Summary
In an Ontario corporation, a shareholder agreement is where owners decide, in writing, how decisions get made and what happens when they disagree. The Business Corporations Act (OBCA) addresses two kinds: an agreement between two or more shareholders on how their shares are voted, and a unanimous shareholder agreement among all the shareholders that can take powers away from the directors. The second kind has real legal consequences: it can bind people who buy in later, and, to the extent it restricts the directors’ powers, it moves directors’ duties and liabilities onto the shareholders who are party to it.
This post covers what the Act says, plus questions to settle before you sign. It covers corporations under Ontario’s Business Corporations Act only.
Still choosing between a sole proprietorship, a partnership and a corporation? Start with how to decide on your business structure.
What the Act means by a shareholder agreement
Voting agreement. A written agreement between two or more shareholders may provide that the shares they hold will be voted as the agreement says (s. 108(1)).
Unanimous shareholder agreement (USA). A written agreement among all the shareholders, or among all of them and one or more non-shareholders, may restrict in whole or in part the powers of the directors to manage or supervise the business and affairs of the corporation (s. 108(2)). The Act defines “unanimous shareholder agreement” by reference to that section and to the sole-shareholder declaration below (s. 1(1)).
One owner. If one person is the registered holder of all the issued shares and signs a written declaration restricting the directors’ powers, the declaration is deemed a USA (s. 108(3)).
Who is bound
A transferee of shares subject to a USA is deemed to be a party to it (s. 108(4)). The same goes for a person who is not an existing shareholder and is issued a share while a USA is in effect, whether or not they knew about the agreement (s. 108(7)(a)), and for a person who otherwise acquires a share (s. 108(8)(a)). Neither the issue nor the transfer ends the agreement (s. 108(7)(b), (8)(b)).
There is a safety valve. A purchaser for value without notice of the USA may rescind the share purchase by giving notice to the corporation within 60 days after actually receiving a complete copy of the agreement (s. 108(7)(c)). A transferee who is a purchaser for value without notice of the USA may send a notice of objection to the corporation and the transferor within 60 days after actually receiving a complete copy of the agreement, if the transferor’s share certificate did not refer to it (s. 108(9)). The transferee can then rescind, or demand that the transferor pay the fair value of the shares, and in the fair-value case can recover any amount paid above fair value (s. 108(10)–(11)).
What an agreement can do
Shift powers and liabilities. A shareholder who is a party to a USA has the rights, powers, duties and liabilities of a director, including any defences available to directors, to the extent the agreement restricts the directors’ discretion or powers. The directors are relieved of their duties and liabilities to the same extent (s. 108(5)). Shareholders may fetter their discretion when exercising those powers (s. 108(5.1)).
Set how it changes and how disputes get resolved. A USA may specify how it is amended, and may refer matters the shareholders can’t agree on to arbitration on stated procedures (s. 108(6)).
Control new share issues. If the articles or a USA so provide, shares of a class or series must first be offered to existing shareholders on the terms provided (s. 26).
Restrict transfers. The Act contemplates a USA that restricts the right to transfer securities (s. 67(2)).
Provide a dissolution trigger. A court may wind up a corporation where a USA entitled a complaining shareholder to demand dissolution after a specified event and that event has occurred (s. 207(1)(b)(i)).
Questions to settle in writing
The Act doesn’t prescribe the content of an agreement beyond the points above, so these are drafting questions, not legal requirements. Settle each of them in writing:
Which decisions need every shareholder’s approval, and which can the board make?
What happens when a shareholder wants out, dies, becomes unable to work, or stops contributing?
How will the shares be valued, and who decides if you disagree?
Can a shareholder sell to an outsider, and what do the others get a say in?
What is the process when owners deadlock, and does it end in arbitration (s. 108(6)) or a buy-out?
If there’s no agreement, or it fails
The Act gives shareholders some statutory rights even without a contract:
Holders of at least 5% of the issued voting shares can requisition the directors to call a shareholders’ meeting (s. 105(1)), and shareholders can remove directors by ordinary resolution at an annual or special meeting (s. 122(1)), subject to the Act’s cumulative-voting protection for directors elected that way (ss. 120(f), 122(1)).
A complainant can apply for leave to bring a derivative action on the corporation’s behalf, after 14 days’ notice to the directors (not required if all the directors are defendants, s. 246(2.1)) and if the court is satisfied on three conditions (s. 246(1)–(2)). “Complainant” includes registered holders and beneficial owners of securities, and former ones, directors and officers, and any other person the court considers a proper person to apply (s. 245).
A complainant can apply for an oppression remedy where the corporation’s conduct is oppressive, unfairly prejudicial or unfairly disregards the interests of a security holder, creditor, director or officer (s. 248(2)). Orders can include a buy-out of the shares, compensation, amending or creating a unanimous shareholder agreement, or winding up (s. 248(3)(c), (f), (j), (l)).
A court may wind up a corporation where that is just and equitable (s. 207(1)(b)(iv)).
In certain corporate actions, including amalgamation or a sale of substantially all property, a shareholder entitled to vote on the resolution who dissents and complies with the Act can be paid the fair value of their shares by the corporation (s. 185(1), (4)).
Practical takeaways
Starting a corporation with co-owners: decide the questions above before issuing shares, and get the agreement signed by all shareholders (s. 108(2)).
Buying shares: ask whether a USA is in effect and get a complete copy. You will be deemed a party whether or not you knew (s. 108(7)–(8)). The 60-day windows start when you receive the complete copy (s. 108(7)(c), (9)).
Already in a dispute: check what the agreement says about amendment and arbitration (s. 108(6)), and what statutory remedies exist (ss. 246, 248).
FAQ
What is a unanimous shareholder agreement in Ontario?
A written agreement among all the shareholders, or among all of them and non-shareholders, that restricts in whole or in part the directors’ powers to manage the corporation’s business and affairs (OBCA s. 108(2)). A sole shareholder’s written declaration to the same effect is deemed one (s. 108(3)).
Does a shareholder agreement bind someone who buys shares later?
A unanimous shareholder agreement does. A person issued or transferred a share while a USA is in effect is deemed a party, whether or not they knew of it (s. 108(7)(a), (8)(a)). A person issued a share who is a purchaser for value without notice has 60 days after actually receiving a complete copy to rescind (s. 108(7)(c)). A transferee in the same position has 60 days to send a notice of objection, then can rescind or demand fair value from the transferor (s. 108(9)–(10)).
Can a shareholder agreement require arbitration?
A USA may provide that matters the shareholders can’t agree on be referred to arbitration on the procedures it specifies (s. 108(6)(b)).
Do shareholders take on directors’ liabilities under a USA?
To the extent the agreement restricts the directors’ discretion or powers, a shareholder who is a party has a director’s rights, powers, duties and liabilities, and the directors are relieved to the same extent (s. 108(5)).
What if there’s no agreement and the owners fall out?
Statutory options include a derivative action (s. 246), an oppression application (s. 248) and, in some cases, a court-ordered wind-up (s. 207). Each has conditions.
Talk to us
Starting a business with co-owners, buying into one, or facing an owner dispute? Our lawyers handle corporate matters for Ottawa business owners. Book a consultation: (613) 226-1011 (Mon–Fri, 9 AM–5 PM).
This content is general information about Ontario law as of October 2026. It is not legal advice and does not create a lawyer-client relationship. Laws change and every situation is different. Speak with a lawyer about your specific circumstances. Published October 26, 2026. Written by the lawyers of Francis Mehr LLP (Francis Lawyers), Ottawa.
