A shareholders' agreement is an important component in the legal organization of a business corporation that has more than one shareholder. It allows shareholders to determine the rules governing the relationship between them as well as the exercising of any rights and privileges attached to their shares.

There are three types of shareholder agreements, namely: i) one that primarily addresses the mechanisms involved in the sale and purchase of shares between shareholders following a death or otherwise, ii) an agreement that contains the previously mentioned buy-sell provisions as well as provisions governing the general conduct and roles of the shareholders, and iii) a unanimous shareholder agreement that contains all the provisions of the first two kinds as well as clauses that relate to the governance of the corporation and the restrictions on the powers of the directors.

Our multi-purpose template may be used as a starting point to draft any of the above types of shareholder agreements. You need only use or delete the clauses that apply for the type of agreement you wish to draft. A shareholder agreement is complex document to draft, given that it is affected by many different areas of law, such as civil law and corporate, securities, insurance, intellectual property, probate, tax law, etc. This is why our template provides a starting point that you can adapt to suit your needs.

Please note that it is especially important to consider the provisions of all laws and their respective regulations that apply to shareholder agreements, in particular, the Canada Business Corporations Act (CBCA) or Quebec Business Corporations Act (QBCA), the Civil Code of Québec (concerning partnership agreements and mandates) and the Quebec Securities Act. It is important to note that the CBCA addresses the issue of transferring shares and an agent’s role in this process in greater detail than the QBCA.

It is recommended that the long form shareholder agreement template be used where the shares held by the shareholders have a market value of over a million dollars or where the value of the shares is likely to significantly increase.

The long form version of the shareholder agreement provides greater detail compared to the short form agreement (template B02400), thereby providing a higher level of protection for shareholders who are willing to be governed by such an agreement.

However, the long form agreement requires more effort in drafting and adapting the clauses to the specific needs of the shareholders, who stand to lose a lot if the agreement fails to serve its intended purpose.

It is important to remember that a shareholder agreement does not govern the employment status of certain shareholders with respect to the issuer, which in certain circumstances also plays the role of employer. The best practice in such circumstances is to enter into an employment agreement (see chapter (“C”) - Human Resources) in addition to the shareholder agreement and to ensure that the two agreements complement each other.

This is not a unanimous shareholder agreement. As such, this agreement does not remove powers from the corporation's board of directors. For a unanimous shareholder agreement, please use template B02500 of this collection.

0.00 INTERPRETATION
0.01 Definitions
0.01.01 Activities
0.01.02 Agreement
0.01.03 Annual Budget
0.01.04 Articles
0.01.05 Best Efforts
0.01.06 Book Value
0.01.07 Change in Control
0.01.08 Confidential Information
0.01.09 Control
0.01.10 Death
0.01.11 Disability
0.01.12 Encumber or Encumbrance
0.01.13 Escrow Agent
0.01.14 Fair Market Value
0.01.15 Force Majeure
0.01.16 Fully Diluted Basis
0.01.17 Group
0.01.18 Incorporating Act
0.01.19 Initial Public Offering
0.01.20 Intellectual Property
0.01.21 Law
0.01.22 Legal Representatives
0.01.23 Ordinary Course of Business
0.01.24 Person
0.01.25 Prime Rate
0.01.26 Regulation 45-106
0.01.27 Shares
0.01.28 SHAREHOLDER
0.01.29 Shareholder-Employee
0.01.30 Subsidiary
0.02 Entire Agreement
0.03 Applicable Laws
0.04 Non-Compliance
0.04.01 Severability
0.04.02 Substitute Provision
0.05 Miscellaneous
0.05.01 Cumulative Rights
0.05.02 No Waiver
0.05.03 Time and Dates
(a) Time of the Essence
(b) Computation of Time
(c) Delays
0.05.04 Financial References
0.05.05 Cross-References
0.05.06 Gender and Number
0.05.07 Headings
0.05.08 Presumptions
0.05.09 Knowledge
0.05.10 Approval
0.05.11 Accounting Standards
1.00 PURPOSE
2.00 GOVERNANCE OF CORPORATION
2.01 Board of Directors
2.01.01 Composition and Quorum
2.01.02 Proportional Representation
2.01.03 Deemed Resignation
2.01.04 Liability Insurance
2.02 Management
2.03 New Issue of Shares
2.03.01 Pre-emptive Right
2.03.02 Exception
2.03.03 Procedure
(a) Notice
(b) Time Limit
(c) Refusal
2.04 Redemption Policy
2.05 Dividend Policy
2.06 Continuous Disclosure to SHAREHOLDERS
2.07 Initial Public Offering
2.07.01 Notice
2.07.02 Qualification
2.07.03 Sale by the SHAREHOLDERS
2.07.04 Costs
2.07.05 Escrow
2.08 Insurance
2.09 Business Plan
3.00 RULES GOVERNING SHAREHOLDERS
3.01 Contribution in Time
3.01.01 General Contribution
3.01.02 Employment Agreement
3.01.03 Disability
(a) Continuity of Salary
(b) Date of Disability
3.02 Financial Contribution
3.02.01 Cash Calls
(a) Pro Rata Basis
(b) Default by a SHAREHOLDER
(c) Adjustment and Special Terms
(i) Promissory Note
(ii) Interest
(d) Security or Suretyship
(i) Undertaking
(ii) Indemnification
(iii) Adjustment
3.02.02 Withdrawal of Certain Contributions
3.03 Profit-Sharing
3.04 Expenses
3.05 Exercise of Voting Rights
3.06 New Issue of Shares
3.07 Loyalty
3.07.01 Conflict of Interest
3.07.02 Business Opportunities
3.08 Confidential Information
3.08.01 Undertaking
3.08.02 Notice
3.09 Non-Competition
3.09.01 Scope of Undertaking
(a) Territory
(b) Prohibited Activities
(c) Period of Prohibition
3.09.02 Exceptions
(a) Incomplete Payment of Sale Price
(b) Investments
3.09.03 Breach of Undertaking
(a) Penalty
(i) Amount
(ii) Payment
(b) Other Remedies
(c) Effect of Breach on Sale Price
(d) Subrogation
3.09.04 Assignment of Rights
(a) Internal Reorganization
(b) Amalgamation
3.09.05 Representation
3.10 Intellectual Property
3.11 No Controlling Position
3.12 Assignment of Shares
3.13 Indemnification
3.14 Exercise of Rights
4.00 MUTUAL REPRESENTATIONS AND WARRANTIES
4.01 Civil Status and Matrimonial Regime
4.02 Status
4.03 Authority
4.04 Binding Agreement
4.05 Canadian Resident
4.06 Canadian Status
4.07 Nominee
4.08 Disclosure
4.09 Legal Proceedings
5.00 WITHDRAWAL OF A SHAREHOLDER
5.01 Voluntary Withdrawal
5.01.01 Application
5.01.02 First Right to Purchase
(a) Notice
(b) Good Faith
(c) Consideration
(d) Proportion
(e) Response
5.01.03 Second Right to Purchase
(a) Notice
(b) Proportion
(c) Response
(d) Condition Precedent
5.01.04 Refusal
(a) Right to Sell
(b) Waiver
(c) Different Terms
5.01.05 Closing
5.01.06 Terms and Conditions of Payment
(a) Payment of Sale Price
(b) Interest
(c) Due Date
(d) Pre-Payment
(e) Loss of Term
(f) Shares in Escrow
(g) Restrictions on Use of Corporate Funds
(h) Reimbursement and Discharge
(i) Promissory Note
(j) Reimbursing Legal Fees
(k) Solidarily Liable
5.01.07 Penalty
5.02 Forced Withdrawal
5.02.01 Application
5.02.02 Triggering Events
5.02.03 First Right to Purchase
(a) Entirety of Shares
(b) Proportion
(c) Time Limit
5.02.04 Second Option to Purchase
(a) Entirety of Shares
(b) Proportion
(c) Time Limit
5.02.05 Applicable Rules
(a) Deemed Sale
(b) Authorization
5.02.06 Calculating Start Dates
(a) Bankruptcy, Incapacity and Seizure
(b) Criminal Sentence
(c) Resignation, Withdrawal from Business or Dismissal
(d) Absentee SHAREHOLDER
(e) Change in Control and Competition
(f) Disability
5.02.07 Closing Session
5.02.08 Sale Price
5.02.09 Terms and Conditions of Payment
(a) Initial Payment
(b) Other Applicable Terms
(c) Assignment to CORPORATION
5.03 Dispute (Shotgun Procedure)
5.03.01 Application
5.03.02 Procedure
(a) “SHAREHOLDER”
(b) Offer to Purchase
(c) Restrictions on Time Limits
5.03.03 Financial Guarantees
(a) “Financial Obligations”
(b) Letter of Credit
(c) Releases
(d) Rejection
5.03.04 Time Limit
5.03.05 Deemed Acceptance
5.03.06 Formal Acceptance
5.03.07 Rejection of the Offer
(a) Presumption of Purchase
(b) Pricing, Terms and Conditions
(c) Proportion
5.03.08 Dissent
(a) Majority
(b) Deemed Acceptance
(c) Deemed Refusal
5.03.09 Further Assurances and Penalty
5.03.10 Liquidation and Dissolution
5.04 Terms and Conditions Applicable to Any Sale
5.04.01 Application of the Agreement
5.04.02 Release, Discharge and Indemnification
5.04.03 Resale or Re-issuance of Shares
(a) Remittance of Profit
(b) Notification by CORPORATION
5.05 Pre-Authorized Transfers
5.05.01 Personal Holding Corporation
(a) Intervention in Agreement
(b) Control
5.05.02 Trust
5.06 Acquisition of Shares by CORPORATION
6.00 TAKE-OVER BID
6.01 Terms and Conditions
6.01.01 Undertaking
6.01.02 Required Content
6.02 Procedure
6.02.01 Application
6.02.02 Notice of Acceptance and Disclosure of Offer
6.02.03 Reply
6.02.04 Notice to Escrow Agent
6.02.05 Amendment of Offer
7.00 DEATH OF A SHAREHOLDER
7.01 Procedure
7.01.01 Application
7.01.02 Sale Subject to Condition Precedent
(a) Deemed Sale
(b) Proportion
(c) Closure of Sale
7.01.03 Overriding Transmission
7.01.04 Non-Application of Subsection 7.01.03
7.02 Terms and Conditions of Payment
7.02.01 Initial Instalment
(a) Sufficiency of Insurance Proceeds
(b) Insufficiency of Insurance Proceeds
(c) Declaration of Dividend
(d) Allocation and Tax Choice
(e) No Insurance Proceeds
7.02.02 Balance
7.02.03 Interest
7.02.04 Expiry of Term
7.02.05 Pre-Payment
7.02.06 Acceleration of Payments
7.03 Protection
7.03.01 Shares Placed in Escrow
(a) Purpose
(b) Default by Surviving Shareholder
7.03.02 Subsequent Disbursements of Funds
7.03.03 Repayment and Release and Discharge
7.03.04 Promissory Note
7.03.05 Fees and Disbursements
7.03.06 Solidarily Liable
7.04 Two or More Deaths
7.05 Further Assurances
7.06 Acquisition of Shares by CORPORATION
7.06.01 Conditions
7.06.02 Pricing
7.06.03 Tax Considerations
7.06.04 Suretyship
7.06.05 Terms of Payment
7.06.06 Default by CORPORATION
8.00 FINANCING
8.01 Life Insurance
8.01.01 Undertaking by CORPORATION
8.01.02 Consent of SHAREHOLDERS
8.02 Obligations of CORPORATION
8.02.01 Insurance Premiums
8.02.02 Prohibition
8.02.03 Additional Protection
8.02.04 Death of a SHAREHOLDER
8.02.05 Escrow Agent
8.03 Transfer of Policies
8.03.01 Change of Owner/Beneficiary
8.03.02 Inter vivos Sale
8.03.03 Termination of Agreement
8.04 Disclosure
8.05 Excess Coverage
8.06 Election
9.00 VALUATION OF SHARES
9.01 General Rule
9.01.01 Sale Upon Death
9.01.02 Voluntary Sale
9.01.03 Forced Withdrawal
9.01.04 Justification of Separate Values [optional clause]
9.02 Determination of Initial Value
9.03 Determination of Current Value
9.03.01 Reassessment by SHAREHOLDERS
9.03.02 Dissent
9.04 Alternative Value Determination
9.04.01 Application
9.04.02 Appraiser
9.04.03 Arbitration
(a) Appointment
(b) Time Limit
(c) Costs
9.05 Prohibition
9.06 Administrative Reassessment
10.00 ESCROW AGENT
10.01 Appointment
10.01.01 Undertaking and Identification
10.01.02 Resignation
10.01.03 Removal
10.01.04 Replacement
10.01.05 Compensation
(a) Lump Sum
(b) Hourly Rate
(c) Payment of Costs
10.01.06 Performance Bond
10.01.07 Delivery
(a) Share Certificates
(b) Additional Certificates
(c) Registration
(d) Undertaking to Sign
10.02 General Duties
10.03 Specific Duties
10.03.01 Sale Upon Death
10.03.02 Power of Attorney
10.03.03 Dispute between the SHAREHOLDERS
10.03.04 Rights Relating to Shares
10.04 Limitation of Escrow Agent’s Liability
10.05 End of Agreement
10.06 Ownership
11.00 SPECIAL PROVISIONS
11.01 Assignment
11.02 Suspension of Rights
11.03 Force Majeure
11.03.01 No Default
11.03.02 Duty
11.03.03 Rights of Other SHAREHOLDER
12.00 GENERAL PROVISIONS
12.01 Notice
12.02 Dispute Resolution
12.02.01 Good Faith Negotiations
12.02.02 Mediation
(a) Procedure
(b) Mediator
(c) Settlement
(d) Legal Proceeding [OR Arbitration]
12.02.03 Arbitration
(a) Notice
(b) Reply
(c) Appointment of Third Arbitrator
(d) Confidentiality
(e) Hearing
(f) Ruling
(g) Costs
(h) Supplementary Rules
(i) Arbitrator’s Power
12.03 Choice of Forum
12.04 Counterparts
12.05 Amendment
12.06 No Waiver of Rights
12.07 Electronic Transmission
13.00 TERMINATION
13.01 Without Notice
13.02 Liquidation
13.02.01 Appointment of a Liquidator
13.02.02 Duties of Liquidator
13.02.03 Tasks of Liquidator
13.02.04 Compensation of Liquidator
14.00 EFFECTIVE DATE
15.00 DURATION
15.01 Initial Term
15.01.01 Automatic Renewal
15.02 Survival
15.03 Dissolution
16.00 SCOPE
16.01 Prior Agreement
16.02 Transfer

SCHEDULE A (A1 to A…) – EXCERPT OF A RESOLUTION BY A CORPORATE SHAREHOLDER
SCHEDULE B – EXCERPT OF A RESOLUTION OF THE CORPORATION
SCHEDULES C (C1 to C…) – DECLARATION OF SHAREHOLDER “…”
SCHEDULE 0.01.11 – DISABILITY INSURANCE POLICY
SCHEDULE 0.01.28 – INTERVENTION BY AN INTERESTED PERSON
SCHEDULE 2.01.04 – LIABILITY INSURANCE POLICIES
SCHEDULE 3.03 – EMPLOYMENT INCOME
SCHEDULE 4.01 – INTERVENTION BY THE SPOUSE OF A SHAREHOLDER
SCHEDULE 8.01 – LIFE INSURANCE POLICIES
SCHEDULE 9.01.01 – VALUATION OF SHARES – SALE UPON DEATH
SCHEDULE 9.01.02 – VALUATION OF SHARES – VOLUNTARY OR INVOLUNTARY SALE
SCHEDULE 10.01.01 – INTERVENTION BY THE ESCROW AGENT