Shareholders’ Agreements – Why Bother When Everyone Gets Along?

I came across this article on a lawyer’s website in BC that discusses shareholders’ agreements and the importance of having one – the link is http://www.magellanlaw.ca/article-shareholders-agreement/.  It is a good read that summarizes what such an agreement consists of and why it is important.

I wholeheartedly agree that the time to put one in place is when the business begins and everyone is getting along.  This is even true in situations where a private company is passing on ownership to the next generation and there are multiple shareholders of a company (where mom and dad used to be the only shareholders).  A shareholders’ agreement should be reviewed and/or revised at the time a succession or estate plan is being worked on.  This can deal with many business issues that will arise in the future and can avoid nasty family squabbles from arising if the “founding shareholders” of a family business become incapacitated or pass away.

I am constantly suprised at the number of times I come accross situations where a shareholders’ agreement is not in place and as indicated in the article when it is mentioned that it is a good idea to put one in place the response is frequently “we all get along and do not see the need”.  After many years of practicing I have seen the outcome of not having a shareholders’ agreement or a poorly written one.  The investment in drafting one can pay a huge return down the road in that the legal fees to draft an effective shareholders’ agreement are much less then having shareholders and ofter family members each hiring their own lawyer during a dispute.

This is one of the areas that we review in our “PRIVATE COMPANY TAX CHECKUP” check it out at: https://karnertax.com/tax-check-up/ it might save you some tax dollars!!!