Can a Unanimous Shareholder Agreement (USA) override statutory rights?
December 18, 2024
In short, yes, it may, provided the following factors are considered. In Husack v. Husack, the court rulings in Ontario have clarified how Unanimous Shareholder Agreements can impact your business, particularly regarding waiving certain shareholder rights.
Here are 4 Key Takeaways for Business Owners:
Importance of Well-Drafted Agreements: The court supported the USA in the family business case because it was clear in granting the mother sole discretionary power to sell the company’s assets. The court found that the daughter’s argument didn’t hold because the USA specifically covered the situation about selling the company, which was also mentioned in the Articles.
Waiving Dissent Rights: The daughter’s dissent rights under the OBCA were waived by the USA because it used clear language, demonstrating how a USA can take precedence over statutory rights.
Context Matters: The court considered the family’s intention to grant the mother control as expressed in the USA, emphasizing the importance of documenting the factual context and intentions behind the agreement. The parities involved had agreed on the USA’s terms, understanding that some rights (like dissent rights) wouldn’t apply.
Potential Waiver of Other Rights: The court suggested that other statutory rights might also be waived if not against public policy, as the USA’s broad waiver clause was enforceable in this case.
Tips for Business Owners:
(a) Seek Legal Advice: Work with legal professionals to draft and review your shareholder agreements to ensure they are comprehensive and enforceable;
(b) Document Thoroughly: Capture all relevant details and intentions when creating your agreements. This helps in supporting their enforceability.
(c) Regular Reviews: Regularly revisit and update your USAs as your business evolves to reflect current realities and legal standards.
(d) Educate Your Team: Make sure all shareholders understand the implications of the agreement, including any rights they may be waiving.
For business owners, these developments highlight the importance of having clear and comprehensive shareholder agreements. By working closely with legal experts and ensuring all parties understand their rights, you can safeguard your business’s interests and ensure smooth operations.
The content of this article is for general informational and educational purposes only and is not intended as legal advice. Please contact a legal professional for advice specific to your situation.
Authored By: Maryam Hennig, LL.B Lawyer based in Toronto and Richmond Hill, ONfor Start ups, Small Businesses, and Online Service Providers