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Unanimous Shareholder Agreement

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Let's get started with your Unanimous Shareholder Agreement. We'll start with the basics and go up from there.
What is the name of your corporation?*

What are the names of your shareholders?*

First Name / Corporation Name	Last Name

Include the names of all your current shareholders, no matter what class of shares they currently own.

Corporations are set up either federally (Canada wide) or in a specific province or territory. Which location did you incorporate your company in?*
Corporations are set up either federally or in a specific province or territory. When you created your company you would have gotten a certificate of incorporation. If you're unsure, take a look at the certificate and on it you will see where your company was formed.

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Let's make some rules for your Board of Directors.
Do you want a range of directors or a fixed number of directors on the Board? *
- A range sounds good
- Let's go with a fixed number
Since your directors make some important decisions for your company, you will want to think about how many people can be on the Board. Having a range for the number of directors gives you some flexibility and also some control to limit the Board to a reasonable number of people.

E.g. 1 to 10 directors are allowed to be on the Board.

Since your directors make some important decisions for your company, you will want to think about how many people can be on the Board. You can set the number of directors to be a specific number. For example, you can say just 3 people can be on the Board and there always must be 3 directors.

This gives you the most control over your Board. For example if your company grows and the new shareholders want to add people to the Board, you can say sorry, the rule is only 3 people are allowed. But, this does mean you have less flexibility to add people if you change your mind.
Please choose a range:*
1 to 10 is a common choice
Director range - To*
How many directors do you want to have on your company's Board?*
How many votes does a person need to be elected as a director?*
- 50% +1 of shareholder votes
- 67% of shareholder votes
- 100% of shareholder votes
Directors are elected to the Board by the shareholders. Since directors make important decisions, you can set the number of votes they need to be elected. Corporate law says the default vote required is a majority (i.e. 50% + 1 vote). You can choose a higher number of votes if you want. Needing a higher vote will make sure there is greater agreement among your shareholders about who gets to be on the Board. But, it also means that voting in a director is less flexible.

Maximum flexibility, lowest control over the decision

Medium flexibility, medium control over the decision

Very low flexibility, highest control over the decision

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Let's go over Board of Director meetings now.
When the Board holds its meetings, how many directors need to show up for the meeting to go ahead?*
- 50% attendance
- 67% attendance
- 100% attendance
Your Board of Directors holds meetings throughout the year to decide important things about your company, like issuing new shares, approving a large loan for the company, and other business decisions. Since your directors decide important things about your company at their meetings, it's important to think about whether the meeting can go ahead if some of the directors are missing.

Needing all the directors to be there for a meeting to go ahead gives you the most comfort that you are fully represented. So for example, if the Board were approving a loan and only 2 of the 3 directors can make it to the meeting the loan could not be approved until all 3 can be there to decide.

Needing just some of the directors to be there for a meeting gives you some flexibility to not delay important decisions when someone can't make it. For example, if your company needs the loan ASAP you may not want to hold up the approval if one director is on vacation and can't make it to the meeting.

Lower representation for important decisions, usually easy to get a meeting to go ahead

Medium representation for important decisions, a little harder to get a meeting to go ahead

High representation for important decisions, least flexibility to get a meeting to go ahead

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We'll go over special rights of certain shareholders to choose a Director to sit on the Board.
Should certain shareholders get to place someone on the Board?
Should certain shareholders get to place someone on the Board?*
- Some individual shareholders will get to choose their own Board member
- A group of shareholders will get to choose their own Board member
You can give shareholders the special right to choose their own Board member. The idea is that this person will give a voice to that shareholder's interests. The person could even be the shareholder him or herself.

You can give a specific group of shareholders the special right to choose their own Board member. The idea is that this Board member will give a voice to the interests of that group of shareholders.

For example, you can say that the founders of the company as a group get to pick a Board member. You could also do the same for the minority shareholders.

If you have different classes of shares in your company (e.g. Class A Shares and Class B Shares), you can even give the right to the class of shareholders.
Board nominee opt out
- Skip this part

Which shareholders should get to place someone on the Board?*

Shareholder

Click on the "+" icon to add more.

Which group of shareholders will have the right to place someone on the Board?*

Description	Number of Board Members

Click on the "+" icon to add more.

If the group will get to choose multiple Board members, put the number here. (e.g. 3)

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Let's go over shareholder meetings now.
When shareholders have meetings, how many shareholders need to show up for the meeting to go ahead?*
- 50% attendance
- 67% attendance
- 100% attendance
Lower representation for important decisions, usually easy to get a meeting to go ahead

Medium representation for important decisions, a little harder to get a meeting to go ahead

High representation for important decisions, least flexibility to get a meeting to go ahead

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Let's go over shareholder approval of major business decisions now.
Do you want the voting shareholders, rather than the Board, to approve major business decisions? Choose which decisions your shareholders should have to approve.*
You can skip this part if you don't want the shareholders to approve major business decisions.
- Select All
- Changing the company share structure (recommended)
- Changing the company by-laws (recommended)
- Exempting a shareholder from some of your Unanimous Shareholder Agreement obligations (recommended)
- Declaring dividends
- Issuing shares and other securities (e.g. options)
- Taking on debt above a certain dollar amount
- Guaranteeing third party debts (e.g. a loan of a joint venture partner)
- Selling company assets above a certain dollar limit
- Investing in or buying another company for a price above a certain dollar amount
- Buying assets or other property above a certain dollar amount
- Entering into a major contract with financial obligations above a certain dollar amount
- Selling the company or giving up control of it to an investor
- Making strategic business agreements with competitors, customers, and suppliers
- Making a business agreement with a shareholder (other than normal ones, like employment agreements)
- Changing the kind of business the company was set up to do
- Winding up or putting the company into bankruptcy
- Other
Usually, the Board of Directors decides important business decisions on behalf of the shareholders. But, your Unanimous Shareholder Agreement can put the shareholders in charge of these decisions instead. Choose the decisions you want to hand over to the shareholders.

Your company has shares and those shares can be divided into classes with different rights. For example, some shares can have the right to vote and others can be non-voting.

Some small changes to your share structure can be done by the directors, and the law says other more major ones have to go to the shareholders for a vote.

Since these kinds of changes can impact your shareholder rights, you can say in your Unanimous Shareholder Agreement that all changes must go to the shareholders for a vote - both the big and the small ones.

Your by-laws have some rules about your company’s management, like things about important meetings, the kinds of officer positions you have, and how the company can borrow money.

The idea behind having a Unanimous Shareholder Agreement is to make all your shareholders subject to the same rules. So, you will want to be quite careful when you make any exceptions to those rules. Sometimes it makes sense to give a certain shareholder an exception to a rule in your agreement and if you like, we can make those exceptions subject to a shareholder vote.

Dividends are one way that you can move money out of your company to your shareholders. Usually the directors set and approve dividends. Since moving money out of your company is an important decision, you can make dividends subject to shareholder approval.

Selling new shares, bringing on new shareholders, and giving someone the option to buy new shares in the future are important decisions. Normally the directors make these kinds of decisions, but you can require a shareholder vote if you wish.

Since taking on debt is a big decision, you can make major borrowing subject to a shareholder vote.

There could be a time when your company is asked to guarantee another company’s debt. It doesn’t come up too often, but for example if you have partnered with another company on a project and that other company is providing financing for the project through their bank loan, you may be asked to give a guarantee on the loan (meaning you would pay the loan if needed). You can make that sort of a decision subject to a shareholder vote.

Selling the assets of your company can be an important decision because it impacts your ability to run the business. It can also be a normal part of doing business though. You can make larger sales of company assets subject to shareholder approval.

One way businesses grow is by taking over other companies or investing in them. You can ask shareholders for approval when you decide to do this but to make things easier, we’ll only ask for shareholder approval if the dollar amount is above a certain amount that you set.

One important way businesses grow is through buying assets or equipment. But it can be hard to make those sorts of financial commitments, especially when your company is a start-up. If you wish, you can ask your shareholders to approve any large spending of this kind above a certain dollar limit that you set.

You may want to have a say over how much money the company can spend in general when it enters into a major contract. For example, if you're looking at going into an expensive commercial lease you may want the shareholders to vote on it first.

Generally, selling the company is something the shareholders would have to vote on. But you can make it clear in your Unanimous Shareholder Agreement that a vote of the shareholders is needed, and you can set the approval level to be higher than a simple 50% majority too.

Also important is selling a controlling position to an investor. That's a big decision. What we mean here is selling enough shares to an investor to allow them to out-vote all the other shareholders (e.g. selling the investor more than 50% of the shares). You can make that choice subject to shareholder approval as well.

Going into business with competitors, major customers, and suppliers can sometimes be risky. We’re talking about agreements outside of the normal course of business here, not the usual day to day things.

For example, you could agree to partner up with a competitor on a project. While that could help you both to be successful in a new market, it could also make you worried about sharing too much confidential information. Agreeing to make someone your exclusive supplier could give you some great volume discounts and cost savings, but it also leaves you exposed if that supplier can’t live up to your expectations.

You can make these sorts of strategic decisions subject to shareholder approval if you wish.

Going into business with a shareholder can lead to questions about fairness. You can put these sorts of business deals to a shareholder vote.
Shareholder business decisions opt out
- Skip this part
When it comes to taking on debt, what dollar value would you like to set for when shareholder approval is needed?*
Giving your Board some flexibility to take on debt without going to the shareholders can be a good idea for flexibility, but you're free to set whatever limits you want for your company.
When it comes to selling the company's assets, what dollar value would you like to set for when shareholder approval is needed?*
Selling the assets of your company can be an important decision because it impacts your ability to run the business. Selling assets can be a normal part of business though, so giving your Board some flexibility to sell some assets without going to the shareholders can be a good idea. But, you're free to set whatever limits you want for your company.
When it comes to investing in or buying another company, what dollar value would you like to set for when shareholder approval is needed?*
One way businesses grow is by taking over other companies or investing in them. We’ll ask shareholders for approval when you decide to do this. But, to make things easier, we’ll only ask for shareholder approval if the dollar amount is above a certain amount that you set.
When it comes to buying assets or other property, what dollar value would you like to set for when shareholder approval is needed?*
One important way businesses grow is through buying assets or equipment. But, it can be hard to make those sorts of financial commitments. So, we’ll ask your shareholders to approve any large spending of this kind above a certain dollar amount that you set.
When it comes to entering into major contracts with large financial obligations, what dollar value would you like to set for when shareholder approval is needed?*
You may want to have a say over how much money the company can spend in general when it enters into a major contract. For example, if you’re agreeing to do a project and will have to spend a large amount on it, you may want to have to approve the project first. Another example could be agreeing to an expensive commercial lease. That way, you keep an eye on anything that’s too big of a commitment for now. We’ll ask your shareholders to approve any general spending above a certain dollar amount that you set.
Other: Write in your own rule and we'll put it into your agreement.*
For all of these decisions, what approval level do you want to have?*
- 50% shareholder approval
- 67% shareholder approval
- 100% shareholder approval
Maximum flexibility, lowest control over the decision

Medium flexibility, medium control over the decision

Very low flexibility, highest control over the decision

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Let's talk about confidentiality and competition now.
Do you want to add any of these shareholder promises?*
- Confidentiality
- Non-competition
You can include an agreement by all the shareholders to keep sensitive company information confidential. This takes the place of individual confidentiality agreements with your shareholders and particularly for start-ups and technology companies, is something that the early shareholders like to see. Each shareholder will acknowledge the confidential nature of the company’s information and agree to only use it for the benefit of the company and to grow its business.

You can include a non-competition clause. Each shareholder agrees that while they are a shareholder and for a set time afterward, they will not compete with the company.

We make an exception for small minority shareholders who own 5% or less of the company. Generally, that is seen as fair for a small investor.
Confi + non-comp opt out
- Skip this part
After a person is no longer a shareholder, for how long should they have to keep the company's information confidential?*
So your shareholders are not at risk of liability forever, you can place a time limit on how long their confidentiality promise lasts. For example, you could say a shareholder has to keep information confidential while they are a shareholder and for 3 years after they are no longer a shareholder.

In fact, courts prefer it (generally) when confidentiality obligations don't go on forever and your agreement is more likely to be enforceable if you put a time limit on it. Two to five years is fairly common, but it could be higher for companies in sensitive and highly competitive industries, like some tech start-ups. 10 years is typically seen as the upper limit.
After a person is no longer a shareholder, for how long should they not be allowed to compete with the company?*
The time limit you set needs to be reasonable or a court is likely to decide it's unenforceable. A typical time period is 1 to 3 years.

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We'll go over some rules about your company finances now.
You have a few choices about the company's finances. Check all that you would like to include. If you're unsure, make sure to check out the help tips by clicking on the "?" icon.
Financial features selections*
- Mandatory shareholder dividends
- Capital call
- Mandatory shareholder guarantees
If the company has enough funds and no outstanding loans owed to shareholders, you could choose to have it pay a mandatory dividend to the shareholders.

One way your company will give money back to you is through dividends. The normal rule is that the directors choose when the shareholders get a dividend, and they make that decision based on how much money is available in the company and how much of it they want to use for future business needs.

You can agree in your Unanimous Shareholder Agreement that if there is a certain amount of money left over and no loans owed by the company to shareholders (i.e. shareholder loans), the company must pay a dividend.

This option isn't typically recommended for start-up companies since in the early days the company usually needs every penny to keep the business growing, so paying out to the shareholders isn't usually the best use of money. But if getting a dividend if there is a certain amount of money left over is important to you, we can put that in your Unanimous Shareholder Agreement.

When a company first starts up it can be difficult to finance growth and day-to-day operations, so the shareholders often have to put their own money into the company.

One feature you can include in your Unanimous Shareholder Agreement is a capital call, which is an obligation by the shareholders to put more money into the company when finances are tight.

A capital call works like this:
- - The Board sets a budget for the year, which is approved by the shareholders.
  - If there is not enough money in the company at some point in the year to meet the budget, the Board can approve a capital call.
  - The shareholders must provide the shortfall the company needs to meet the budget.
You can exempt certain shareholders from the capital call obligation with the approval of the other shareholders.

With start-ups and early stage companies, it's very common for banks and other lenders to ask the shareholders to personally guarantee the company's debts. That means that if the company doesn't pay up, the shareholders have to pay. Your Unanimous Shareholder Agreement can say that shareholders must provide the personal guarantee if asked.
Financial features none of the above
- None of the above
Mandatory dividends.
Should the mandatory dividend only apply if the company earned a minimum amount of income?*
- Yes
- No
What percentage of net after-tax profit should the company have to pay to the shareholders as a dividend?*
What minimum amount of net after-tax profit must the company earn before a dividend is mandatory?*
Capital calls.
What approval of the Board of Directors is needed before the capital call can be made?*
- 50% of Director approval
- 67% of Director approval
- 100% of Director approval
Maximum flexibility, lowest control over the decision

Medium flexibility, medium control over the decision

Very low flexibility, highest control over the decision
Mandatory shareholder guarantees.
Who should have to give the guarantee?*
- All shareholders, no matter what (even minority shareholders)
- Just voting shareholders that own a certain percentage of the company (minority shareholders excluded)
Sometimes it can be unfair to ask all the shareholders to promise to give the loan guarantee. For example, a non-voting shareholder or someone who owns just a small percentage of the company will find it unfair to give a guarantee of the company's debts.

The fairest way to go about it is generally to make the guarantee requirement apply only to voting shareholders that own a certain percentage of the company.
What voting interest must a shareholder have to be required to give a guarantee?*
Will the company pay a fee to any shareholder who must give a guarantee?*
- Yes
- No
This is often seen as being fair in exchange for a shareholder being required to give the guarantee and tying up their own personal credit. The Board of Directors determines what the fee will be.
If a lender goes after only one shareholder who has given a guarantee, do you want all the other shareholders who also gave guarantees to reimburse that one shareholder who had to pay?*
- Yes
- No
You would think that when several shareholders guarantee a bank loan, lease, or some other financial obligation, the creditor would have to collect the fair share from each person individually if the company doesn’t pay the obligation, but that’s not how it works.

For example, if three shareholders all guaranteed a $60,000 bank loan and the company stopped making payments, you would think the bank would only be able to collect $20,000 from each one. The truth though is the bank can go after just one shareholder for the whole $60,000 if it wants.

The creditor can go after one or more of the people as it sees fit, usually going after the ones that actually have the money to pay. You can make an agreement among all the shareholders that give a guarantee that they will reimburse any of them who pays more than their fair share.

In our example, that means that if one shareholder has to pay the whole $60,000 then the other shareholders will reimburse that person $40,000 so he or she has only paid their $20,000 fair share.

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Let's go over shareholder loans now.
It is very common for shareholders to lend money to the company when you’re starting up and in the first stages of your business. If you have given money to the company or paid for business expenses and expect to be paid back, then you’ve made a shareholder loan. When it comes to repaying shareholder loans, you have three repayment options.
What rules do you want to make about repaying shareholder loans?*
- Repayments go to shareholders based on their percentage of the loans
- Repayments first go to shareholders who have loaned more than the others based on their ownership percentage in the company, and then based on their percentage of the loans
- Skip making rules for shareholder loan repayments and deal with it later
Most Common

Shareholder loans are paid back according to how much the loan is compared to all the shareholder loans made to the company.

For example, let's say we have three loans - one for $25,000 (25% of all the shareholder loans), another for $35,000 (35% of all the shareholder loans), and the last one for $40,000 (40% of all the shareholder loans).

Any time the company makes a payment to shareholder loans, 25% of the payment has to go to the first loan, 35% to the second, and 40% to the third loan.

If the company wants to pay back $10,000 one month, then $2,500 (25%) goes to the first loan, $3,500 (35%) to the second, and $4,000 (40%) to the last loan.

This is an easy way to deal with shareholder loans and is the more common option.

More Fair, But More Complicated

Sometimes a shareholder lends more than their fair share to the company. For example, the shareholder may own 30% of the company’s shares but has made 50% of the shareholder loans to the company.

If that’s the case, you may want to have the company pay back that shareholder first until their loan equals their ownership percentage. After that, the loans are paid back according to how much the loan is compared to all the shareholder loans made to the company (just like the previous option).

For example, let's say there is a total of $100,000 shareholder loans to the company. Elon is a shareholder that owns 30% of the shares but he's loaned $50,000 to the company. So our friend Elon has loaned more than what we might say was his fair share. Since he owns just 30% of the company, we would have expected him to have only loaned $30,000 ($100,000 in loans x 30% = $30,000).

If the company wants to make a payment toward its shareholder loans, it will first pay Elon $20,000 to bring his loan down to 30% of all the money borrowed from the shareholders and matched up to his 30% ownership in the company. After that repayments go to the shareholders on their percentage of the loans, just like in the previous option above.

This is a little more complicated but usually seen as more fair.

Most Flexible

Your last option is to simply not include any repayment rules in your Unanimous Shareholder Agreement. Instead, you will come up with repayment rules in a separate agreement with a shareholder that makes a loan to the company. The advantage here is flexibility and the disadvantage is it can lead to disagreements later since there can be different rules for each shareholder.

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We know, that was a long one! Take a break with a bad law joke.

A man sued an airline company after it mishandled his luggage. Sadly, he lost his case.

You're making good progress, keep it up!

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You have a lot of flexibility about your rules for issuing new shares in the company or transferring existing shares to new owners. We'll walk you through your choices.
Check all that you want to include in your Unanimous Shareholder Agreement. If you're unsure about any of the choices, be sure to check out the help tips by clicking on the "?" icon.
Share issuance and transfer rules
- Make any transfers of shares to new owners subject to shareholder approval
- Give current shareholders the chance to buy any new shares first
- Give the other shareholders a right of first offer when a shareholder wants to sell their shares
- Give the other shareholders a right of first refusal when a shareholder wants to accept an offer to buy their shares from an outside party
- Include a drag-along right
- Include a tag-along right
- Include a shotgun clause
If someone wishes to sell or transfer their shares, you may want the other shareholders to have to approve the transfer first.

Let's look at an example. Let's say you go into business with two of your friends, Bill and Richard. You get along really well with them and share the same vision for your business. Bill eventually decides that he wants to go another direction and tells you he doesn't want to be a part of the business anymore. He still owns his shares, of course, so he decides to sell them to Elon. But there’s a problem: you really can't stand working with Elon. Your visions are different and there's no way you can see yourself working well with him. On top of that, Elon has a business that could compete with yours.

To avoid this bad business partner issue, you can make share transfers subject to the approval of the other shareholders.

We make a few exceptions where a shareholder vote is not needed:
- - Transfers to holding companies and trusts for tax and estate planning purposes, so long as the individual shareholder maintains control.
  - Special cases of transfers that we'll go over in the next few questions, including rights of first offer and refusal, drag-along rights, tag-along rights, and shotgun clauses.
There will come a time when you may want to issue new shares in your company. Each time you do, the percentage of the company owned by your current shareholders goes down and so does the voting control they have. This is called "shareholder dilution".

One way to deal with this problem is to give each shareholder the right to buy any new shares being issued first before they are offered to someone new that is not yet a shareholder. This is known as a “preemptive right”. It works by giving existing shareholders the right to buy the same proportion of new shares as what they currently own. So for example if someone owns 20% of the company today, they can buy 20% of any new shares offered.

One important thing to understand about a preemptive right is that it is just the right, not an obligation, to buy new shares.

A right of first offer means a shareholder who wishes to go find someone to buy their shares has to first offer to sell the shares to the other shareholders.

Sometimes a shareholder decides it's time to see if they can find some outside party to buy their shares. A right of first offer means that before a shareholder can look for an outside party to sell their shares to, they have to first offer the shares to the other shareholders.

If the other shareholders do not want to buy the shares, then the selling shareholder is free to go look for an outside party to buy them for the same price and on the same conditions as were offered to the other shareholders.

The selling shareholder has 6 months to go find a buyer. After that, the right of first offer rules begin again.

A right of first refusal means when a shareholder gets an offer from an outside party to buy their shares, they have to give the other shareholders a chance to match the offer.

A right of first refusal means that if a shareholder receives an offer to buy their shares from an outside party, the shareholder has to first let the other shareholders match the offer. If the other shareholders want to accept the offer, then they get the shares. If the other shareholders refuse to match the offer, the sale goes ahead to the outside party.

What's the difference between a Right of First Offer and a Right of First Refusal?

You may be wondering what the difference is between a right of first offer and a right of first refusal. They are very similar and the difference comes down to the order of events.

If the outside party offer comes first, then you follow the right of first refusal rules. The price is set by the outside party. The other shareholders have to decide whether to match, or refuse to match, the outsider's price and terms.

If there is no outside party offer yet but the shareholder has decided they want to go find someone to sell their shares to, then you follow the right of first offer rules. The shareholder that wishes to sell sets the price. The other shareholders have to decide if they want to accept the offer.

In both cases, the outcome is basically the same - the other shareholders get the first opportunity to get the selling shareholder's shares if they want them. If not, the selling shareholder is free to go ahead with a sale to an outside party.

When you're selling your business, a potential buyer may offer to buy all the shares of the company. If a majority of the shareholders want to accept the offer, a drag-along right means they can force the other shareholders to also sell their shares.

Let's say you have an offer from someone to buy your company and a majority of the shareholders want to go ahead with the sale. Great! But, you have one shareholder that's just not agreeing to go along with the sale and is holding it all up. The person who wants to buy your company may back out because they want all of the company's shares, not just part of them.

To get around this problem, you can have a "drag along" right. It works just like it sounds - the other shareholders can force the uncooperative shareholder to sell their shares, dragging them along in the sale of the company if they have to.

A potential buyer may offer to buy shares from just one or a few shareholders to gain control of the company, rather than buying shares from everyone. A tag-along right gives the left out shareholders the right to join in on the deal and sell their shares, too.

Let's say you have an offer from someone to buy your company but they only want a part of it – just enough to control the voting of the company. As an example, say you have three shareholders in your company, each owning a third of the voting shares. The buyer offers to buy the shares of just two of your shareholders, so one shareholder is left out.

A tag-along right is meant to give some fairness to the left out shareholder by allowing him or her to join in on the deal. In our example if the third shareholder decides to tag along, he or she joins in on the deal on the same terms (e.g. price, etc.).

You may see a problem here though. The buyer only wanted 2/3rds of the shares, not all of them. If the buyer does not want to buy all the shares now with the tag-along shareholder joining the deal, we make an adjustment. All three shareholders will now sell 2/3rds of their shares, so no one is left out.

A shotgun clause is an agreement between shareholders that allows one shareholder to put a price on the table for the value of the business and leave it up to the other shareholder(s) to take the money or match the offer.

A shotgun clause is meant to end a disagreement between shareholders by forcing one of them out of the company. So, it is a pretty serious clause to consider putting into your agreement. Here's how it works.

Alex decides he wants to either (1) sell all his shares to Brian and Chelsea or (2) buy all the shares of Brian and Chelsea. But one way or another, someone has to go. Alex tells Brian and Chelsea that he is triggering the shotgun clause and is offering to sell his shares for $100 per share.

Brian and Chelsea have a choice to make. They can choose to buy Alex's shares for $100 per share or they can sell their shares to Alex for the same price. There are three basic outcomes:

(1) If both Brian and Chelsea decide to buy Alex's shares, then they will buy Alex’s shares and divide them up between them according to their existing ownership position in the company.

(2) If both Brian and Chelsea decide to sell their shares to Alex, then Alex must buy all of Brian and Chelsea's shares for the $100 price per share that started the shotgun.

(3) If Brian decides to buy Alex's shares but Chelsea decides to sell her shares to Alex, then Brian ends up having to buy both Alex's shares and Chelsea's shares.

So as you can see, in a shotgun situation someone ends up going. That's how it's used to end shareholder fights. Shotgun clauses are a little dangerous because of that; if you include one, you must be prepared to lose your shares if the shotgun clause is triggered.
Share transfers none of the above
- None of the above
Make any transfers of shares to new owners subject to shareholder approval.
What approval of the shareholders should be needed to allow a transfer to go ahead?*
- 50% of shareholder approval
- 67% of shareholder approval
- 100% of shareholder approval
Maximum flexibility, lowest control over the decision

Medium flexibility, medium control over the decision

Very low flexibility, highest control over the decision
Include a shotgun clause.
Do you want to include an optional fair market value price in your shotgun clause? This would override the offer price that started the shotgun process.*
- Yes
- No
Shotgun clauses are risky, so approach them with caution. The idea is one person triggers the shotgun procedure by making an offer to buy the shares of the other shareholder(s), or to sell their shares to the other shareholder(s), for a certain price. Read the help section in the previous question if you need some more background.

The problem is if one shareholder is wealthy and the other shareholder is poor. The wealthy shareholder can set a low share price for the shotgun procedure and take advantage of the poorer shareholder.

For example if the market value of the shares is $50 per share, the wealthy shareholder could trigger the shotgun by offering to buy out the other shareholder for say just $10 per share. That's a big discount.

The other shareholder should switch the shotgun, as allowed, and say "no thanks, I'll buy your shares for $10, thank you very much." The thing is though, the other shareholder is poor and can't afford to pay even the $10 per share price. So, the wealthy shareholder just acquired the company for a huge bargain and pushed out the other shareholder.

That's just one reason why you have to be very careful with shotgun clauses. We can get around this particular problem by saying that instead of the share price being set by the shareholder that is triggering the shotgun, we'll use the fair market value of the shares. That way, you're using a fair price and are less likely to have bid manipulation.

It isn't a perfect solution, though. In our example, the fair market value was $50 and that's still outside of the poor shareholder's budget. But the poor shareholder at least would have gotten $50 per share and even though they were forced out of the company, they got pushed out for a fair price.

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Let's go over some rules about what happens when a serious life event impacts a shareholder.
When a major life event happens that impacts a shareholder's ability to be a part of the business, you can give the company or the shareholders the right to buy back the shares. Who should have that right?*
Click on the "?" button for more details about the life events we cover in your Unanimous Shareholder Agreement.
- The company
- The other shareholders
There are some serious life events that can impact a shareholder and when they happen, the law may transfer the shares to another person. For example, in death or divorce the shares may go to the estate or a spouse. You may not want those shares to go to another person, so we can give your company the right to buy back the shares if an event like that comes up.

There are other serious situations where the shares don't transfer to another person, but the shareholder is so impacted they cannot carry on in the business. In that case, you don't want shareholder voting and other decisions to be put on hold and so again, the company gets the right to buy back the shares.

Here are some of the events we cover in a Unanimous Shareholder Agreement:
- - death of a shareholder;
  - the shareholder becomes critically ill or disabled;
  - the shareholder is found guilty of a crime and will be in jail for an extended period;
  - the shareholder goes missing for a long time and can't be found;
  - the shares are ordered by a court to be transferred to someone else to satisfy a judgment;
  - bankruptcy of the shareholder;
  - divorce or separation where the shares become part of the property of the spouse;
  - a lender gets the shares as collateral for a loan; and
  - a corporate shareholder is bought by an outside party and the change in control has not been approved as required by your Unanimous Shareholder Agreement.
The company may be in a better position with cash on hand to buy back shares of someone that has gone through a triggering life event. It's also sometimes seen as more fair to give the buy back right to the company since not every shareholder will have the funds to invest more through purchasing the shares. Lastly, there is more control over the situation (usually) when you give the company this buy back right since there's no risk that the other shareholders can't decide if they want the shares or not.

Since the other shareholders are invested in the business, they may want the right to buy the shares of someone that has gone through a triggering life event.
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Would you like the same right to buy back the shares of an employee who leaves the company for any reason?
- Include
When an employee shareholder leaves the company (e.g. resigns or is let go), the company or the shareholders, depending on what you chose in the last question, will get the right to buy the departing employee's shares.
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Triggering event opt out
- Skip this part

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Let's put on the finishing touches.
Now for your last big decision before we wrap up, if in the future you want to change any of the things we've gone over, what approval of the shareholders should be needed?*
- 50% of shareholder approval
- 67% of shareholder approval
- 100% of shareholder approval
Maximum flexibility, lowest control over the decision

Medium flexibility, medium control over the decision

Very low flexibility, highest control over the decision
Your Unanimous Shareholder Agreement includes promises by your company to the shareholders, so it also has to sign the agreement. Who will sign for the company? If you don't know yet, just leave it blank.
This person should be a director of the company.
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Let's give your Unanimous Shareholder Agreement a date.*
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Unanimous Shareholder Agreement quantity

Unanimous Shareholder Agreement

Unanimous Shareholder Agreement

Step 1 of 14

Let's get started with your Unanimous Shareholder Agreement. We'll start with the basics and go up from there.

Let's make some rules for your Board of Directors.

Let's go over Board of Director meetings now.

We'll go over special rights of certain shareholders to choose a Director to sit on the Board.

Let's go over shareholder meetings now.

Let's go over shareholder approval of major business decisions now.

Let's talk about confidentiality and competition now.

We'll go over some rules about your company finances now.

Let's go over shareholder loans now.

We know, that was a long one! Take a break with a bad law joke.

You have a lot of flexibility about your rules for issuing new shares in the company or transferring existing shares to new owners. We'll walk you through your choices.

Let's go over some rules about what happens when a serious life event impacts a shareholder.

Section Break

Section Break

Let's put on the finishing touches.

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Unanimous Shareholder Agreement

Unanimous Shareholder Agreement

Step 1 of 14

Let's get started with your Unanimous Shareholder Agreement. We'll start with the basics and go up from there.

Let's make some rules for your Board of Directors.

Let's go over Board of Director meetings now.

We'll go over special rights of certain shareholders to choose a Director to sit on the Board.

Let's go over shareholder meetings now.

Let's go over shareholder approval of major business decisions now.

Let's talk about confidentiality and competition now.

We'll go over some rules about your company finances now.

Let's go over shareholder loans now.

We know, that was a long one! Take a break with a bad law joke.

You have a lot of flexibility about your rules for issuing new shares in the company or transferring existing shares to new owners. We'll walk you through your choices.

Let's go over some rules about what happens when a serious life event impacts a shareholder.

Section Break

Section Break

Let's put on the finishing touches.

Legal help you can get through in less than the time it takes to finish your coffee.

Send a little love to Made It Legal.

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