This article attempted to address some of the most common provisions that should be included in the contracts of shareholders of closely owned companies. The memory of many of these provisions can ultimately avoid conflicts and problems along the way. Far from being exhaustive, the issues discussed here are generally those most often faced by shareholders of closely managed companies. Other issues that often need to be addressed are distributions, profit and loss distribution, and tax consequences. It goes without saying that a shareholder pact and agreements on limited liability companies and partnerships are complex documents. Therefore, shareholders of financial statements close to the company should always discuss their circumstances and specific objectives with their legal, financial and tax advisors before entering into such agreements. c) bankruptcy/insolvency. Much of these same concerns, at least as far as other shareholders are concerned, are related to death. Given that participation in many small businesses is often significantly represented by loans and shareholder advances, repayment is even more of a concern, particularly when the parties see that it has no apparent benefit to the insolvent shareholder and they draw personal or corporate funds that could be better used in the business. Depending on the market capacity of the shares, a long-term price/put or long-term forward call could be used.
Keep in mind that the impact of such a transaction on the insolvent shareholder is little or no affected by income tax. However, the provisions of the Bankruptcy and Insolvency Act may come into play if it turns out that any transaction imposed by the agreement can be done at a market value below fair value. Individual shareholders – and for the purposes of this document the principal or majority shareholder of a partner – may and may have events that do not involve other shareholders of a company or individuals outside the shareholder group. However, these events may have a direct effect on the company and its remaining shareholders through an agreement reached by shares or out of court. For example: while the following summaries are not exhaustive – and probably never will be – shareholder divorce cases generally fall into three categories, sometimes overlapping, namely specific shareholder events, interaction events and third-party events. Two different approaches are available for the development of control provisions. In general, these issues are subject to provincial approval or approval of directors (by decision or other means) of shareholders or by votes or both. Appendix “A” is an example of the approval or approval approach to control such problems. The second approach takes into account specific issues within the directors` competence and leaves them exclusively to shareholders.
