain business stability.
A well-crafted shareholders’ agreement considers the economic, legal, and personal circumstances of the parties, as well as the company’s specifics. Consult Twin Lisbet for tailored advice and drafting of your agreement.
Shareholders’ agreements are critical contracts for structuring corporate governance, protecting shareholders’ rights, and preventing commercial disputes. They define rules for share management, voting rights, directors’ responsibilities, and mechanisms for resolving shareholder conflicts.
Our lawyers draft customized agreements, including pre-emption clauses, non-compete clauses, non-solicitation clauses, and arbitration clauses to secure your investments and ensure transparent business management. We also provide guidance on integrating “shotgun” clauses, share buyback mechanisms, and provisions to protect minority shareholders.
We support you in creating subsidiaries, drafting articles of incorporation, and establishing internal regulations to ensure effective governance and optimal share management. Whether you are a majority shareholder seeking to secure your investments or a minority shareholder looking to protect your rights, we help you structure agreements tailored to your needs.
In addition to legal aspects, we incorporate tax planning and optimization strategies to maximize your company’s value and ensure a smooth asset transfer in case of succession.
A QUESTION ?
Feel free to contact us — we will get back to you as soon as possible.
