Shareholder agreements are a wise choice!
A shareholder agreement is a written agreement that helps prevent and resolve potential conflicts that could arise, especially following a shareholder's death.
What it includes
The shareholder agreement set outs the terms and conditions that apply in the event of a death, disability, disagreement or retirement involving one of the partners. It includes the following:
- Share buyback price
- Source of funding in the insurance clause
- Conditions under which shares may be transferred to an heir
- Business exit strategy
- Payment and transfer terms
Contact your notary or attorney to prepare your agreement. It should be revised regularly, usually every 3 years.
The benefits of a shareholder agreement
Here are some of the many benefits of a shareholder agreement:
- Helps avoid interference from the estate
- Guarantees that the partners are the only owners
- Establishes the price in advance, including predetermined payment terms
- Provides peace of mind to:
- creditors
- suppliers
- clients
- employees
A shareholder agreement helps shareholders anticipate certain situations so decisions can be easier to make if something unexpected comes up. To ensure that this agreement holds up; however, it is advisable to have a good insurance plan. A meeting with a financial security advisor will help you understand the role that insurance plays in ensuring the survival of your business.