Shareholder Agreement Template Canada

SHAREHOLDER AGREEMENT TEMPLATE CANADA FREE

THIS SHAREHOLDER AGREEMENT (the "Agreement") is made and entered into as of this [Day] day of [Month], [Year] (the "Effective Date"), by and among:

PARTIES:

1. [Company Name], a corporation incorporated under the laws of [Province or Federal Jurisdiction, e.g., Ontario / Canada], having its registered office or principal place of business at [Company Address] (hereinafter referred to as the "Corporation");

AND

2. [Shareholder 1 Name], an individual residing at [Shareholder 1 Address] / a corporation incorporated under the laws of [Jurisdiction] having its principal place of business at [Address] (hereinafter referred to as "Shareholder 1");

AND

3. [Shareholder 2 Name], an individual residing at [Shareholder 2 Address] / a corporation incorporated under the laws of [Jurisdiction] having its principal place of business at [Address] (hereinafter referred to as "Shareholder 2").

(Shareholder 1 and Shareholder 2 are collectively referred to hereinafter as the "Shareholders" and individually as a "Shareholder").

RECITALS:

WHEREAS the Corporation has been duly incorporated under the laws of [Province or Federal Jurisdiction] and has an authorized capital consisting of an unlimited/fixed number of common shares without par value;

WHEREAS as of the Effective Date, the Shareholders are the legal and beneficial owners of the issued and outstanding shares of the Corporation in the amounts and classes set forth in Schedule "A" attached hereto; and

WHEREAS the Shareholders and the Corporation desire to enter into this Agreement to govern their respective rights, duties, and obligations with respect to the governance, management, capitalization, and operation of the Corporation, as well as the transfer of Shares, pursuant to the applicable corporate statutes of [Jurisdiction].

NOW, THEREFORE, in consideration of the mutual covenants, premises, agreements, representations, and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto covenant and agree as follows:

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SECTION 1: OPERATIONAL DEFINITIONS

1.1 "Act" means the [Canada Business Corporations Act, R.S.C. 1985, c. C-44 / Business Corporations Act, R.S.O. 1990, c. B.16], as amended from time to time, or any successor legislation.

1.2 "Affiliate" means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person.

1.3 "Board" or "Board of Directors" means the board of directors of the Corporation as constituted from time to time in accordance with this Agreement and the Act.

1.4 "Business Day" means any day, other than a Saturday, Sunday, or statutory holiday recognized in the Province of [Province].

1.5 "Control" (including the terms "Controlled by" and "under common Control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

1.6 "Fair Market Value" means the cash price that a willing, informed buyer would pay to a willing, informed seller in an arm’s-length transaction, as determined in good faith by the Board or, failing agreement, by an independent chartered business valuator appointed jointly by the disputing Parties.

1.7 "Offer Notice" has the meaning ascribed thereto in Section 3.4 of this Agreement.

1.8 "Person" means an individual, corporation, partnership, limited liability company, trust, unincorporated association, joint venture, government authority, or any other legal entity.

1.9 "Pro Rata Share" means, with respect to any Shareholder, the proportion that the number of common shares held by such Shareholder bears to the total number of issued and outstanding common shares of the Corporation at the relevant time.

1.10 "Shares" means any and all shares of any class or series in the capital of the Corporation now or hereafter authorized and issued.

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SECTION 2: SUBSTANTIVE TERMS & OBLIGATIONS

2.1 Corporate Governance and Board Composition

(a) The Board of Directors shall consist of [Number] directors. (b) Each Shareholder agrees to vote, or cause to be voted, all Shares held or controlled by them at any annual or special meeting of Shareholders called for the purpose of electing directors, or in any written resolution in lieu thereof, to elect the nominees designated as follows: (i) [Shareholder 1 Name] (or their designated nominee) shall have the right to designate [Number] director(s); (ii) [Shareholder 2 Name] (or their designated nominee) shall have the right to designate [Number] director(s).

2.2 Unanimous Shareholder Agreement Provisions

The Parties acknowledge and agree that this Agreement constitutes a unanimous shareholder agreement within the meaning of the Act. To the extent that any provision of this Agreement restricts, limits, or transfers the powers of the directors of the Corporation to manage or supervise the management of the business and affairs of the Corporation, such provision shall take effect and be construed as if it were a provision of the articles or bylaws of the Corporation.

2.3 Reserved Matters (Supermajority / Approval Requirements)

Notwithstanding anything to the contrary in this Agreement or the bylaws of the Corporation, the Corporation shall not, and the Board shall not permit the Corporation to, take any of the following actions without the prior written consent or affirmative vote of Shareholders holding at least [e.g., 75%] of the voting Shares: (a) Amend, alter, or repeal the articles or bylaws of the Corporation; (b) Authorize, create, or issue any new class of shares or securities convertible into shares; (c) Sell, lease, exchange, or otherwise dispose of all or substantially all of the property or assets of the Corporation outside the ordinary course of business; (d) Merge, amalgamate, or consolidate the Corporation with any other corporate entity; (e) Declare or pay any dividend or make any distribution on any Shares; (f) Incur any indebtedness for borrowed money in excess of [Dollar Amount] outside the approved annual operating budget.

2.4 Representations and Warranties

Each Shareholder severally represents and warrants to each other Shareholder and to the Corporation that: (a) Such Shareholder has the full legal capacity, power, and authority to execute, deliver, and perform its obligations under this Agreement; (b) This Agreement has been duly executed and delivered by such Shareholder and constitutes a legal, valid, and binding obligation, enforceable against them in accordance with its terms; (c) The execution, delivery, and performance of this Agreement do not violate any provision of any law, regulation, order, contract, or organizational document applicable to such Shareholder; (d) Such Shareholder is the sole legal and beneficial owner of the Shares set forth opposite their name in Schedule "A", free and clear of all liens, pledges, encumbrances, security interests, or adverse claims of any kind whatsoever.

2.5 Financing and Capital Contributions

If the Board determines that the Corporation requires additional working capital beyond its current cash flow and reserves, the Corporation shall first seek commercial debt financing. If commercial debt is unavailable on commercially reasonable terms, the Board may request additional capital contributions from the Shareholders in proportion to their respective Pro Rata Shares. No Shareholder is obligated to advance funds to the Corporation except as explicitly agreed in a separate written instrument.

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SECTION 3: SHARE TRANSFER RESTRICTIONS & MECHANICS

3.1 General Prohibition on Transfers

Except as expressly permitted by this Agreement, no Shareholder shall directly or indirectly sell, assign, transfer, pledge, mortgage, hypothecate, or otherwise dispose of ("Transfer") any Shares, or any right, title, or interest therein, to any Person. Any attempted Transfer in violation of this Section 3 shall be null and void ab initio, and the Corporation shall not register any such Transfer on its securities register.

3.2 Permitted Transfers

A Shareholder may Transfer all or any part of their Shares without the prior written consent of the other Shareholders to: (a) An Affiliate of such Shareholder, provided that such Affiliate remains an Affiliate at all times; (b) In the case of an individual Shareholder, for estate planning purposes to a living trust for the primary benefit of such Shareholder, their spouse, or lineal descendants; Provided that any permitted transferee under this Section 3.2 shall first execute and deliver to the Corporation and the non-transferring Shareholders a deed of adherence, agreeing to be bound by all the terms and conditions of this Agreement as if they were an original party hereto.

3.3 Right of First Refusal (ROFR)

If any Shareholder (the "Selling Shareholder") receives a bona fide, arm’s-length written offer from a third party (the "Third-Party Purchaser") to purchase all or any portion of their Shares (the "Offered Shares"), which the Selling Shareholder desires to accept, the Selling Shareholder shall first offer the Offered Shares to the non-selling Shareholders in accordance with the following procedure: (a) The Selling Shareholder shall deliver a written Offer Notice to the Corporation and each non-selling Shareholder, detailing the identity of the Third-Party Purchaser, the number and class of Offered Shares, the purchase price per share, and all other material terms and conditions of the offer, accompanied by a copy of the written third-party offer. (b) Each non-selling Shareholder shall have the option, exercisable by written notice delivered to the Selling Shareholder within 30 days of receipt of the Offer Notice, to purchase all or any portion of their Pro Rata Share of the Offered Shares on the same terms and conditions set forth in the Offer Notice. (c) If the non-selling Shareholders do not elect to purchase all of the Offered Shares within the 30-day period, the Selling Shareholder may, within 60 days thereafter, sell the remaining Offered Shares to the Third-Party Purchaser on terms no more favorable to the Third-Party Purchaser than those set forth in the Offer Notice.

3.4 Tag-Along Rights (Co-Sale)

If a Selling Shareholder proposes to Transfer a controlling block of Shares (exceeding [50%] of the issued voting Shares) to a Third-Party Purchaser, the non-selling Shareholders shall have the right, exercisable upon written notice within 30 days of receiving notice thereof, to require the Third-Party Purchaser to purchase a proportionate number of Shares from the non-selling Shareholders at the same price and on the exact same terms and conditions as offered to the Selling Shareholder.

3.5 Drag-Along Rights

If Shareholders holding at least [75%] of the issued and outstanding voting Shares (the "Dragging Shareholders") approve and enter into a bona fide arm’s-length agreement to sell all of their Shares to an independent third-party purchaser, the Dragging Shareholders shall have the right to require all other Shareholders (the "Dragged Shareholders") to sell, transfer, and deliver all of their Shares to such third-party purchaser on the same terms and conditions, provided that the price per share and payment terms are identical.

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SECTION 4: DEFAULT, TERMINATION, AND REMEDIES

4.1 Events of Default

A Shareholder shall be deemed to be in default under this Agreement (an "Event of Default") upon the occurrence of any of the following events: (a) The material breach by such Shareholder of any covenant, agreement, representation, or warranty contained in this Agreement; (b) The insolvency, bankruptcy, or making of an assignment for the benefit of creditors of such Shareholder, or the filing of a petition under any bankruptcy or insolvency legislation (including the Bankruptcy and Insolvency Act (Canada) or Companies' Creditors Arrangement Act (Canada)); (c) The seizure, attachment, or execution against a substantial portion of such Shareholder’s Shares which is not released or discharged within 30 days.

4.2 Notice and Cure Period

Upon the occurrence of an Event of Default under Section 4.1(a), the non-defaulting Shareholders or the Corporation shall provide written notice of default to the defaulting Shareholder specifying the nature of the breach in reasonable detail. The defaulting Shareholder shall have 30 Business Days from the date of receipt of such notice to cure such breach. If the breach is not capable of being cured within such 30 Business Day period, but the defaulting Shareholder has commenced and is diligently pursuing a cure, the cure period may be extended by mutual agreement of the non-defaulting Shareholders, not to exceed an additional 30 Business Days.

4.3 Remedies Upon Default

If an Event of Default is not cured within the applicable cure period set forth in Section 4.2 (or immediately upon the occurrence of an Event of Default under Sections 4.1(b) or 4.1(c)), the non-defaulting Shareholders shall have the right, exercisable by written notice to the defaulting Shareholder, to: (a) Purchase, or cause the Corporation to purchase, all (but not less than all) of the Shares held by the defaulting Shareholder at a purchase price equal to [e.g., 80%] of the Fair Market Value of such Shares, determined as of the date of the Event of Default; (b) Institute legal proceedings to seek specific performance, injunctive relief, or damages for breach of contract; (c) Exercise any other rights and remedies available at law or in equity.

4.4 Termination

This Agreement shall terminate automatically and be of no further force or effect upon the earliest to occur of: (a) The written agreement of all Shareholders to terminate this Agreement; (b) The dissolution, winding-up, or bankruptcy liquidation of the Corporation; (c) The date on which the Corporation becomes a reporting issuer or public company listed on a recognized stock exchange in Canada; (d) The ownership of all issued and outstanding Shares of the Corporation being consolidated in a single Shareholder.

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SECTION 5: BOILERPLATE LEGAL PROVISIONS

5.1 Severability

If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court or tribunal of competent jurisdiction, such provision shall be severed from this Agreement and rendered null and void to the minimum extent necessary. The remaining provisions of this Agreement shall remain in full force and effect and shall in no way be impaired or invalidated, provided that the core commercial intent of the Parties is preserved.

5.2 Entire Agreement

This Agreement, together with the Schedules attached hereto, constitutes the entire agreement between and among the Parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, and discussions, whether oral or written, of the Parties.

5.3 Force Majeure

No Party shall be liable or responsible to the other Parties, nor be deemed to have defaulted under or breached this Agreement, for any failure or delay in fulfilling or performing any term of this Agreement when and to the extent such failure or delay is caused by or results from acts beyond the impacted Party's reasonable control, including, without limitation: acts of God, flood, fire, earthquake, explosion, war, terrorism, invasion, riot, national or regional emergencies, pandemics, or strikes (each a "Force Majeure Event"). The impacted Party shall give prompt written notice to the other Parties, stating the period of time the occurrence is expected to continue.

5.4 Governing Law and Attornment

This Agreement, and all claims or causes of action (whether in contract, tort, or statute) that may be based upon, arise out of, or relate to this Agreement, shall be governed by, and enforced in accordance with, the internal laws of the Province of [Province] and the federal laws of Canada applicable therein, without regard to conflict of law principles. Each Party irrevocably and unconditionally attorns to the exclusive jurisdiction of the courts of the Province of [Province] sitting in [City].

5.5 Dispute Resolution (Arbitration)

Any dispute, controversy, or claim arising out of, relating to, or in connection with this Agreement, including any question regarding its existence, validity, interpretation, breach, or termination, shall be referred to and finally resolved by binding arbitration administered by the [ADR Chambers / Vancouver International Arbitration Centre / Toronto Commercial Arbitration Society] in accordance with its applicable arbitration rules. The place of arbitration shall be [City, Province], the language of the arbitration shall be English, and the tribunal shall consist of a single arbitrator appointed in accordance with the said rules. The award of the arbitrator shall be final and binding upon the Parties, and judgment upon the award rendered may be entered in any court having jurisdiction thereof.

5.6 Amendments and Waivers

No amendment, modification, or supplement to this Agreement shall be effective unless it is in writing and signed by all Parties. No waiver of any provision of this Agreement shall be effective unless set forth in writing and signed by the waiving Party. No failure or delay by any Party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof.

5.7 Notices

All notices, requests, consents, claims, demands, waivers, and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by email of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours. Notices shall be addressed to the respective Parties at the addresses set forth on page 1 of this Agreement (or to such other address as a Party may designate from time to time in accordance with this Section).

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SECTION 6: FORMAL EXECUTION BLOCK

IN WITNESS WHEREOF, the Parties hereto have executed this Shareholder Agreement as of the Effective Date first written above.

THE CORPORATION:

[COMPANY NAME]

Per: ___________________________________
Name: [Signatory Name]
Title: [Signatory Title, e.g., President & CEO]
I/We have the authority to bind the Corporation.

SHAREHOLDERS:

[SHAREHOLDER 1 NAME]

________________________________________
Signature

Name: [Shareholder 1 Signatory Name]
Title: [Title if Corporate Shareholder / Leave blank if individual]
Date: __________________

[SHAREHOLDER 2 NAME]

________________________________________
Signature

Name: [Shareholder 2 Signatory Name]
Title: [Title if Corporate Shareholder / Leave blank if individual]
Date: __________________

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SCHEDULE "A"

SHAREHOLDERSHIP AND CAPITALIZATION SCHEDULE