Alberta’s dynamic business landscape offers significant opportunities, and a unanimous shareholders agreement (USA) empowers corporations to navigate it with greater clarity and confidence. This valuable corporate legal tool proactively establishes a strong corporate governance and dispute resolution framework, minimizing the potential for conflicts, shareholder deadlock, and disruptive departures.
Particularly beneficial for private corporations, family enterprises, and companies with multiple shareholders, a well-drafted USA can safeguard shareholder interests, foster internal harmony, and clarify directors’ and shareholders’ roles and responsibilities. While not legally mandated, it may be worth consulting legal counsel to see if a USA is right for your business.
What Is a Unanimous Shareholders Agreement?
A unanimous shareholders agreement (USA) is a private contract entered into by all the shareholders of a corporation. It outlines how the corporation will be governed, how major decisions will be made, and how shares may be sold, transferred, or inherited. In legal terms, a USA can restrict or remove certain powers from the board of directors and assign those powers directly to the shareholders.
Under section 146 of the Canada Business Corporations Act (CBCA) and mirrored provisions in the Alberta Business Corporations Act (ABCA), a USA must be signed by all shareholders to be enforceable. It effectively becomes part of the internal constitution of the corporation. Any person who later becomes a shareholder is automatically bound by the USA, even if they did not sign it.
A USA can override or supplement the corporation’s bylaws and the default rules set out in the ABCA, giving shareholders the flexibility to tailor governance according to the needs of their business.
Why Should You Consider a Unanimous Shareholders Agreement?
Although the USA may not be the right answer for every business, it could bring some benefits to your business.
Clear Governance Structure
Many small and mid-sized corporations in Alberta rely on informal understandings between shareholders. These arrangements may work initially, but often break down when disagreements arise. A USA formalizes governance rules, reducing ambiguity and ensuring that all shareholders have a clear understanding of their rights and obligations.
Dispute Prevention & Resolution
Without a USA, internal disputes could escalate to costly litigation. A well-drafted USA includes dispute resolution mechanisms such as mediation or arbitration clauses. These mechanisms provide a clear, private, and cost-effective path to resolving shareholder disagreements.
Share Transfer Restrictions
A USA can prevent unwanted third parties from acquiring shares by establishing conditions for transfers. For example, it may require a shareholder who wishes to sell their shares to first offer them to existing shareholders.
Protection for Minority Shareholders
In the absence of protective provisions, minority shareholders may have little influence over key decisions. A USA can provide minority shareholders with veto rights on fundamental issues, such as mergers or significant asset sales, which helps maintain balance and fairness in governance.
Succession & Exit Planning
Shareholder exits, whether through retirement, death, or voluntary sale, can destabilize a business. A USA anticipates these scenarios and includes buy-sell provisions that establish how shares will be valued and transferred. This ensures continuity of operations.
Key Provisions to Include in a Unanimous Shareholders Agreement
Though every corporation is unique, certain provisions are commonly included in Alberta-based USAs:
- Voting thresholds for key decisions (e.g., unanimous, two-thirds, simple majority)
- Pre-emptive rights allow existing shareholders to maintain their ownership percentage
- Share valuation formulas for voluntary or involuntary exits
- Drag-along and tag-along rights for sale scenarios
- Non-compete and confidentiality clauses to protect business interests
- Funding obligations or capital call provisions
- Mandatory mediation/arbitration for dispute resolution
These terms should be tailored to the corporation’s size, industry, and structure.
Legal Implications of a Unanimous Shareholders Agreement
Shareholders who sign a USA and assume powers typically held by the directors may also assume associated liabilities.
Additionally, a USA binds not only current shareholders but also future ones. Any purchaser of shares automatically becomes a party to the agreement. This continuity strengthens its enforceability but requires periodic review to ensure it remains appropriate for the evolving shareholder structure.
All USAs must comply with the Alberta Business Corporations Act and other applicable federal and provincial regulations. An improperly drafted agreement may be declared void or unenforceable.
When Is a Unanimous Shareholders Agreement Essential?
While any corporation with more than one shareholder can benefit from a USA, it may become important in the following circumstances:
- Family-owned businesses with complex dynamics or succession issues
- Startups with investors, multiple founders, or plans for future financing
- Professional corporations (e.g., legal, accounting, medical practices) with licensing and income-sharing requirements
- Businesses with different classes of shares, especially where voting rights or dividend entitlements vary
- Corporations entering joint ventures or strategic partnerships
Steps to Implement a Unanimous Shareholders Agreement in Alberta
- Engage legal counsel: Retain a corporate lawyer experienced in Alberta law. The agreement must reflect your corporation’s structure, needs, and legal obligations.
- Involve shareholders: Participation from shareholders is recommended to ensure mutual understanding of the USA.
- Draft and review: Your legal counsel will draft a customized agreement. All shareholders should carefully review the document and seek clarification on any unclear terms.
- Execute the agreement: Once all parties agree, they must sign the document for it to be enforceable. It is recommended that each shareholder seek independent legal advice prior to signing.
- Maintain and update: Periodically review the USA to ensure that it reflects the corporation’s objectives. Revisions may be required following major changes.
We Can Help
A unanimous shareholders’ agreement is not just a legal formality. It is a foundational document that supports the long-term health and success of a corporation. At KH | Dunkley Law Group, we can help you build a strong unanimous shareholders’ agreement to protect your business’s future. Contact us to schedule a consultation and discover how we can help your business.
This memorandum is for informational purposes only, does not constitute legal advice or an opinion, and does not create a solicitor-client relationship. This is an overview and is not intended to be a complete and exhaustive explanation of the concepts covered. This information may become inaccurate based on passage of time or changes in the law. Nothing herein should be relied upon without seeking the advice of a lawyer.
