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Shareholders' Agreements

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Whenever a new company is established with more than one shareholder, it is wise to set up a shareholders' agreement. In addition, it should be updated when an additional shareholder is brought in and when there are changes in income tax provisions, family law and changes in the nature of the business operations. The agreement should be set up with the assistance of a lawyer and a Canadian Chartered Accountant. There are many reasons to set up a shareholders' agreement, but the primary one is to prevent shareholder disputes from arising later on that could be disruptive to the normal course of business operations. Such disputes are avoided by defining in advance the terms of many often-disputed areas, such as the following:

  • who can contract on behalf of the company
  • salaries and bonuses to owners
  • limitations on borrowings and giving security
  • limitations on capital expenditures without approval
  • restrictions on transfer of shares to other persons, and approval required for any new shareholders
  • any new shareholders must sign the agreement
  • non-competition clause
  • requirement for disability insurance
  • clause to ensure that spouses do not become shareholders or disrupt business operations
  • clause allowing formation of holding company
  • buy-sell provisions, re buying out other partner

Please contact Simkover and Associates at 905-943-4046 if you need further accounting services or advice in relation to this topic.Click here for additional contact information

Shareholders' agreements | Simkover and Associates Chartered Accountants

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