Shareholder Agreements Must Talk About Conduct. Canada 150 Recommendation #25

Monday’s= Small Business

If you have a partner then you need a partnership agreement. If you read my posts you will know that Monday is the day that the Canada 150 Recommendation is about small business. This post is the second of three posts about partnership agreements, which are called shareholder agreements if your business is incorporated.

The questions that a shareholder agreement should cover concerning conduct are as follows:

  • How much effort should each shareholder expend on the business? Are there a number of hours a year that must be committed to the business? Can shareholders have other business interests
  • Confidentiality of the business affairs – what is confidential and who can be told, spouses, relatives etc.?
  • Non-competition – how long after the shareholder leaves before they can carry on the same business, define type of business and geographic area.
  • Will you have any rules about the personal conduct of a shareholder who is a director? Will you have the ability to remove them? Think Rob Ford!

The time to prepare a shareholder agreement is at the beginning of any relationship. The idea is to iron out all of the rules so that when the fighting starts there is a plan in place for how to deal with the problem. Waiting until you are mad at each other is not the time to make any decisions about how the business is going to operate. Make those decisions when people are still getting along.

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