A shareholder agreement is a private contract among the owners of a corporation that governs their relationship with each other and, often, their relationship with the corporation itself. It exists because the default rules found in corporate legislation across Canada, while comprehensive in many respects, were never designed to address the full range of circumstances that arise when multiple individuals invest capital, time, and expertise into a shared business venture. The statutory framework establishes the bare minimum requirements for how corporations must operate, but it leaves vast territory uncovered, territory that becomes critically important the moment shareholders find themselves in disagreement, facing unexpected life events, or contemplating an exit from the business they helped build.
In Canada, corporations are creatures of statute. A business may be incorporated federally under the Canada Business Corporations Act or provincially under legislation specific to each jurisdiction. The Business Corporations Act governs incorporations in British Columbia, while the Business Corporations Act in Alberta serves the same function in that province. Saskatchewan has its own Business Corporations Act, as does Ontario, where the Business Corporations Act has governed corporate affairs for decades. In Quebec, the Business Corporations Act creates the framework for Quebec corporations, though the Civil Code of Quebec provides an underlying foundation that influences how contractual relationships, including shareholder agreements, are interpreted and enforced. As of the date of authorship, each of these statutes provides default rules about matters such as how directors are elected, how dividends are declared, what happens when a shareholder dies, and how fundamental corporate changes require approval. Yet these default rules operate as precisely that: defaults. They represent what will happen if the shareholders have not agreed to something different.