
SHAREHOLDERS' AGREEMENT
Shareholders' agreement
Protecting shareholders and their families
The shareholders' agreement is essential to anticipate unforeseen events and defend the interests of the owners and their loved ones. It also guarantees the ability to monetize the value of the company when needed.
Shareholder Disability: An Often Overlooked Risk
Prolonged disability of a shareholder can create tensions. A disability buyout clause, funded by insurance, protects the company by buying back the shares without affecting its assets.
Estate Planning and Stock Buybacks
A buy-out clause clarifies how shares will be managed in the event of death. This ensures control by the remaining shareholders and provides heirs with a fair market value. These provisions should be aligned with each shareholder's estate plan.
Active contribution and shareholder conflicts
Least effort: A clause allows the shares of an inactive shareholder to be bought out to preserve the balance.
Shotgun clause: Resolves disputes quickly by requiring shareholders to sell or buy the offered shares at a specified price.
Sale of shares and tax exemption
The agreement should specify the terms of sale and include mechanisms for determining fair market value. It can also optimize tax benefits, such as the cumulative capital gains exemption.
Review and structure of the company
An agreement should be updated after changes in the company structure, such as an estate freeze or the addition of shareholders. It should also include a clear valuation method to avoid disagreements during transactions.
Tax possibilities and restrictions
The agreement must take into account:
Tax residence and citizenship of shareholders.
Family ties as defined by the Income Tax Act.
Mechanisms to minimize tax losses, particularly with life insurance for share buybacks.
Personal planning and strategy
Shareholders should align their wills and powers of attorney with the provisions of the agreement, consulting legal advisors to optimize their personal plan.
Business emergency plan
Although separate from the agreement, a contingency plan ensures the continuity of operations in the event of the death or disability of a key executive. Life insurance for these employees can help maintain the stability of the business.
A good shareholders' agreement takes into account the economic, legal and personal situation of the parties, as well as the specificities of the company. Consult Twin Lisbet for tailored advice and the drafting of your agreement.
