A Unanimous Shareholders Agreement (“USA”) is a written agreement between a corporation and all of its shareholders that sets out the manner in which the corporation will be managed and governed. It sets out the rules and procedures to be followed by the corporation with the intent of reducing the potential for disputes. It is also used by Shareholders for estate and tax planning purposes.
A USA is an extremely important document where there is more than one shareholder in a corporation (and sometimes even where there is only one shareholder). Some of the objectives of a USA include:
1) Fettering Directors’ powers and giving certain powers back to the Shareholders;
2) Establishing procedures for making distributions (e.g. profit sharing and dividends);
3) Providing exit strategies for Shareholders and regulating the transfer of shares;
4) Planning for death and/or disability of a Shareholder;
5) Estate and tax planning for Shareholders;
6) Regulating the rights and liabilities of Shareholders, including minority Shareholders;
7) Governing the management of the corporation; and
8) Providing mechanisms to resolve disputes between Shareholders.
This is not an exhaustive list but gives an idea of the sorts of topics that would be addressed in a typical USA. A USA is not a “template” document and careful consideration should be given to its preparation. The inclusion of various provisions can have significant legal and tax consequences. Therefore, it is important for corporations and shareholders to seek proper legal and tax advice prior to executing a USA.
At KH/Dunkley Law Group, we take the time to understand our clients’ business so as to provide proper legal advice and to ensure that we prepare a USA catered to the unique nature of each particular corporation. We work closely with our clients’ accountants and tax advisors, where needed with respect to estate and tax planning, in the preparation of USAs.
Please contact our office if you wish to discuss how KH/Dunkley Law Group can assist your corporation in preparing a suitable USA.
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.