What an Ontario shareholder agreement is for
Incorporating a company in Ontario sets up the legal shell: articles, by-laws, directors and shares. It says almost nothing about the relationship between the owners. Who decides whether to take on a big loan? Can one owner sell to a stranger? What happens to a founder's 40% when they die, and does their estate become your new business partner? What if one owner stops showing up but keeps collecting dividends, or two equal owners simply cannot agree? Without a shareholder agreement the answers come from the Business Corporations Act and, too often, from an oppression lawsuit.
This template is a unanimous shareholder agreement for an owner-managed Ontario corporation with two to five shareholders. It covers board nomination, a table of decisions needing majority, special or unanimous approval, funding and personal guarantees, dividends and pay, and restrictive covenants drafted with Ontario's non-compete ban in mind. Its centre is a buy-sell table for seven triggering events, backed by an annual certificate of agreed value, payment terms, insurance funding, a shotgun clause, and a spousal acknowledgment.
When to use it
Sign it when two or more people start an Ontario corporation together, when a key employee or a new partner buys in, or when an existing company has been running on trust and a handshake. It also works where shareholders hold their shares through holding companies, which is common in Ontario for tax planning.
It is not designed for venture-financed startups with investor preferred shares, for companies with dozens of passive shareholders, or for professional corporations whose regulators restrict who may own shares. Each shareholder should have their own lawyer and accountant review it, because the buyout terms carry real tax consequences.
What's inside
The full list of sections and fields in this template, in the order they appear.
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Parties and definitions
- Corporation
- Shareholders and holding companies
- Principals
- Approval levels
- Disability
- Triggering Event
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Unanimous shareholder agreement
- Section 108 effect
- Conflict with articles
- Joinder
- Share legend
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Board and management
- Number of directors
- Nomination rights
- Meetings and quorum
- Officers
- Banking
- Residency and tax
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Shareholder approvals
- Unanimous Special and Majority matters
- Related-party decisions
- Deadlock procedure
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Capital and financing
- Initial contributions
- Further funding
- Personal guarantees shared
- Shareholder loans
- Pre-emptive right
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Dividends, roles and covenants
- Dividend policy
- Remuneration
- Time commitment
- Corporate opportunities
- Confidentiality
- Non-solicitation
- Optional non-competition
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Records
- Monthly and annual statements
- Inspection
- Audit exemption
- Individuals with significant control register
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Transfers
- Restrictions
- Holding company transfers
- Pledges
- Right of first refusal
- Tag-along
- Drag-along
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Buy-sell
- Seven triggering events
- Mandatory or optional purchase
- Discounts
- Option periods
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Value, closing and insurance
- Certificate of agreed value
- Chartered Business Valuator fallback
- Closing deliveries
- Instalment terms
- Life and disability insurance
- Solvency
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Shotgun and spousal acknowledgment
- Shotgun offer and election
- Cash closing
- Spousal acknowledgment under the Family Law Act
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Termination, disputes and general
- Termination events
- Mediation then arbitration
- Oppression remedy preserved
- Notices
- Amendment
- Legal advice
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Schedules A to F
- Shareholders shares loans and insurance
- Roles and remuneration
- Joinder
- Certificate of Agreed Value
- Spousal Acknowledgment
- Annual checklist
Preview pages
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Page 1 -
Page 2 -
Page 3
How to complete the agreement
- Fill in Schedule A. List each shareholder, their shares, subscription price, voting percentage, any shareholder loan and the life insurance on each principal.
- Set the board. Choose the number of directors and each shareholder's nomination right.
- Review the approvals table. Adjust the dollar thresholds and choose the special approval percentage.
- Choose the deadlock route. Status quo, or the shotgun after mediation fails.
- Set funding and dividend policy. Fill in the loan rate and the target dividend payout.
- Decide on restrictive covenants. Keep the non-solicitation; keep the non-competition only if it is narrow and tied to share ownership.
- Set the buy-sell terms. Review the triggering events, discounts, option periods and instalment terms, then decide the insurance and tax structure with your accountant.
- Sign the agreed value. All shareholders sign Schedule D with today's value.
- Sign, then collect spousal acknowledgments. Every party signs; each principal's spouse signs Schedule E; note the agreement on the share register.
Example: a buyout after a death
Fictional company Northshore Millwork Inc. of Barrie has three shareholders: Adeyemi Holdings Inc. (principal Tunde Adeyemi) with 40%, Lisa Moreau with 35% and Raj Patel with 25%. Their January 2026 certificate of agreed value puts the company at $1,800,000. The company owns $750,000 of life insurance on each of them.
Triggering Event: Tunde dies on June 2, 2026. The certificate is under 18 months old, so it fixes the price. Price: 40% × $1,800,000 = $720,000, plus repayment of Adeyemi Holdings' $60,000 shareholder loan. Funding: the $750,000 insurance payout covers the $720,000 price, paid on closing in August 2026 as the accountant advised; the $30,000 excess stays in the company. Result: Lisa and Raj now own the company in a 58.3% / 41.7% ratio; Tunde's family receives full value in cash without becoming involved in the business.
Without the agreement, Adeyemi Holdings would have remained a 40% owner, controlled by Tunde's estate, with no obligation on anyone to buy and no agreed price.
Ontario rules to know
- Unanimous shareholder agreements (OBCA section 108). Must be signed by all shareholders; bind future shareholders; shareholders assume the directors' powers and liabilities they take over.
- Dividends and buybacks (section 38(3) and related solvency tests). No dividend or share purchase if the company would fail the solvency tests.
- No residency rule for directors. Ontario dropped the 25% resident Canadian director requirement in July 2021.
- Individuals with significant control (section 140.2). A register of people with 25% or more of votes or value, or control in fact, kept since January 1, 2023.
- Audit exemption (section 148). Shareholders of a non-offering corporation can all consent to skip the audit each year.
- Oppression remedy (section 248). Always available to a shareholder treated unfairly; the agreement does not remove it.
- Non-competes (ESA section 67.2). Void for employees except executives and the seller in a sale of a business.
- Family Law Act. Shares count toward net family property; the spousal acknowledgment confirms claims are paid in money, not shares.
Where owner disputes start
Most shareholder disputes come from four gaps. There was no price formula, so a buyout became a two-year valuation fight. The agreed value was set once and never updated, so it bore no relation to the company's worth when someone died. A 50/50 company had no deadlock mechanism, so a disagreement froze the business. Or the non-compete was so broad that a court refused to enforce any of it, leaving the company with no protection at all. The buy-sell table, annual agreed value certificate, deadlock route and narrow covenants in this agreement are there to close each of those gaps.
Frequently asked questions
Is a shareholder agreement required in Ontario?
No. The OBCA does not require one. Without it, shareholders have only the rights in the Act and the articles, and there is no agreed way to buy out a shareholder who dies, becomes disabled, divorces or stops working in the business. Disputes then tend to end in an oppression application under section 248, which is slow and expensive.
What is a unanimous shareholder agreement in Ontario?
An agreement among all the shareholders that restricts the directors' powers, in whole or in part (OBCA section 108). It binds anyone who later acquires shares, and shareholders who take on directors' powers under it also take on directors' duties and liabilities for those decisions.
How does a shotgun clause work?
One shareholder names a price per share at which it will either buy the other's shares or sell its own. The other shareholder must choose whether to buy or sell at that price, usually within 60 days. It forces a fair price, because the offeror does not know which side of the deal it will end up on, but it favours the shareholder who can finance a purchase.
Can a shareholder agreement include a non-compete in Ontario?
It can, but if the shareholder is also an employee, the Employment Standards Act ban on employee non-competes may be raised against it. A covenant tied to the shareholder's ownership and the sale of their shares, and narrow in time, area and activity, is far more likely to be enforced. A non-solicitation clause is the safer protection.
How is a shareholder's share valued on a buyout?
This agreement uses a certificate of agreed value signed by all shareholders each year. If the latest certificate is more than 18 months old, a Chartered Business Valuator determines fair market value. Departures for cause or before retirement can carry a discount.
