How Your Business Could Benefit from a Unanimous Shareholder Agreement
Starting a new business in Alberta is an exciting venture, but it also comes with important legal considerations. One of the most critical documents to have in place when you incorporate your business is a Unanimous Shareholder Agreement (USA). This document plays a pivotal role in protecting the interests of shareholders and ensuring the smooth operation of your company. Here, we’ll explain what a USA is, why it’s important for Alberta businesses, and how it can safeguard your company’s future. Contact us today for a free consultation.
What Is a Unanimous Shareholder Agreement?
In Alberta, the Business Corporations Act governs corporations and allows for the use of USAs. A USA is a legally binding document agreed upon by all shareholders of a corporation. It sets out rules and expectations for how the business will be managed and operated, as well as how key decisions will be made. A USA provides specific and tailored rules for the shareholders and can pre-empt and avoid common disputes.
How can your business benefit from a USA?
A USA offers numerous advantages for new businesses, particularly those with multiple shareholders. Here are some key reasons why it’s essential:
Clarifies Roles and Responsibilities
A USA sets clear expectations for each shareholder’s role in the company. It defines voting rights, management responsibilities, and decision-making authority, helping to avoid misunderstandings.
Protects Minority Shareholders
In Alberta, a USA can provide protections for minority shareholders by outlining their rights, such as requiring unanimous approval for major decisions (e.g., issuing new shares or selling the business).
Resolves Disputes
A USA establishes mechanisms for resolving disputes among shareholders, such as buy-sell provisions, mediation, or arbitration. This helps prevent costly and time-consuming legal battles.
Plans for the Unexpected
Life is unpredictable. A USA addresses what happens if a shareholder wants to sell their shares, becomes incapacitated, or passes away. It ensures continuity for the business and protects the remaining shareholders.
Customizes Decision-Making
The Alberta Business Corporations Act allows significant flexibility in how USAs are structured. Shareholders can customize how decisions are made, whether by majority vote, unanimous consent, or other arrangements tailored to your business.
Attracts Investors
Potential investors or partners often view a well-drafted USA as a sign of professionalism and foresight. It reassures them that governance and risk management are taken seriously.
Key Provisions in a USA
A strong USA should address the following areas:
Share Transfers: Rules for buying, selling, or transferring shares, including rights of first refusal and valuation methods.
Decision-Making: Processes for approving major decisions, such as mergers, acquisitions, or issuing new shares.
Management and Voting Rights: Allocation of decision-making authority between shareholders and directors.
Dispute Resolution: Procedures for resolving conflicts, such as buyout provisions or arbitration.
Exit Strategies: Guidelines for what happens when a shareholder leaves the company.
Confidentiality and Non-Compete Clauses: Protecting the company’s intellectual property and competitive position.
Risks of Not Having a USA
Without a USA, your corporation will rely solely on the default provisions of the Business Corporations Act, which may not suit the unique needs of your business. This can lead to:
Unclear rules for decision-making and management.
Increased risk of shareholder disputes.
Difficulty managing unexpected events, such as a shareholder’s exit or death.
Vulnerability to hostile takeovers or disputes over share ownership.
Drafting a USA: Why Legal Advice Matters
While it’s possible to find templates for USAs online, these are rarely sufficient for addressing the specific needs of your Alberta business. The laws governing corporations vary by jurisdiction, and your USA must comply with Alberta’s Business Corporations Act. Working with an experienced business lawyer ensures your agreement is comprehensive, enforceable, and tailored to your unique situation.
At Whitlock and Company, we understand the unique needs of Alberta businesses. Our team can help you draft a customized USA that aligns with your goals and safeguards your company’s future. Contact us today to learn more about how we can support your business.
