Starting or owning a corporation with a partner can be very exciting. These ventures force partners to focus on the financial projections, financial results, and organization and management of the day to day operations. These issues are fundamental, but the partners (or shareholders) also need to understand that no business is free from contentious issues within the corporation. While corporations started by a family, friends, or even long-time associates may run smoothly, you should never assume that problems cannot arise. These are the cases where shareholder agreements come into play.
A shareholder agreement is a contract between the shareholders and, in some situations, between the shareholder(s) and the corporation to structure the relationship amongst them. A unanimous shareholder agreement has the same features as described above, but it restricts the power of the directors explicitly to manage the corporation.
A well-drafted shareholder agreement should define each party’s expectations with clear rules that describe the relationship amongst the shareholders and provide some mechanisms designed to be able to address some of the possible contentious issues that could arise in the future.