What is a unanimous shareholder agreement and how is it different from a regular one?
Under the Ontario Business Corporations Act, a unanimous shareholder agreement (USA) is a specific type of shareholder agreement signed by all shareholders of a corporation. Its defining feature is that it can restrict or transfer powers that would otherwise belong to the directors.
In other words, an ordinary shareholder agreement regulates the relationship among shareholders but cannot strip the board of directors of its management authority. A USA can. For example, a USA might require that all shareholders approve a major business decision, effectively taking that power away from the directors and placing it with the owners. When a shareholder sells their shares, the new shareholder is bound by the USA even if they haven't signed it, as long as they received notice of it.
This added power comes with added responsibility: shareholders who exercise director powers under a USA take on director-like duties and potential liabilities for those matters. For closely held Ontario corporations where the owners are also the managers, a USA can be a useful tool, but it requires careful drafting. A corporate lawyer can help you decide whether a USA or a conventional shareholder agreement better suits your structure.
Key takeaways
- A USA is signed by all shareholders and can limit or transfer directors' powers.
- It binds new shareholders who acquire shares with notice of it.
- Shareholders exercising director powers under a USA can incur director-like liability.
- It's governed by the Ontario Business Corporations Act and requires careful drafting.