Most owners who ask us for “a shareholder agreement” get a unanimous one and never learn what the adjective is doing. It is not a description of how many people signed; it is a switch, and when you flip it the document stops being a contract and becomes part of the corporation's constitution — on the same footing as the articles — with consequences that reach people who never saw it and impose duties on people who thought they were only owners.
The problem the statute is solving
Canadian corporate law puts management in the hands of the directors. Section 102 of the CBCA says the directors shall manage, or supervise the management of, the business and affairs of the corporation; shareholders elect them, and that is largely the end of the shareholders' say. In a public company this is the point. In a company with three owners who are also the three directors and the three employees, it is absurd: it means the owners cannot legally agree among themselves that no one will borrow more than $100,000, or issue shares, or hire a relative, without the board's approval — because any agreement that fetters the directors' discretion is, at common law, unenforceable. The board must be free to manage in the corporation's best interest, and a promise to vote a certain way as a director is a promise the law will not hold you to.
The unanimous shareholder agreement is the statutory exception. Where all the shareholders agree, the statute lets them take the wheel from the directors, in whole or in part, and drive.
What a USA does that a contract cannot
| Feature | Ordinary shareholder agreement | Unanimous shareholder agreement |
|---|---|---|
| Who signs | Any two or more shareholders | Every shareholder (or a single shareholder's written declaration) |
| Can it restrict the directors' powers? | No — a fetter on directors' discretion is unenforceable | Yes, in whole or in part (CBCA s. 146(1), OBCA s. 108(2)) |
| Who carries the directors' duties and liabilities for restricted powers? | The directors | The shareholders, to the extent the powers were taken (CBCA s. 146(5), OBCA s. 108(5)) |
| Does it bind a buyer of shares? | Only if the buyer signs | Yes, automatically; the buyer is deemed a party (CBCA s. 146(3)) |
| Legal character | Contract | Constitutional document, alongside the articles and by-laws |
| Amendment | As the contract provides | Only with every shareholder's consent, unless it says otherwise |
The clause owners do not read: you now carry the directors' liability
Section 146(5) of the CBCA is the price of the power. A shareholder who is party to a USA “has all the rights, powers, duties and liabilities of a director” to the extent the agreement restricts the directors' discretion, and the directors are relieved of those duties and liabilities to the same extent. The Ontario section reads the same way. So if you are a passive investor who holds 10% and signed a USA that requires shareholder approval for any borrowing you have, on the borrowing decision, a director's fiduciary duty, a director's duty of care, and a director's exposure. If the agreement takes all the directors' powers, which some do, the shareholders are effectively the board — with the statutory liabilities directors carry for unremitted source deductions and unpaid wages sitting alongside them. Whether a USA transfers those particular statutory liabilities is contested, but it is not a bet a 10% investor should be making without knowing it is a bet.
This is exactly the reason a well-drafted USA restricts the directors surgically. It lists the decisions the shareholders want a veto over — issuing shares, selling the business, borrowing above a threshold, changing the business, paying dividends outside a formula, related-party transactions — and leaves everything else with the board. The owners get control where control matters, and the investor's exposure is confined to the decisions they actually make.
How it follows the shares
Under section 146(3), a person who buys shares subject to a USA is deemed to be a party to it. The buyer does not need to sign; the buyer needs to have been told, which is why section 49(8) of the CBCA requires the share certificate to note the agreement conspicuously, and why section 146(4) lets a buyer who was not given notice rescind the purchase within 30 days of learning the agreement exists. A shareholder agreement that is merely a contract dies with the first transfer to someone who declines to sign it. A USA travels with the shares. For a company that expects to bring in new owners — a key employee, a family member, an investor — this is the difference between an agreement that lasts and one that lasts until the first exit.
What goes in one
The restriction on directors' powers is the part the statute cares about. Everything else in the document is ordinary contract, and it is where most of the value sits: how shares are valued and bought when someone dies, is disabled, quits or is fired; the right of first refusal; the shotgun or the auction that ends a deadlock; drag-along and tag-along rights on a sale; non-competition and confidentiality; how dividends are declared; dispute resolution. We have written separately about what a shareholder agreement needs to cover and when you need one at all. Those provisions work in an ordinary agreement or a unanimous one. The vetoes over management only work in the unanimous one.
When you do not want a USA
Three situations. A corporation with many small shareholders, where unanimity is impractical and a single holdout can freeze amendments forever — a drag-along in an ordinary agreement plus a clean set of articles is better. A corporation that expects institutional investors, whose counsel will insist on their own form and often prefer rights in the articles to a USA that carries fiduciary exposure. And a corporation whose owners genuinely want the board to manage — a family business with an independent board, say — where a USA that restricts the directors defeats the purpose of having them. In each case the statute still lets the shareholders make a USA; the question is whether they should.
In most closely held companies you should, and you should read the section that hands you the directors' liabilities before you do. The document is called unanimous because everyone has to sign it. It works because, once everyone has signed, everyone is in charge.
Common questions
What is a unanimous shareholder agreement?
A written agreement among all the shareholders of a corporation (or a declaration by a sole shareholder) that restricts, in whole or in part, the powers of the directors to manage the corporation. It is recognised by CBCA s. 146 and OBCA s. 108 and has the force of a constitutional document, not just a contract.
What is the difference between a shareholder agreement and a unanimous shareholder agreement?
An ordinary shareholder agreement is a contract among the shareholders who sign it and cannot lawfully restrict the directors' discretion. A unanimous shareholder agreement is signed by every shareholder, can restrict or remove the directors' powers, binds later buyers of shares automatically, and transfers the directors' duties and liabilities to the shareholders to the extent of the restriction.
Do shareholders become liable as directors under a USA?
Yes, to the extent the agreement restricts the directors' powers. CBCA s. 146(5) and OBCA s. 108(5) give the shareholders the rights, powers, duties and liabilities of a director for the restricted matters, and relieve the directors to the same extent. That is why most agreements restrict the board only on listed decisions rather than wholesale.
Does a unanimous shareholder agreement bind someone who buys shares later?
Yes. Under CBCA s. 146(3) a transferee of shares subject to a USA is deemed to be a party to it. Share certificates must carry a conspicuous reference to the agreement, and under s. 146(4) a buyer who was not given notice may rescind the purchase within 30 days of learning of it.
Can a unanimous shareholder agreement remove all the directors' powers?
It can, in which case the shareholders manage the corporation directly and carry all of the directors' duties and liabilities. Most owners instead restrict the board on specific decisions — share issuances, borrowing, sale of the business, dividends, related-party dealings — and leave day-to-day management with the directors.
How is a unanimous shareholder agreement amended?
Because every shareholder must be a party, amendments generally require the consent of every shareholder unless the agreement itself sets a lower threshold. A well-drafted USA includes an amendment clause and a drag-along so that a single small shareholder cannot freeze the company.
Does a corporation with one shareholder need a USA?
A sole shareholder can make a written declaration that has the effect of a USA, which is useful if the shareholder wants to restrict a board that includes outsiders. Most single-owner corporations do not need one until a second shareholder arrives, at which point it should be signed before the shares are issued.
Is a unanimous shareholder agreement filed anywhere?
No. It is kept in the corporation's minute book and is available to shareholders. It is not filed with Corporations Canada or the Ontario Business Registry. Its existence must be noted on share certificates so that buyers are on notice.