Death / Disability of Shareholder - Disputes

Contact Neufeld Legal PC at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

Resolving disputes arising from the death of a principal shareholder, as between the remaining shareholders and the intended beneficiaries of the deceased shareholder's estate.

The untimely death of a principal shareholder can be extremely troublesome and problematic for both the company and its remaining shareholders, as well as the spouse and dependents of the deceased shareholder. For not only is the company often lossing a significant business contributor to the corporate enterprise, but there is also the issue of the pay-out on the deceased shareholder's shares to the decedent's estate.

Where that shareholders had previously entered into a unanimous shareholders' agreement, such agreement may well have provided a formula by which the decedent's shares are valued. Yet in applying this share valuation, the stark reality is that there might be a substantial pay-out required and the company and/or its remaining shareholders might not have the financial resources with which to effect said pay-out. When this occurs, resolving this situation can be quite difficult given that the remaining shareholders don't necessarily wish to pay what appears to be an inflated buy-out price, while the spouse and other recipients of the decedent's estate don't wish to be short-changed when they are contractually entitled to the full amount without any discounts.

Meanwhile, where there is no unanimous shareholders agreement, the deceased shareholder's spouse and the other beneficiaries of the decedent's estate will find themselves in a very difficult position to realize upon the decedent's ownership in the company. For without a contractual mechanism that provides a definitive methodolgy to value one's share ownership and thereafter impose a procedure for proceeding with the share buy-out, it can be incredibly challenging to get the remaining shareholders to effect a share buy-out at a reasonable share price. Instead, the absence of a unanimous shareholders agreement all too frequently results in the decedent's corporate shares being bought out at well under their reasonable value, if at all. As such, this too can lead to some very serious legal disputes between the surviving shareholders and those having a beneficial interest in the estate of the deceased shareholder, such that knowledgeable legal counsel should be engaged to advance one party's position in resolving this particular shareholder dispute.

Resolving disputes arising from the disability or incapacity of a shareholder, as between the other shareholders and those charged with protecting and preserving the financial entitlement of the disabled or otherwise incapacitated shareholder.

The untimely disability or incapacity of a principal shareholder can be extremely troublesome and problematic for both the company and its other shareholders, as well as the disabled/incapacitated shareholder, their spouse and other dependents. For not only is the company often losing a significant business contributor to the corporate enterprise, but there is also the issue of the pay-out on the the impacted shareholder's shares to the disabled shareholder or the trustee overseeing the incapacitated shareholder's finances.

Where that shareholders had previously entered into a unanimous shareholders' agreement, such agreement may well have provided a formula by which the disabled/incapacitated shareholder's shares are valued. Yet in applying this share valuation, the stark reality is that there might be a substantial pay-out required and the company and/or its other shareholders might not have the financial resources with which to effect said pay-out. When this occurs, resolving this situation can be quite difficult given that the other shareholders don't necessarily wish to pay what appears to be an inflated buy-out price, while the intended recipients of this buy-out don't wish to be short-changed when they are contractually entitled to the full amount without any discounts.

Meanwhile, where there is no unanimous shareholders agreement, the disabled shareholder or the trustee for an incapacitated shareholder tend to find themselves in a very difficult position to realize upon the share ownership in the company. For without a contractual mechanism that provides a definitive methodolgy to value one's share ownership and thereafter impose a procedure for proceeding with the share buy-out, it can be incredibly challenging to get the other shareholders to effect a share buy-out at a reasonable share price. Instead, the absence of a unanimous shareholders agreement all too frequently results in the corporate shares being bought out at well under their reasonable value, if at all. As such, this too can lead to some very serious legal disputes between the various shareholder factions, such that knowledgeable legal counsel should be engaged to advance one party's position in resolving this particular shareholder dispute.

At Neufeld Legal P.C., we undertake significant and complex shareholder disputes, amongst shareholders or with the company, its directors and/or officers, creditors or other third parties. Contact us at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com.

What is a Unanimous Shareholders Agreement?

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