Shareholder agreements: A wise choice!

Shareholder agreements: A wise choice!

shareholder agreement is a written agreement that helps prevent and resolve potential conflicts, especially at the time of a shareholder’s death.

What it includes

The shareholder agreement set outs the terms and conditions that apply in the event of death, disability, disagreement or the retirement of one of the partners. It includes primarily the following:

  • share buyback price
  • source of funding in the insurance clause
  • conditions under which shares may be transferred to an heir
  • business exit strategy
  • payment and transfer terms
  • etc.

Contact your notary or attorney to prepare your agreement. It should be revised regularly, usually every 3 years.

The benefits of a shareholder agreement

Here are some of the many benefits of a shareholder agreement:

  • helps avoid interference from the estate
  • guarantees that the partners are the only owners
  • establishes the price in advance, including predetermined payment terms
  • provides peace of mind to:
    • creditors
    • suppliers
    • clients
    • employees

A shareholder agreement helps shareholders foresee certain situations and make decisions more easily should the unexpected occur. To ensure that this agreement holds up, however, it is advisable to have a good insurance plan. A meeting with a financial security advisor will help you understand the role that insurance plays in ensuring the survival of your business.

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