Shareholders' Agreement
Lawyer Toronto.
Drafting, reviewing, and negotiating shareholders' agreements for Ontario corporations. Protect your investment, your rights, and your exit — before a dispute arises.
· Reviewed by Jonathan Kleiman, J.D.
Ontario Bar
200+ reviews
consultation
Why every multi-shareholder corporation needs this agreement
A shareholders' agreement is a private contract between the shareholders of a corporation. It governs the issues that the Ontario Business Corporations Act does not adequately address — decision-making, profit distribution, share transfers, and what happens when a shareholder wants out.
Without one, disputes between shareholders are governed by the OBCA's default rules, which rarely reflect what the parties actually intended. The result is deadlock, litigation, or both.
If your corporation has more than one shareholder — whether a co-founder, investor, family member, or key employee — a shareholders' agreement is not optional. It is the single most important document your business will sign.
What a shareholders' agreement covers
The following provisions are standard in most shareholders' agreements. For a comprehensive walkthrough of each clause, see our guide on what to include in a shareholders' agreement.
Share transfer restrictions
Controls who can own shares. Includes right of first refusal (existing shareholders get the first opportunity to buy), tag-along rights (minority shareholders can join a sale on the same terms), and drag-along rights (majority shareholders can compel minority shareholders to sell).
Buy-sell provisions
Defines how shares are valued and transferred when a shareholder dies, becomes disabled, retires, or wants to exit. Common mechanisms include shotgun clauses (one shareholder names a price; the other must buy or sell at that price) and put/call options.
Decision-making and governance
Specifies how decisions are made — board composition, voting thresholds, and reserved matters that require unanimous consent (such as taking on debt, issuing new shares, or selling the business).
Dividend and distribution policy
Sets out when and how profits are distributed to shareholders, preventing disputes about whether to reinvest or pay dividends.
Non-competition and confidentiality
Prevents shareholders from competing with the business or disclosing confidential information during and after their involvement.
Dispute resolution
Establishes the process for resolving disagreements — mediation, arbitration, or litigation — before a dispute escalates.
Death, disability, and departure
Addresses what happens to shares when a shareholder can no longer participate. Often paired with life insurance and disability insurance to fund the buyout.
Need a shareholders' agreement drafted or reviewed?
Free 30-minute consultation. No fee, no obligation.
When you need a shareholders' agreement
- Starting a business with a co-founder — define the rules before money and ego complicate the relationship
- Bringing in an investor — protect both the investor's capital and the founder's control
- Adding a key employee as a shareholder — structure the equity incentive with proper vesting and exit terms
- Running a family business — separate family dynamics from business governance
- Buying into an existing business — understand your rights and restrictions before you invest
- Resolving an existing dispute — sometimes the best time to create an agreement is in the middle of a disagreement, when the consequences of not having one are clear
What happens without a shareholders' agreement
Without a shareholders' agreement, the OBCA's default rules apply. Those defaults may not align with what you expect:
- Any shareholder can potentially transfer their shares to a stranger
- There is no mandatory buyout mechanism when a shareholder wants out
- Deadlock has no built-in resolution mechanism beyond going to court
- Minority shareholders have limited protection against oppressive conduct by the majority
- There are no built-in non-compete or confidentiality protections
Shareholder disputes are among the most expensive and disruptive forms of business litigation. A properly drafted shareholders' agreement prevents the vast majority of them.
The best time to negotiate a shareholders' agreement is when everyone is getting along. The worst time is when they are not.
Jonathan Kleiman — shareholders' agreement lawyer in Toronto
Jonathan Kleiman drafts, reviews, and negotiates shareholders' agreements for Ontario corporations of every size — from two-person startups to multi-shareholder family businesses.
- Free 30-minute consultation — assess your situation and get a clear recommendation
- Drafting — custom shareholders' agreements tailored to your business, your shareholders, and your goals
- Review — independent review of an existing agreement or a draft provided by the other side
- Negotiation — representing your interests in multi-party negotiations
- Amendments — updating existing agreements when circumstances change
- Flat-fee pricing — quoted before work begins
Call 416-554-1639 or book a free consultation. For a detailed overview of key provisions, see our complete shareholders' agreement checklist.
FAQs.
Common questions about shareholders' agreements in Ontario.
01What is a shareholders' agreement?
A shareholders' agreement is a private contract between the shareholders of a corporation that governs their relationship, rights, and obligations — including decision-making, dividends, share transfers, and exit.
02Do I need a shareholders' agreement?
If your corporation has more than one shareholder, yes. Without one, disputes are governed by the OBCA's default rules — which rarely reflect what the shareholders actually intended.
03What should a shareholders' agreement include?
Key provisions include share transfer restrictions, buy-sell mechanisms, decision-making rules, dividend policy, non-competition and confidentiality obligations, dispute resolution, and provisions for death, disability, or departure.
04How much does a shareholders' agreement cost?
Jonathan offers flat-fee shareholders' agreement drafting and review. The fee is quoted before work begins, and the initial 30-minute consultation is free.
05Can a shareholders' agreement be changed after it is signed?
Yes, with the consent of all shareholders (or a specified majority). Amendments should be documented in writing and signed by the required parties.
Protect your investment.
A shareholders' agreement is the most important document your business will sign. Free 30-minute consultation with a Toronto business lawyer.