The Importance of Shareholders’ Agreements

If you are considering establishing, buying into, or bringing a new shareholder into, an incorporated business, we strongly suggest that you get a shareholders’ agreement at the outset of the relationship. Shareholders’ agreements, among other things, set out how key business decisions are to be made, define how the shares of the company are to be valued, and perhaps most importantly provide mechanisms to protect each shareholder’s interests and provide for the transferability and liquidity of the company’s shares.

There are many practical matters which are often set out in a shareholders’ agreement that can facilitate a better relationship among shareholders of a private corporation. We encourage prospective shareholders to discuss setting up a shareholders agreement with their lawyer.