What is a shareholder agreement and do I need one for my Ontario company?
A shareholder agreement is a private contract among the owners of a corporation that governs how they relate to each other and to the company itself. Unlike the articles of incorporation or a company's by-laws, a shareholder agreement is confidential — it doesn't get filed publicly.
For any Ontario private corporation with more than one owner, a shareholder agreement is strongly advisable. It covers critical topics such as how shares can be bought or sold, what happens when a shareholder dies or becomes incapacitated, how disputes are resolved, and what voting thresholds are required for major decisions. Without one, the Ontario Business Corporations Act fills in the gaps with default rules that may not reflect what the owners actually want.
If you're starting or already running a business with partners, reviewing and signing a shareholder agreement early — ideally before any disagreement arises — is one of the most practical steps you can take to protect yourself and the business.
Key takeaways
- A shareholder agreement is a private contract among co-owners of a corporation.
- It supplements but does not replace the articles of incorporation or by-laws.
- Default rules under the OBCA apply where no agreement exists, and they may not suit your situation.
- Put an agreement in place early, before conflicts arise.