The Shotgun Clause Nobody Thought Would Fire

The situation

Andre, Simone, and Rejean started a contracting company together a decade earlier, each holding an equal one-third of the shares. Andre kept his day job as an IT support lead and handled the company's back office on evenings and weekends. Simone, a licensed electrician, ran the field crews and held the electrical licence the company's contracts depended on. Rejean managed sales and client relationships. The business had grown steadily into an established operation generating roughly $3 million a year in revenue, with a mix of commercial and residential electrical work across the region.

When they incorporated, their lawyer at the time had included a standard shareholder agreement with a buy-sell mechanism known as a shotgun clause. Under this kind of clause, any shareholder can trigger a forced sale by naming a price per share. Once triggered, the other shareholders have a fixed window to choose one of two things: buy out the triggering shareholder at that exact price, or sell their own shares to the triggering shareholder at that same price. Nobody involved expected it would ever actually be used. It was the kind of clause everyone signs and forgets.

Over the past two years, the three had drifted apart on strategy. Rejean wanted to take money out of the company as dividends and slow down growth. Andre and Simone wanted to reinvest in a second crew and new equipment. The disagreements became personal. One morning, Andre and Simone each received a formal written notice from Rejean: he was invoking the shotgun clause, naming a price of $550,000 per one-third share, and giving them the window set out in the agreement to respond.

What the shotgun clause meant

A shotgun clause is designed to be self-policing on price. Because Rejean did not know in advance whether he would end up buying or being bought out, he had an incentive to name a price he genuinely believed was fair — too low, and he risked being forced to sell his own third for less than it was worth; too high, and he risked having to pay that much to buy the others out. That built-in fairness on price is the clause's strength. Its weakness is that it says nothing about whether the responding shareholders can actually come up with the money in time.

Andre and Simone had two options once the clause was triggered. They could jointly buy Rejean's one-third for $550,000, keeping the company between the two of them. Or they could sell their combined two-thirds to Rejean for $1.1 million — $550,000 each, at the same per-share price Rejean had set. There was no third option to negotiate a different number or extend the timeline unilaterally; the agreement's mechanics were fixed once the notice was validly given.

Our first task was to confirm the notice was valid — that it had been delivered in the manner the agreement required, that the price was stated per share rather than ambiguously, and that the response window had been calculated correctly. A defective notice can sometimes be challenged, but this one was properly drafted and properly served. Rejean, or whoever advised him, had done the mechanics correctly. That meant Andre and Simone were working against a real deadline, not a technicality they could set aside.

What we did

1. Confirmed the clause was validly triggered before spending energy fighting it. We reviewed the shareholder agreement and the notice itself line by line. Challenging a validly triggered shotgun clause on procedural grounds when it was not actually defective would have burned time the clients did not have and would not have changed the outcome.
2. Modelled both paths side by side, in dollars and in time. Buying Rejean out meant raising $550,000 within the response window. Being bought out meant receiving $1.1 million between them, but losing the company. We worked with the company's accountant to pressure-test what financing was actually available — savings, a line of credit against company assets, and a possible term loan — against what the lender's timeline could realistically support before the deadline.
3. Was honest with the clients early about the financing gap. Between savings and available credit, Andre and Simone could reliably access about $350,000 within the window, not the full $550,000. A rushed loan for the shortfall was possible in theory but risked stripping the company's working capital right before its slower winter season, which could have put the whole business at risk even if the buyout succeeded.
4. Negotiated the terms of the sale rather than treating it as a fixed outcome. Once it was clear that buying Rejean out was not responsible, we shifted to protecting Andre and Simone's position as sellers. Because Simone's electrical licence was tied to several of the company's active contracts, we negotiated a short paid consulting arrangement so those jobs could transition without disruption, and a narrow carve-out from any post-sale restriction so Andre could continue his separate IT support work without conflict.
5. Confirmed payment mechanics and closing conditions in writing. The agreement required the full $1.1 million to be paid on closing. We confirmed Rejean's financing was in place before the clients gave up any operational control, so they were not left exposed between signing and payment.

The outcome

Andre and Simone sold their combined two-thirds of the company to Rejean for $1.1 million, paid in full on closing, roughly $550,000 each. It was not the outcome either of them wanted. They had built the company over ten years, and losing it to the partner they had disagreed with was a genuine loss, not a technicality that got fixed. But the alternative — stretching the company's finances to force a buyout they could not comfortably fund — carried real risk of a worse result: a company weakened by debt, run by two of three partners who had just spent their reserves, heading into a slower season.

The transition terms softened the landing. Simone's short consulting arrangement gave the company continuity on its existing contracts and gave her a bridge income while she decided her next move. Andre's carve-out meant the sale did not touch his separate work. Both received the exact price the clause's own mechanics produced, paid on the schedule the agreement required, with no last-minute renegotiation in Rejean's favour once the deadline had passed.

The lesson for Andre and Simone was a hard one: a shotgun clause only protects you if you can actually afford to be on either side of it. They had signed the agreement a decade earlier without ever asking themselves whether they could raise their share of the company's value on short notice. By the time the answer mattered, the clause had already been triggered and there was no room left to change the terms — only to manage the consequences properly.

What you can learn from this