In Quebec, shareholders invest in a company. In return for their contribution, they receive shares with right on the company. These rights are listed in the description of the “share capital” in the articles of association of the company. It is therefore up to the founders of the company to ensure the rights of each class. Shareholders must determine how the company`s profits, losses and expenses will be divided and who will be paid first. If shareholders expect to receive dividends or distribution, the agreement must state this. Establishing the most important rules and regulations for shareholders before certain situations arise can be crucial to the success of your business. A right of first refusal is a right granted to existing shareholders to acquire newly issued shares of the Company before they are offered to third parties. This right exists to allow shareholders to retain their share of ownership and control of the company. It also prevents a shareholder from selling shares to a potentially undesirable third party. Piggy Back Provision: Also known as a “tag along” or “co-sale” disposition, a piggy back provision applies to majority shareholders who intend to sell a significant portion of their shares. It protects minority shareholders because the buyer must also buy his shares at the same price as the majority shareholder and therefore agrees to buy all the shares. Partners must determine how much each shareholder plans to contribute to the business.

This article refers not only to money, but also to time and effort. etc. This clause is particularly important when it comes to small businesses that have very few shareholders. In this case, shareholders can prevent an undesirable third party from joining the partnership without their consent – or even more so from an undesirable third party obtaining a majority stake in the company. A shareholder holds portions of the equity called shares of a corporation. If the company works well, the shareholder benefits. If the business malfunctions, the shareholder may lose money. A shotgun clause is used as a form of dispute resolution. It allows a shareholder to offer to buy the shares of another shareholder at a certain price. The shareholder has the option to accept the offer or purchase the shares of the offering shareholder at the same price. In addition, the right of first refusal clause should address what happens if all or more shareholders offer to buy the shares. In this case, the selling shareholder will most likely have to sell his shares on a pro rata basis, depending on the participation of each shareholder.

In addition to the legal requirements we have just explained, shareholders may decide to govern their relations within the company through a shareholders` agreement. As stated in a previous article “What does the shareholders` agreement contain?”, a shareholders` agreement can, among other things, regulate the transfer, purchase and sale of shares as well as shareholder decision-making within the company. The non-compete obligation may prevent shareholders from competing directly with the company during or after their participation in the company. Similarly, a non-solicitation clause may prevent a shareholder from asking other shareholders, employees, directors or officers of the Company to leave the Company for another. If you decide to merge into a company, we recommend that you enter into a shareholders` agreement beforehand. In certain circumstances, such an agreement is mandatory. The right to vote is arguably the most important right for an entrepreneur. It represents the political force that a shareholder has within the company and, as the name suggests, is used to “vote”.

No, shareholder agreements apply exclusively to corporations. If your business is incorporated in partnership and you are more than a partner, you must sign a partnership agreement. For more information about the Partnership Agreement, please visit our Partnership Agreement page or contact us using the form below. Last week, the Registre des entreprises, which manages the online registration system for all companies required to register in the province of Quebec, updated its form, which now requires legal persons to answer yes or no to the existence of a shareholders` agreement. If so, another question arises as to whether all the powers of directors are so limited. The shotgun clause is used to force a shareholder to buy a shareholder offering or sell his shares to the shareholder offering at the same price. Therefore, the target shareholder has the opportunity to buy his partner or sell his shares to his partner. As a general rule, the clause specifies how the target shareholder is informed of the ignition of the shotgun clause and how long he must react to it – usually within 30 days.

Shareholders must determine what to do in the event of the death, disability or incapacity of one of the shareholders. Who will get their shares in the company? A shareholders` agreement (also known as a “shareholders` agreement”) is an agreement between all the shareholders of a corporation. The agreement will set out certain rules for the Company`s operations, as well as detailed rules that will determine how certain matters affecting the Company`s shareholders will be handled. “Public” companies are generally large publicly traded companies and require a significant capital investment from a large number of people. The shareholders of these companies react to a takeover bid. In addition to commercial company laws, these companies must comply with various securities regulations. Therefore, it is crucial for shareholders to include a clause that the company will be able to buy back the shares of the deceased shareholder of the company. In addition, shareholders should set a share repurchase price at the time of signing the shareholders` agreement to avoid having to pay an exorbitant price for the shares in case the company grows exponentially. What happens if one of the shareholders wants to leave the company? Finally, the rejection clause should specify how the shares will be transferred and, in the event that the selling shareholder does not transfer the shares if necessary, how the situation will be resolved.

Thus, when directors decide to declare cash dividends to shareholders, they must first ensure that the company is financially able to declare those dividends. In other words, directors must ensure that the company is not insolvent. If they fail to do so, directors may be held personally liable. In summary, this internal document can protect shareholders by confirming that everyone agrees with the company`s rules, and it can also be used to refer to them in case of future disputes. In summary, it is crucial that shareholders of a corporation sign a shareholders` agreement at the beginning of the partnership and keep some of these issues in mind. The right exit strategy or procedure to solve certain problems at the beginning of the relationship can lead to great ease between the partners at the beginning of the relationship in case a potentially unpleasant situation occurs. In a previous article, we explained the role of the three main players in a Quebec company. One of them is the famous “shareholder”.

If the word scares you, don`t worry: today, Lex Start demystifies the rights and obligations arising from shareholder activity. Right of first refusal: If a shareholder wants to sell his shares and part of the company, he must first offer to the other shareholders at their fair value. If the shareholders cannot buy them, the selling shareholder can offer them to a third party. As of February 14, 2011, all Canadian corporations (registered in a jurisdiction or province in Canada or under federal law) registered in Quebec must indicate whether there is a unanimous shareholder agreement between their shareholders that limits the powers of their directors. This requirement is set out in subsection 35(6) of a Corporation Legal Disclosure Act, which states that the second so-called “fundamental right” in a Quebec corporation is the right to dividends. According to the Dictionary of Quebec and Canadian Law, a dividend is a “share of the profits of a corporation or commercial corporation distributed to shareholders in proportion to its capital expenditures.” Therefore, we recommend that any unanimous shareholders` agreement that limits the powers of directors of Quebec CCQQ corporations be limited to including such restrictions only in a separate agreement. This agreement could be reviewed by creditors. If a shareholder plans to leave the corporation and has been aware of certain confidential ownership information, it is useful for shareholders to include a non-compete and solicitation clause in the shareholders` agreement. The content of a shareholders` agreement depends on the company and the shareholders, but usually relates to: In particular, Québec corporations are required, under the new Quebec Business Corporations Act (“QCA”), to allow creditors to review shareholder agreements that limit the powers of their directors under section 32 of the QCB. .