You and your two best friends start a company. Everything is great. Then one of you wants out, or dies, or stops working. What happens next depends almost entirely on one document you probably do not have.
Alberta law does not require you to sign a shareholder agreement before you incorporate. Most small companies skip it. The incorporation documents get filed, the shares get issued, and everyone shakes hands on the understanding that they will “figure it out later.” Later usually arrives as a crisis.
Here is what that crisis tends to look like.
Three Ways It Goes Wrong Without One
The Edmonton trades company. Three friends build a plumbing business over six years. One of them wants out, wants to move to BC, and asks to be bought out. He thinks his third is worth $800,000. The other two think it is worth $250,000. There is nothing in writing: no valuation method, no formula, no buyout mechanism. He threatens to sue. They threaten to fire him and cut off his dividends. The business grinds to a halt for eighteen months while lawyers argue.
The St. Paul consulting firm. Two partners, fifty-fifty shares, no agreement. One of them dies unexpectedly at fifty-two. His will leaves everything to his spouse. Under the default rules of the Business Corporations Act, RSA 2000, c B-9 (the ABCA), her executor steps into the deceased partner’s shoes and can vote those shares. The surviving partner is suddenly in a fifty-fifty governance relationship with a grieving spouse who wants liquidity. There is no mechanism to force a sale and no agreed price.
The family corporation in Red Deer. Four siblings own equal shares in a holding company that owns a commercial rental property. Three of them manage tenants, handle repairs, and do the work. The fourth has been “too busy” for three years, but still receives a quarter of the dividends and votes on every major decision. No vesting schedule, no “leaver” provision, no performance obligation tied to the shares. The three working siblings are carrying a free rider who legally cannot be removed.
None of these situations are rare. All of them are preventable.
What the Default Rules Actually Say
If you do not have a shareholder agreement, the ABCA and your articles of incorporation are the entire rulebook. That rulebook is written for a generic corporation, not for your company. It does not know that two of you do the work and one of you is an investor, or that the business depends on personal relationships with clients, or that none of you ever intended a stranger to inherit voting control.
Under the default regime, shares are freely transferable unless your articles say otherwise. When a shareholder dies, the shares pass through the estate under the will or intestacy rules, and the personal representative is entitled to step in and vote them. Directors are elected by majority shareholder vote, so a fifty-fifty split can deadlock the board on who sits on it. There is no shotgun, no buyout trigger, no non-compete, no vesting. If you want any of that, you have to contract for it.
The ABCA gives you one powerful tool to rewrite the default rules. Section 146 allows the shareholders of a corporation to enter into a unanimous shareholder agreement, known as a USA. A USA, when properly signed by all shareholders, can restrict or entirely withdraw the powers of the directors and hand them to the shareholders themselves. That is a big deal. It means you can design a governance structure that actually matches how your business operates, and it is legally binding on the corporation.
What you trade for that power is real. Under s. 146, if the USA transfers the directors’ powers to the shareholders, the shareholders also take on the duties and liabilities that go with those powers. Good drafting keeps that trade-off deliberate.
What a Good Shareholder Agreement Covers
A shareholder agreement that actually earns its fee does a few specific things.
It restricts who can own shares. The most basic promise is that the people in the company today get to decide who joins tomorrow. Transfer restrictions block a shareholder from selling to a competitor, a hostile investor, or a stranger without the other shareholders’ consent.
It gives existing shareholders the first crack at any sale. A right of first refusal, or ROFR, works like this: a shareholder who wants to sell has to take the outside offer to the other shareholders first. They can match the price and buy the shares themselves. Only if they decline can the sale to the outsider close.
It breaks deadlocks with a shotgun. A shotgun clause, sometimes called a buy-sell, is the tool for a two-shareholder company that cannot agree. One shareholder serves notice offering to buy the other out at a specified price. The recipient then has a choice: sell at that price, or flip it around and buy the initiator out on the same terms. The mechanic forces the initiator to name a fair price, because they could end up on either side of the deal.
It covers the exit to a third-party buyer. Drag-along rights let a majority who wants to sell the whole company force the minority to come along on the same terms, so a buyer can get 100 percent. Tag-along rights do the opposite: they protect the minority by letting them ride along when the majority sells, on identical terms. Drag and tag usually travel together.
It sets a valuation method in advance. The fight in the Edmonton example above is a valuation fight. You avoid it by agreeing up front on how the shares will be priced in a buyout, whether by a formula tied to earnings, a multiple of EBITDA, an annual valuation updated at each fiscal year-end, or an independent appraiser selected by a stated process. The method matters more than the number.
It handles the leavers. Not every shareholder leaves the same way. The person who works for ten years and retires is not the same as the one who quits in year two to join a competitor. A good agreement distinguishes “good leavers” from “bad leavers” and treats their shares differently. Vesting schedules, which release shares over time based on continued service, make sure nobody walks away with a full equity stake on day two.
It addresses the spouse problem. If a shareholder is married, their shares can be drawn into a matrimonial property dispute, and if they die, the shares usually pass to the spouse. Spousal consent clauses, paired with a mandatory buyout on death or marital breakdown, keep the shares inside the intended ownership group. This is not hostile to families. It is the cleanest way to protect everyone, including the spouse, from a governance mess they did not sign up for.
It stops departing shareholders from competing. A non-compete and non-solicitation clause, drafted narrowly enough to be enforceable, stops a departing shareholder from taking the client list, the team, and the know-how across the street. Alberta courts enforce these only where they are reasonable in scope, geography, and duration. Overreach and a court will strike the whole clause.
When to Put One in Place
The right time to sign a shareholder agreement is the day you incorporate. Everyone is friendly, nobody has an entrenched position yet, and the terms can be negotiated as a clean-slate exercise rather than a power struggle.
Retrofitting one later is still possible, and often still worth it, but it is harder. Every shareholder must agree. If a shareholder has already seen the business go a direction they like, they may refuse to sign anything that restricts their current position. If you are reading this and you already own a company without an agreement, the next best day to do it is today, while the relationships are still good.
A USA under s. 146 of the ABCA has to be signed by every shareholder to take effect. Once signed, it binds the corporation and every current and future shareholder who takes shares with notice of it. That is the mechanism Alberta gives you to rewrite the default rules for your own company.
If you are incorporating a new business or you own shares in an Alberta corporation without an agreement, reach out through the contact page or read more about my business and commercial services.