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Unanimous Shareholder Agreement (USA)
Practical Law Canada Glossary 7-562-5131 (Approx. 3 pages)
Glossary
Unanimous Shareholder Agreement (USA)
Under Canada Business Corporations Act, R.S.C. 1985, c. C-44, section 146, a unanimous shareholder agreement (USA) can consist of an agreement between two or more shareholders or a declaration of the sole beneficial shareholder (USD). A USA must satisfy the following criteria:
- It must be otherwise lawful (that is, not void or voidable due to mistake, illegality, or incapacity).
- It must be among all the shareholders of the corporation as well as, possibly, a non-shareholder (including the corporation itself if a party).
- It must restrict, in whole or in part, at least some of the powers of the directors to manage, or supervise the management of, the business and affairs of the corporation (see Duha Printers (Western) Ltd. v. R., 1998 CarswellNat 750 (S.C.C.)).
A USA has two key features. It:
- Has the effect of binding parties other than the original signatories. It binds the corporation, directors, officers, and subsequent transferees of shares (unless the transferee rescinds his purchase of shares within 30 days of first becoming aware of the existence of the USA).
- Always restricts to some degree the authority of the board of directors. Powers withdrawn from the directors by the USA reside with the shareholders.
The Business Corporations Act, R.S.O. 1990, c. B.16 (OBCA), takes a similar approach except that, under the OBCA, a USD must be executed by the sole registered shareholder (not the sole beneficial shareholder as under the CBCA) and a subscriber or a transferee has 60 days to rescind his acquisition of shares (not 30 days for a transferee under the CBCA).
For more information, see Shareholder Agreement Toolkit.