Since in Quebec, the Registrar of Businesses now requires disclosure in its records of the existence and termination of any unanimous shareholders’ agreement of a corporation, the corporation’s creditors may therefore have access to the and review it, regardless of whether said unanimous agreement is already included in an agreement among shareholders that also contains purchase and sale clauses governing shareholders’ rights. Given this requirement, many legal experts have therefore recommended splitting the “old” shareholder agreements—which include both a unanimous agreement and buy-sell provisions—into two separate documents: 1) the unanimous shareholder agreements (the “CUA”); and 2) the share purchase agreements between shareholders.
In both Canada and Quebec, a CUA is a written agreement signed by all shareholders of the corporation, including non-voting shareholders, that restricts or removes, in whole or in part, the directors’ powers to manage the corporate activities and internal affairs of the corporation or to oversee its management. Thus, the rights, powers, obligations, and responsibilities of the directors—including the defenses they may invoke—are devolved to the parties to the CUA (i.e., the shareholders) to whom these powers are conferred, and the directors are relieved of them to the same extent. The purpose of the CUA is to transfer all or certain powers of the directors to the shareholders of a corporation in order to meet the shareholders’ expectations regarding certain management activities that they wish to undertake. The corporation must notify the Registrar of Enterprises of the existence or termination of a CUA for entry in the corporate registry and must also report the names and addresses of those who will henceforth exercise these powers. Any person who becomes a shareholder of the corporation (whether as a purchaser or transferee) after the conclusion of a CUA is deemed a party to it; however, if that person is not notified of its existence, they may then have the transaction by which they became a shareholder set aside. A sole shareholder of a corporation may also sign a sole shareholder’s declaration.
Both in Canada and in Quebec, a share purchase agreement is a written agreement governing the interactions among the shareholders of a corporation and is intended to protect their respective interests, as it is designed to prevent potential conflicts among them and resolve any possible disputes. A share purchase agreement is intended, in particular, to address and regulate the following situations for the benefit of all shareholders: a) the voluntary withdrawal of a shareholder; b) the forced withdrawal of a shareholder; c) the incapacity, disability, or incapacity of a shareholder; d) the death of a shareholder and the transfer of their shares; e) the determination of the value of the shares in the event of voluntary or forced withdrawal, incapacity, or death, and the payment for the shares as well as the release of endorsements, if applicable; f) the disposition of a shareholder’s shares to a third party or to the other shareholders; g) the protection of shareholders’ rights; h) the right to elect elect among themselves as directors; i) the management and administration of the corporation.
A share purchase agreement may also include provisions addressing, in particular, the following matters: 1) a clause regarding the voluntary withdrawal of a shareholder following receipt of a bona fide external offer ; 2) a tag-along clause following a bona fide external offer (the “Piggy Back” clause); 3) a “shotgun” clause; 4) a clause regarding each shareholder’s time commitment; 5) a clause addressing the financial contribution and guarantees to be provided by the shareholders in the event of additional financial needs; 6) a clause on the sharing of revenues among shareholders; 7) a clause regarding the shareholders’ right of first refusal in the event of a new issuance of shares by the company; 8) non-competition and non-solicitation clauses.