Shareholder Non-Contribution

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

Non-contributing shareholders can be very problematic for a private company where there is the expectation that everyone would be making a substantive effort towards the realization of the objective goals with the other shareholders making the requisite contribution.

When there is such disparity in the efforts of the respective shareholders, it can be very destructive to the company's progress. The non-contributing shareholder having been rewarded to the same degree as the fellow shareholders can be extremely disconcerting, with efforts tailing off and additional demands and advancements not being pursued. Such matters should have been addressed at the formative stage of the corporate partnership, when the participants were negotiating and drafting the company's unanimous shareholders agreement. Unfortunately, even where the shareholders have a unanimous shareholders agreement, most such agreements lack adequate measures to deal with non-contributing shareholders, short of the buy-out provision, typically a shot gun clause, which still rewards the non-contributing shareholder (such that the unanimous shareholders agreement should have been better drafted at the outset).

As such, when a company is faced with a non-contributing shareholder, the other shareholders need to make some hard decisions such that they might move effectively forward and this tends to require the intervention of experienced medal counsel. For the lawyer can put forth strategic legal options that have the potential of addressing the non-contributing shareholder's impact on the company, although achieving a final resolution may not be that easy.

For knowledgeable and experienced legal representation in advancing your prospective or current shareholdings, while protecting your position as a shareholder, 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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