Partnership / Shareholder Agreement Checklist |
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Written by Chris Green
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1. For the day-to-day operation of the company what kind of limits will you have on discretionary spending?
2. What should your Board of Directors look like? Who controls it? What decisions (if any) require unanimity?
3. Are the shareholders required to spend their full-time attention on company matters? And what if they can't (injury or illness or economic necessity)?
4. What is required, and how will the decision be made, if you want to do a major refinance or sell the business?
5. Will the majority shareholder have “drag along” rights to force the minority shareholders to join in on the sale of the business, and will the minority be allowed to "tag along" if the majority sells out?
6. Will the shareholders be required to provide their personal guarantee if the company borrows money?
7. Do you want a protective clause which would throw a roadblock in the way of a creditor (including a departing spouse) trying to seize and sell shares (by devaluing the shares and/or providing that they may be purchased over an extended period of time by the other shareholders)?
8. Will shareholders’ loans bear interest and will they be secured?
9. What happens if there is a cash call and some shareholders are unable or unwilling to contribute their share?
10. What about a buyout if one of you becomes disabled?
11. Most agreements make provisions for the orderly purchase of a deceased shareholder’s shares from his/her estate; will you, or can you, use a life insurance to fund the buyout of a deceased shareholder?
12. Most agreements provide that you have to offer your shares to the existing shareholders before selling them to an outsider. Do you want this provision?
13. Do you want a “shotgun clause”? (This is a provision wherein any offer you make to another shareholder to buy their shares could be turned around and used against you and you could be required to sell your shares on the same terms as your offer.)
14. What about non-competition, in the event one of you leaves, or is forced out? |
Corporate Reorganization Pursuant to the Bankruptcy and Insolvency Act |
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Written by Chris Green
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Ever wondered how huge companies, such as Dow Chemicals or Eaton's manage to sail through financial disaster, apparently unscathed?
Many of them do it by availing themselves of the relatively little known provisions of the Bankruptcy and Insolvency Act, or the Company Creditors Arrangement Act, two federal laws which permit companies, under some circumstances, to freeze
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Written by Chris Green
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What are they?
A legal document whereby a person appoints one or more people to look after their legal and financial affairs, by allowing the person appointed (the attorney) to sign documents on their behalf. A Power of Attorney is a very powerful document and should only be granted to very trusted individuals after careful consideration.
Why make one?
As a precaution: in the event that you experience a debilitating illness or have an accident that incapacitates you and prevents you from acting on your own behalf.
As a convenience: if you travel and may be out of town when business transactions arise (e.g. bills need to be paid, or your house is listed and an offer comes in while you are away).
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The Advantages of Incorporation |
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Written by Chris Green
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Incorporation is the process whereby one or more individuals make application to a provincial, state, or federal government for the creation of an artificial entity, or "person" called a limited liability company. In earlier times, an act of Parliament was required to create such an artificial person; nowadays the process is considerably simpler, but is still regulated by statute.
The entity created by incorporation is
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