What happens to our existing shareholder agreement when we bring in a new investor?

When a new investor joins an Ontario private corporation, the existing shareholder agreement needs to be addressed. There are generally two approaches: the new investor signs a joinder agreement (also called an adherence agreement) to become bound by the existing shareholder agreement's terms, or the existing agreement is replaced entirely by a new, amended and restated agreement that all parties — existing and new — sign.

Which approach is appropriate depends on the complexity of the deal. If the new investor is simply buying into the existing structure on the same terms as current shareholders, a joinder is often sufficient. If the new investor is bringing new rights (for example, preferred shares, anti-dilution protections, board representation, or information rights that other shareholders don't have), an entirely new agreement is usually needed.

Either way, do not issue shares to a new investor without updating or confirming the shareholder agreement. The new investor's rights and obligations, and their impact on existing shareholders, need to be clearly documented. Failing to do this can create ambiguity about governance, exit rights, and financial entitlements that is costly to untangle later.