Canada: A Brief Introduction To Unanimous Shareholder Agreements

Last Updated: June 16 2016
Article by Shanlee Von Vegesack


Every corporation is governed by corporate legislation (such as the Business Corporations Act (Alberta)), articles of incorporation and by-laws. These documents cover the basic rules and procedures by which a corporation is governed. However, there may be instances where shareholders will want to agree on matters beyond the scope of the legislation and constating documents of the corporation. A shareholder agreement will allow shareholders to do this – it is an agreement in which the shareholders define their obligations between themselves and it governs shareholders' behavior in certain circumstances. A unanimous shareholder agreement ("USA") is a specific type of shareholder agreement that (i) is signed by all shareholders at the time it is first signed; (ii) binds future shareholders whether or not they sign; and (iii) removes, in whole or in part, the duties and powers from the directors of the corporation to the extent shareholders assume them.

Why Adopt a Unanimous Shareholder Agreement?

Share ownership in a corporation brings about certain risks to shareholders; a USA can help to minimize and manage these risks. In addition to numerous other considerations, if there is a significant shareholder in a corporation, then it may be advantageous to smaller shareholders to negotiate a USA. For example a minority shareholder investing significant capital may want certain protections from the significant or majority shareholder. A USA can be a useful mechanism in preventing disputes between shareholders in the future. If a dispute does arise, a USA may drastically reduce the costs of such dispute.

Key Provisions

  • Governance, Management & Control Provisions: The governance section of the USA will set out provisions dealing with various matters related to the board of directors and its committees, as well as shareholder approvals of certain actions. USAs may dictate specific guidelines for the selection of the board of directors as well the removal of individual directors from the board. As an example, a minority shareholder may want to be assured of a board seat if she invests. She can ask all shareholders to agree to this in a USA. Shareholders may negotiate for additional protections in the USA such as requiring super-majority or unanimous voting on certain significant matters or expanding the list of actions that require shareholder consent.
  • Financing: These provisions may set out how the corporation's annual budget is to be determined and how it will be funded in the early years. If all shareholders are expected to participate in funding early stage development, the ability to make cash calls may be needed. This is a sensitive issue and would need to be considered carefully.
  • Pre-Emptive Rights: This right requires the corporation to first offer shares to existing shareholders when it issues new shares. This mechanism can help shareholders avoid dilution.
  • Right of First Offer: This right requires a shareholder to offer its shares to the other existing shareholders before offering to sell to third parties.
  • Right of First Refusal: This right requires the selling shareholder to offer to sell the shares to the other existing shareholders after receiving a bona fide offer from a third party, and on the same terms as that third party offer.
  • Piggyback/Tag-Along Rights: These rights are designed to protect minority shareholders. They typically provide that, if a majority shareholder sells all or some portion of her shares, the other shareholders must be allowed to participate in the sale on a pro rata basis and on the same terms as the majority shareholder.
  • Drag-Along Rights: As opposed to piggyback/tag-along rights, these rights are designed to protect the majority interest. They typically allow a majority shareholder selling all of her shares to a third party to force the minority shareholders to sell all of their shares as well. Such a mechanism may enable the majority shareholder to command a greater premium for all the shares.
  • Buy-Sell Provisions: These provisions describe certain triggering events for circumstances where the shareholders either may, or must, purchase or sell shares from each other. Common examples of triggering events would be: death or disability, termination of employment, fraud, insolvency, breach of the USA or an irresolvable shareholder disagreement over the operation of the business.
  • Shotgun Provisions: These provisions are exit provisions and relatively blunt instruments, and allow a shareholder to offer to buy all of the shares held by another shareholder at a specified price per share. The other shareholder may then either choose to sell their shares at the offered price, or instead to buy all of the offeror's shares at that same price per share (ensuring that only one party is left with a position in the corporation). These can work well between shareholders with relatively equal bargaining positions, but can disadvantage a financially weaker shareholder. If the price is high the weaker shareholder may not be able to raise the purchase price and might be forced to sell.
  • Valuation Provisions: Valuation provisions are critical in respect of any buy-sell provisions contained in the USA. Common methods for valuing transferred shares include setting an agreed price at the outset, mutual agreement of the parties, establishing a formula and obtaining a valuation from an independent third party.
  • Confidentiality of Information: This provision protects against unauthorized disclosures of confidential information by the shareholders. It is particularly useful when the shareholders are also key employees of the corporation and have access to sensitive information.
  • Non-Competition and Non-Solicitation: These provisions restrict the shareholders' ability to compete with the corporation or solicit employees away from the corporation for a fixed period. These provisions are likely to apply to shareholders differently depending on their level of involvement with the corporation. As above, key employees will likely be subject to stricter provisions.
  • Dispute Resolution: These provisions provide mechanisms for resolving various disputes. Depending on the dispute contemplated, the various mechanisms may include a unilateral decision made by one of the parties, negotiation, mediation, arbitration, and buy-sell/shot-gun clauses. Buy-sell/shot-gun clauses consist of an offer by one shareholder to another to purchase all of the other shareholder's shares for a given price.

Tailoring Your USA

The terms of a USA are driven by the unique needs of the parties and must be tailored to address the particular risks and objectives of those parties. The USA should anticipate reasonably likely events in the future as well as provide flexibility for dealing with unforeseen events. Several aspects will need to be discussed and negotiated at the outset, such as the nature and composition of the board, division of management between the board and shareholders and amongst shareholders, exit rights and other restrictions on share sales and the terms of any governing documents that are already in place.

While negotiating a USA may be challenging, it is often easier to negotiate fair provisions for foreseeable issues at the outset than to do so once the event has occurred.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.