A shareholders agreement is a binding contract between the owners of a private corporation that governs their rights, obligations, and the rules for how ownership decisions, including exit, are made.

The shareholders agreement is the operating constitution of a multi-owner business. It defines what decisions require unanimous consent, how share transfers are managed, what happens when shareholders disagree, how the business is valued for buyout purposes, and what protections minority shareholders have against decisions made by the majority.

Without one, disputes default to the corporation’s articles and the applicable provincial Business Corporations Act, a framework designed for general applicability, not for the specific circumstances of a particular business and its owners. The absence of a shareholders agreement is rarely a problem until it is, at which point the legal and relational cost of resolving what should have been agreed upfront is almost always disproportionate to what the agreement would have required.

A shareholders agreement built before a dispute is needed is worth considerably more than one built during one. See how Wefinx approaches exit planning.

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