We have dealt with the unanimous shareholder agreement (“USA”) in a previous blog entry but today’s blog post deals with why the USA is great. The USA is an agreement between the shareholders of a corporation. It will typically restrict the management powers of a corporation’s directors to run a corporation. Otherwise, legislation would govern these areas. For instance, the USA can limit the powers of a director; ensure that a shareholder can be a director; or place limitations on the issuance or transfer of shares. Another advantage of the USA is that if the USA provides for a greater number of votes than is required by legislation, then the USA will prevail. While the USA will strengthen the rights of a minority shareholder, the USA will limit the rights of the majority shareholders to some degree.

The USA is meant as a tool to allow a corporation to run without major disruption. As an example, you and your friends have a fabulous idea for a new business. You are all putting in a lot of money and effort into making this venture a reality. However, life does not stop just because you are all working towards a common goal. Life happens – people are no longer are friends, someone dies, someone divorces, or there are disagreements as to how the business should be run.

Having a USA will govern how the parties would proceed in the event any of these issues arise because some of these events may negatively affect the corporation. This is beneficial as it may help to avoid or reduce potential litigation by outlining how situations will be dealt with before the situation becomes a problem. USAs are particularly helpful when a corporation will have more than one shareholder.

By Christina Dao of Aarbo Fuldauer LLP

If you have a legal issue that you need reviewed by a lawyer, please contact the law office of Aarbo Fuldauer LLP at:

Address: 3rd Floor, 1131 Kensington Road NW, Calgary, AB, T2N 3P4
Phone: (403) 571-5120
Email: [email protected]

Christina Dao
Barrister & Solicitor
www.aflawyers.ca

*The information contained in this blog is not legal advice. It should not be construed as legal advice and should not be relied upon as such. If you require legal assistance, please contact a lawyer. At Aarbo Fuldauer LLP, our lawyers have broad experience in many areas of practice.  If you require assistance in an area of law that is outside our area of practice, we can refer you a suitable colleague.*