Unanimous Shareholder Agreements in Ontario: Form vs Substance
A unanimous shareholder agreement is often treated as a label.
In practice, it changes the allocation of authority within a company.
Transfer of Director Powers
A USA can transfer powers from directors to shareholders.
When it does, the responsibilities associated with those powers follow.
Shareholders may assume roles typically held by directors, whether they recognize it or not.
Liability Follows Control
If shareholders exercise decision-making authority, they may also assume the liabilities associated with those decisions.
This is not always apparent from the document itself.
Label vs Function
Some agreements are labeled as unanimous shareholder agreements but do not clearly define what powers have been transferred.
Others function as USAs without using the label.
Courts look at substance, not form.
Misunderstanding the Structure
Many business owners are not aware of whether their agreement changes the default corporate structure.
They operate under assumptions that may not reflect the actual allocation of authority and responsibility.
The Practical Takeaway
A unanimous shareholder agreement is not just a variation of a standard agreement.
It alters who controls the company and who bears responsibility for that control.
Understanding that shift is essential to understanding how the agreement operates.