Reason's To Review A Shareholder's Agreement
​Posted on April 18th, 2022 by Don Anderson

Every shareholders’ agreement should be reviewed and updated from time to time, particularly when the business experiences an ownership change. 

Any and all of the obligations, needs and what-ifs associated with the agreement, particularly those that require funding, should be identified, reviewed and clearly defined.

​For example:

1. The disability of a shareholder.
2. The death of a shareholder.
3. The method for defining the effective share price at which any buy-sell will take place.
4. The allowances related to the share redemption or purchase.
5. As applicable, the most tax-efficient structure for funding those transactions. 
6. Charitable giving goals and obligations. ​

​When a life insurance plan forms some or all of the liquidity solution, a review of the shareholder's agreement should be completed to ensure consistency with the insurance policy. Attention should be given to confirming the policy owner, named life insured(s),  premium funding requirements, named beneficiary(s), and potential change options and requirements in the years ahead. 

Once all the preparatory work has been completed, a legally binding shareholders’ agreement must be signed by all parties and put in place. Strokes, cancer and accidental deaths can impact families and businesses at any time and at a moments notice. Risks such as these become particularly important to address as shareholders age. The importance of implementing and completing a relevant, affordable shareholder's agreement can future-protect the business, employees and families alike.  

​Don Anderson
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