Previous articles in this column have given readers tips and tactics to protect your money, your family and your estate. In this article, I want to talk about protecting your company. You likely have money, time (and maybe even blood, sweat and tears) invested in your company so it’s important to consider a protection plan for your business.
Shareholder disputes and disagreements can be devastating to a company. Whether you co-own a company with your spouse, relatives or friends, there are many obstacles that can threaten shareholder relationships. Finding ways to minimize these obstacles is important to your company’s success.
A useful corporate tool to help protect against these types of disturbances among shareholders is a Unanimous Shareholder Agreement (or USA.) Like the name suggests, a USA is an agreement between all of the shareholders in a corporation. A USA is like a manual that sets the rules for the shareholders.
Alberta’s Business Corporations Act (Act) governs our province’s corporations. The Act sets out minimum requirements and standards every Alberta company must follow. By entering into a USA, shareholders can depart from the Act and decide their own governance rules.
USAs can be quite lengthy but they often cover a wide range of foreseeable events. The terms in your USA will be unique to your corporation and its shareholders.
Here are some important topics and questions to consider when planning a USA:
These are often called “triggering events” and they can cause confusion and disagreement among shareholders. Triggering events are stressful without having to negotiate and navigate their impact on a company. Planning ahead and setting out what happens to a shareholder’s shares on the occurrence of these events will help establish clarity and certainty.
Planning a USA doesn’t have to be intimidating. Talk to your lawyer and accountant to see if your company could benefit from a USA. Your professional advisors will guide you through the USA process to ensure your company is well protected. Some thoughtful planning now will save you time, stress and money down the road because prevention is easier than finding a cure.