What Is a Unanimous Shareholder Agreement in Canada?

What a unanimous shareholder agreement changes

A unanimous shareholder agreement, usually shortened to USA, is a written agreement signed by every shareholder of a corporation (or by all shareholders together with one or more non-shareholders) that restricts, in whole or in part, the power of the directors to manage or supervise the corporation’s business. Federally, the Canada Business Corporations Act confirms that such an agreement is valid law once made, provided it is otherwise lawful. The CBCA’s definitions section formally ties the term “unanimous shareholder agreement” to this same provision.

The practical effect is a shift of control. Ordinarily, a corporation’s board of directors runs the business. A USA moves some or all of that authority to the shareholders themselves. Corporations Canada’s guidance states plainly that under the CBCA, the board keeps control of management “unless there is a unanimous shareholder agreement that transfers the powers and liabilities of the directors to the shareholders.” That last phrase matters: a USA does not just transfer power, it transfers the legal liabilities that go with exercising it, so shareholders who take over management functions can end up carrying obligations a director would otherwise bear.

How the three jurisdictions treat it

Federally, Ontario, and Alberta all recognize the unanimous shareholder agreement as a valid governance tool, but the statutory wording and a few details differ.

The one clear difference worth flagging for Ontario readers involves professional corporations, common for lawyers, doctors, and accountants who incorporate their practices. A USA involving an Ontario professional corporation is void unless every shareholder of that corporation is also a member of the profession, under OBCA s 108(5). The federal CBCA has no equivalent restriction in the facts reviewed here.

Alberta’s Business Corporations Act treats a USA as one of the corporation’s constating documents, meaning it sits alongside the articles and bylaws as a source of rules directors, officers, and the corporation must comply with, according to the Alberta King’s Printer statute text. A Government of Alberta fact sheet also confirms that corporations can use either the articles of incorporation or a USA to grant specific waivers, such as allowing a director to participate in certain corporate opportunities that would otherwise conflict with their duty to the corporation.

The sole shareholder route

Not every corporation has multiple shareholders, and the CBCA accounts for this. Where a corporation has only one shareholder, that person can sign a written declaration instead of an agreement, achieving the same restriction on directors’ powers, as Corporations Canada explains. Ontario’s definition of a USA likewise captures a declaration alongside an agreement, so the same one-person mechanism is available there.

What a USA is typically used for

Because a USA can restrict directors’ powers “in whole or in part,” it does not have to be all-or-nothing. A corporation’s shareholders might use one to reserve only specific decisions to themselves, such as approving major contracts, issuing new shares, or bringing in new investors, while leaving day-to-day operations with the board. Because a USA is a private contract among shareholders rather than a document filed with a corporate registry, there is no government filing fee attached to creating or amending one in any of the three jurisdictions covered here; the cost, where one exists, is the legal work of drafting and negotiating its terms.

Anyone who becomes a shareholder of a corporation that already has a USA in place is typically bound by it automatically, since the agreement is a term of holding the shares themselves rather than a separate contract each new shareholder must individually re-sign. This is one reason the CBCA, OBCA, and ABCA all treat the USA as a document that runs with the corporation, not just with the individuals who happened to sign it first.