Shareholder Agreements in Saskatchewan

If you own shares in a corporation with others, it is always possible that you may have a disagreement with the other shareholders. One of you may want to sell your shares to an outsider or you may want to buy out the other person's shares so that they are no longer involved in the business. Even if there is no disagreement, other events can happen such as the death, disability or insolvency of a shareholder. Negotiating a solution may not be possible when the problem is already there. By dealing with these and other issues in advance through a shareholder agreement, you can avoid problems in the future.

Shareholder Agreements Can Deal with the Following:

  • If you hold do not own the majority of voting shares in a corporation, you may find yourself not being appointed as a director and thus having little say in how the business is operated. A Shareholder Agreement can ensure that you are elected as a director or officer of the corporation.

  • You can deal with what would happen if a shareholder was called on a guarantee he/she signed for the corporation or incurred other liability for the corporation.

  • You can provide existing shareholders with the right of first refusal to purchase shares from a shareholder if they are about to sell them to someone else ... on the same terms as the proposed sale to the third party.

  • You can create an option to purchase shares from other shareholders at a specified price under specified circumstances You can either agree on the price per share in the document or else you may set out a procedure to determine a fair price.

  • You can provide rights for existing shareholders with the right/option to purchase shares from a shareholder who has died, become disabled or bankrupt, etc. Remember, if a shareholder becomes bankrupt, the shares will belong to the trustee and can sometimes be sold, subject to certain limitations in the articles of the corporation, for example. You may want to have the corporation purchase life insurance to fund the buyout in the most tax efficient manner if a shareholder dies.

  • You may want to prohibit shareholders from being involved in a competing business now or for a certain amount of time after they cease to be a shareholder.

    These are only a few simple examples of why you may want to enter into a shareholder agreement. Please contact me if I can be of help.

    Notice:The information on this website is general in nature only. It relates to Saskatchewan, Canada and may not be applicable in your jurisdiction. It does not constitute legal advice to you and no solicitor client relationship will be established. A conflict check would also be required before our firm can act for someone. You should seek specific legal advice regarding your circumstances from a lawyer entitled to practise law in your jurisdiction.
    * Richard Carlson Legal Prof. Corp. | Friday, Jun 21 2024 18:29 pm UTC1 (-6 hrs for Sask)