A unanimous shareholders agreement, unlike a standard shareholders agreement, arises where the agreement is entered into by all of the shareholders of the corporation. A unanimous shareholders agreement is significant because it can bind future shareholders and restrict the powers of directors to manage the business and affairs of the corporation.
A unanimous shareholders agreement is typically highly customized to the needs of a particular situation. Below is an overview of provisions that are commonly a part of a unanimous shareholders agreement.
Restriction on share transfers
Forced sale of shares
Right to elect directors
Directors manage the business and affairs of a corporation and conduct such activities as approving financial statements, issue shares and declare dividends. Common shares provide shareholders with the right to vote on the election of directors. In the absence of a unanimous shareholders agreement, directors are elected by a majority vote of the shareholders. If there are two shareholders, a majority shareholder with 60% of the common shares and a minority shareholder with 40% of the common shares, the majority shareholder could elect all of the corporation’s directors. This would leave the minority shareholder without sufficient influence over the day-to-day management of the corporation. This imbalance could also arise in situations where shareholders with a combined majority of shares vote in concert.
A unanimous shareholders agreement is often used to give all shareholders (or shareholders who own a certain percentage of shares) the right to nominate a director. The other shareholders are then required to elect each shareholders’ nominee. In this way, each shareholder can ensure that either they or their representative is on the corporation’s board of directors.