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.
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.
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.
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).
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.
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).
Sets out when and how profits are distributed to shareholders, preventing disputes about whether to reinvest or pay dividends.
Prevents shareholders from competing with the business or disclosing confidential information during and after their involvement.
Establishes the process for resolving disagreements — mediation, arbitration, or litigation — before a dispute escalates.
Addresses what happens to shares when a shareholder can no longer participate. Often paired with life insurance and disability insurance to fund the buyout.
Free 30-minute consultation. No fee, no obligation.
Without a shareholders' agreement, the OBCA's default rules apply. Those defaults may not align with what you expect:
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 drafts, reviews, and negotiates shareholders' agreements for Ontario corporations of every size — from two-person startups to multi-shareholder family businesses.
Call 416-554-1639 or book a free consultation. For a detailed overview of key provisions, see our complete shareholders' agreement checklist.
Common questions about shareholders' agreements in Ontario.
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.
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.
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.
Jonathan offers flat-fee shareholders' agreement drafting and review. The fee is quoted before work begins, and the initial 30-minute consultation is free.
Yes, with the consent of all shareholders (or a specified majority). Amendments should be documented in writing and signed by the required parties.
A shareholders' agreement is the most important document your business will sign. Free 30-minute consultation with a Toronto business lawyer.