A Company with two or more shareholders should have a Shareholders’ Agreement. The Shareholders' Agreement provides a framework to navigate within regarding the shareholder's rights and obligations, and the protection of the interests of all the shareholders in the event of changing circumstances.
The agreement should provide guidelines about how the ownership of the company will operate, including an outline of the funding of share transfers, management rights, dividend policies and details of how equity will be provided to employees. As well as setting parameters for company operations, the overview helps guide shareholders through issues not dealt with elsewhere in the agreement.
Some other key considerations to include in a shareholders’ agreement for your company:
How are the Company’s shares valued? This price is critical to a wide range of actions, including issuing new shares and shareholder sales. There are several valuation methods such as capitalisation of earnings, discounted cashflows and net tangible assets. All are subjective – different external valuers can come up with different valuations of the same company, so the agreement should specify an agreed methodology.
Did you know there are several exit strategies available for shareholders to buy and sell their shares? Setting out formal processes that govern how shareholders can exit the business and at what price, can remove a major source of contention in private company ownership. The sale process should give existing shareholders pre-emptive rights to purchase the stake before it can be sold to an outsider using the valuation method set out in the agreement. Should the partners refuse this “first right” to buy, then the selling partner can then find a third-party buyer at the same (or higher) asking price.
What happens in the event of death or disability? How are the Shares handled? How do existing partners protect the company? The shareholder agreement can ensure shareholders are able to afford to purchase the stakes of co-owners in the event of death or disability, by funding such a sale through linked life and trauma insurance. The death of an owner can cause problems for private companies – relatives may wish to realise inherited company shareholdings, thus requiring other shareholders to raise finance or face the prospect of the stake being sold to an outsider. The shareholder agreement can stipulate that each owner should take out life and trauma insurance to the benefit of other shareholders, which then provides finance to buy the stake in event of death.
How are Dividends Paid? Set out how often dividends will be paid and how their value will be determined (e.g., as a percentage of net profits). The agreement should say when they are not to be paid – such as when working capital is required and liquidity ratios have fallen below a threshold.
What happens when you cannot agree? The Agreement doesn’t handle your particular problem? Although the agreement should stem most possible sources of conflict between shareholders, it should also anticipate that owners may disagree occasionally and provide a mechanism to resolve differences. The most common approach is to nominate a third-party mediator.
We’ve only discussed a few considerations when putting together your company’s shareholders’ agreement. Let’s discuss in detail: call our offices 905-456-9969 or email ruby@rutmanlaw.com.
The most overwhelming part for a working pregnant woman is figuring out maternity leave. With so many rules, pay details, and important deadlines to keep track of, it’s easy to feel a bit lost. However, knowing everything about maternity leave in Ontario, Canada, can make the process much easier and less stressful. From your rights under the Employment Standards Act to ensuring you get the maternity benefits you’re entitled to, we’ll help you with every step! What is Maternity Leave in Ontario? In Ontario, “maternity leave” is formally known as pregnancy leave under provincial law. It is a job-protected leave of absence for employees who are pregnant or have recently given birth. It’s protected by the law through the Ontario Employment Standards Act (ESA), but it doesn’t pay you. There are two systems you need to know about: Ontario ESA – This makes sure your job is secure while you're...
Read MoreAt times, an illness or injury can stop you from working. Not only is it a matter of concern in terms of health, but also the financial stress that follows. The instability can make it difficult to manage everyday expenses like rent, groceries, and bills. While some employees may rely on paid sick days offered by their employer, longer medical leaves may require additional financial support. Fortunately, the residents of Canada have access to support programs designed to help during such times. One of these is EI Sickness Benefits, which provides temporary financial assistance to individuals who are unable to work due to a medical condition while they focus on recovery. By the end of this guide, you will know What EI sickness benefits are Who qualifies How much you may receive, and The steps involved in applying What Are EI Sickness Benefits? EI sickness benefits are a type of...
Read MoreLosing someone close to you is one of the hardest experiences in life. During this sad time, focusing on work becomes challenging. That’s why bereavement leave exists. It gives employees the time and space they need to grieve, attend funeral arrangements, and be with their families. In Ontario, bereavement leave is protected under the Employment Standards Act (ESA). There is so much you must know about this leave policy, so this guide covers: What is a bereavement leave Who qualifies for the leave If it is a paid or unpaid leave, and more When you know these details, you can properly determine if you are getting all the rights and entitlements from your employer. What is a Bereavement Leave in Ontario? Bereavement leave is a job-protected, unpaid leave for employees to help them heal after the sudden death of a family member. During this time, they can attend funeral services,...
Read More
The most overwhelming part for a working pregnant woman is figuring out maternity leave. With so many rules, pay details, and important deadlines to keep track of, it’s easy to feel a bit lost. However, knowing everything about maternity leave in Ontario, Canada, can make the process much easier and less stressful. From your rights under the Employment Standards Act to ensuring you get the maternity benefits you’re entitled to, we’ll help you with every step! What is Maternity Leave in Ontario? In Ontario, “maternity leave” is formally known as pregnancy leave under provincial law. It is a job-protected leave of absence for employees who are pregnant or have recently given birth. It’s protected by the law through the Ontario Employment Standards Act (ESA), but it doesn’t pay you. There are two systems you need to know about: Ontario ESA – This makes sure your job is secure while you're...
Read More
At times, an illness or injury can stop you from working. Not only is it a matter of concern in terms of health, but also the financial stress that follows. The instability can make it difficult to manage everyday expenses like rent, groceries, and bills. While some employees may rely on paid sick days offered by their employer, longer medical leaves may require additional financial support. Fortunately, the residents of Canada have access to support programs designed to help during such times. One of these is EI Sickness Benefits, which provides temporary financial assistance to individuals who are unable to work due to a medical condition while they focus on recovery. By the end of this guide, you will know What EI sickness benefits are Who qualifies How much you may receive, and The steps involved in applying What Are EI Sickness Benefits? EI sickness benefits are a type of...
Read More
Losing someone close to you is one of the hardest experiences in life. During this sad time, focusing on work becomes challenging. That’s why bereavement leave exists. It gives employees the time and space they need to grieve, attend funeral arrangements, and be with their families. In Ontario, bereavement leave is protected under the Employment Standards Act (ESA). There is so much you must know about this leave policy, so this guide covers: What is a bereavement leave Who qualifies for the leave If it is a paid or unpaid leave, and more When you know these details, you can properly determine if you are getting all the rights and entitlements from your employer. What is a Bereavement Leave in Ontario? Bereavement leave is a job-protected, unpaid leave for employees to help them heal after the sudden death of a family member. During this time, they can attend funeral services,...
Read More
Are you stuck with a legal issue? Don't navigate the complexities alone! Turn to our top-rated lawyers for expert guidance and support, ensuring you make informed decisions every step of the way!
call us: 