Shareholder agreements are a wise choice!

A shareholder agreement is a written agreement that helps prevent and resolve potential conflicts that could arise, especially following a shareholder's death.

What it includes

The shareholder agreement set outs the terms and conditions that apply in the event of a death, disability, disagreement or retirement involving one of the partners. It includes the following:

  • Share buyback price
  • Source of funding in the insurance clause
  • Conditions under which shares may be transferred to an heir
  • Business exit strategy
  • Payment and transfer terms

Contact your notary or attorney to prepare your agreement. It should be revised regularly, usually every 3 years.

The benefits of a shareholder agreement

Here are some of the many benefits of a shareholder agreement:

  • Helps avoid interference from the estate
  • Guarantees that the partners are the only owners
  • Establishes the price in advance, including predetermined payment terms
  • Provides peace of mind to:
    • creditors
    • suppliers
    • clients
    • employees

A shareholder agreement helps shareholders anticipate certain situations so decisions can be easier to make if something unexpected comes up. To ensure that this agreement holds up; however, it is advisable to have a good insurance plan. A meeting with a financial security advisor will help you understand the role that insurance plays in ensuring the survival of your business.