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A shareholders' agreement aims to prevent disputes

It often happens that entrepreneurs start a company without worrying about signing a shareholders' agreement. Such an agreement aims to prevent certain disputes, particularly the distribution of tasks among key actors.

«Anyone who writes commits»
Anatole France

It often happens that entrepreneurs start a company without caring to sign a shareholders' agreement. Such an agreement aims to prevent certain disputes, especially the allocation of tasks among key players.

A few years after co-founding a company, a shareholder, after refusing to be involved in the management, starts his own business, which immediately serves the company's clients.

A month passes, his co-shareholder starts his own business that also serves the company's clients. He even reimburses himself for the advances he had made to the company. The shareholder reacts, addresses the Court, and requests the liquidation of the company. The co-shareholder, even though he agrees to this request, demands that the shareholder buy back his shares for the amount of $269,000.

The Court of Appeal* recalls that the forced sale of shares to a shareholder, under the Corporations Act, is not the appropriate remedy. It is a solution that applies only if one of the shareholders wants to sell his shares and another shareholder is willing to buy them.

Since there has never been an agreement between the two shareholders to set a definite or determinable price for the company's shares, the Court orders the co-shareholder to reinvest the reimbursed advances in the company and the judicial liquidation of it.

It should be kept in mind that a contract that is concluded with a handshake often ends in a brawl.

*CA 500-09-025225-152

François Forget, notary and legal advisor as well as the entire Notaire-Direct team, are at your service to ensure the preparation of your legal documents and answer all your legal questions.
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