The fundamental purpose of a shareholders agreement is to easily regulate problems when the parties disagree. The reason there is shareholder litigation is because the parties never properly foresee and never properly write even the most obvious expected disputes into their agreement.
The optimal shareholders agreement is the document which produces zero litigation and optimally zero legal fees because it so clearly sets out the dispute and how it will settle.
There is litigation because agreements are never written comprehensively enough to capture all disputes.
Most shareholder agreements that end up being litigated are off-the-shelf documents (general precedents without too much specificity) with a few changes here and there to speak to the most obvious characteristics between the parties. What the parties need, and don’t generally get is a comprehensive document which captures all break-up situations in a non-litigation resolution process.
Even with strong documents, there will often be a party seeking a courtroom resolution. This can only be managed not eliminated. But the strength of the agreement lessens the likelihood of any negative outcome even in litigation.
We can do a number of things for you. If you are starting, we can draft your shareholders agreement for you. So many of these agreements are boilerplate that ordinary people do not understand or see the significant of many of the clauses (i.e. shotgun clause, drag-along clause). What is important from talking to us, is that we try to determine all of the likely breakdown issues that could arise among shareholders. There are numerous issues that could arise from the death of a shareholder and the attempt by the estate to force sale of the company, to the divorce of a shareholder and the attempt by a third-party spouse who is not a shareholder, to force sale or valuation of the shares.
Often people come to us when the shareholder issue has already arisen. We have represented all sides of shareholder disputes and interpretation of the agreement and managed these problems successfully for numerous clients in the past.
Below you will see my commentaries on important recent Ontario shareholder cases.
Call us for a free discussion of the issues.
