What is a unanimous shareholders' agreement and how is it different from a regular one?

A unanimous shareholders' agreement (USA) is a specific type of shareholders' agreement that all shareholders sign and that can legally transfer some or all of the directors' powers to the shareholders. This is authorized under the Ontario Business Corporations Act and is a recognized corporate governance tool.

Under a USA, shareholders can agree to restrict or take over the powers that would normally rest with the board of directors. For example, in a small corporation where the shareholders are also the managers, they might agree that certain major decisions require unanimous shareholder approval rather than just board approval. The trade-off is that to the extent shareholders take on directors' powers under a USA, they also take on directors' liabilities for those decisions.

A regular shareholders' agreement, by contrast, governs the relationship among shareholders and covers things like exit rights and buy-sell mechanics, but it does not transfer or restrict directors' powers the way a USA can. The distinction matters because a USA is referenced in the corporation's articles or noted in the minute book, and it binds subsequent shareholders who acquire shares with notice of its existence. If you are considering a USA, legal advice is essential to understand what powers you are taking on and what liabilities follow.