Unanimous Shareholder Agreements in Ontario

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What makes an agreement “unanimous”

Under Ontario’s Business Corporations Act (the OBCA), the directors run the company. Section 115(1) says the directors shall manage or supervise the management of the business and affairs of a corporation, but it begins with five important words: “subject to any unanimous shareholder agreement“. A unanimous shareholder agreement is how the owners can take some of that power back.

Section 108(2) describes it as a written agreement among all the shareholders, or among all the shareholders and one or more people who are not shareholders, that restricts in whole or in part the powers of the directors to manage or supervise the management of the corporation. The definition in section 1(1) adds a second form: a written declaration by a sole shareholder, which section 108(3) deems to be a unanimous shareholder agreement. Two features have to be present: every shareholder is bound, and the directors’ powers are restricted.

Not every shareholders’ agreement qualifies. Section 108(1) separately allows two or more shareholders to agree how they will vote their shares, which is an ordinary voting agreement. An agreement signed by only some of the shareholders, or one that never restricts the board, is a contract between the people who signed it, not a unanimous shareholder agreement. Our shareholders’ agreements page covers both kinds of document. The shareholders’ agreements section of our corporate law page sets out what they usually contain.

Ordinary shareholders’ agreement, unanimous shareholder agreement and sole shareholder declaration
Point	Ordinary agreement	Unanimous shareholder agreement	Sole shareholder declaration
Who signs	Some or all shareholders	All shareholders, with or without others (s. 108(2))	The registered holder of all the issued shares (s. 108(3))
Restricts directors’ powers	No	Yes, in whole or in part	Yes, in whole or in part
Shareholders take on directors’ duties and liabilities	No	Yes, to the extent of the restriction (s. 108(5))	Yes, to the same extent
Binds a new shareholder or a buyer of shares	Only if they sign or agree	Yes, deemed a party (s. 108(4), (7), (8))	Yes, as a unanimous shareholder agreement
Directors and officers must comply	Not under s. 134(2)	Yes (s. 134(2))	Yes (s. 134(2))
Copy kept in corporate records	Not required by s. 140(1)(a)	Required if known to the directors (s. 140(1)(a))	Required if known to the directors (s. 140(1)(a))

How it works in practice, step by step

Decide which decisions move to the shareholders. The agreement can take away a single power, such as borrowing above a set amount, or nearly all of them. Section 5(4) also lets a unanimous shareholder agreement require more votes of directors or shareholders than the Act does for a given action.
Use the other places the Act defers to it. Many OBCA provisions are expressly “subject to” a unanimous shareholder agreement, including who may be issued shares (section 23(1)), pre-emptive rights on new shares (section 26), by-laws (section 116), officers (section 133) and remuneration (section 137).
Have every shareholder sign. A single missing shareholder means it is not unanimous. Non-shareholders, such as a lender or a key employee, may also be parties under section 108(2).
Set how it can be changed and how disputes are handled. Section 108(6) allows the agreement to say how it may be amended and to send disagreements about it to arbitration on terms it sets out.
Put a copy in the minute book. Section 140(1)(a) requires the corporation to keep a copy of any unanimous shareholder agreement known to the directors with its articles and by-laws. What else belongs there is covered in what goes in an Ontario corporation’s minute book.
Follow it. Section 134(2) requires every director and officer to comply with the Act, the articles, the by-laws and any unanimous shareholder agreement.

Who carries the duties and the liability

This is the part owners most often miss. Section 108(5) says a shareholder who is a party to a unanimous shareholder agreement has all the rights, powers, duties and liabilities of a director, including the directors’ defences, to the extent that the agreement restricts the directors’ powers. The directors are relieved of their duties and liabilities to the same extent, and the section expressly includes liabilities under section 131, which makes directors liable to employees for up to six months’ unpaid wages and up to twelve months’ vacation pay.

So if the agreement takes the power to approve payroll or major spending away from the board, the shareholders who now hold that power carry the duties and exposure that come with it. Section 108(5.1) adds that shareholders may fetter their discretion when exercising directors’ powers under the agreement, meaning they can agree in advance how they will decide. Section 134(3) says no contract, article, by-law or resolution can otherwise relieve a director or officer of the duty to comply with the Act, subject only to section 108(5). The duties themselves are explained in what are directors’ duties under Ontario’s OBCA.

How it binds new and buying shareholders

A unanimous shareholder agreement follows the shares. Section 108(4) deems a transferee of shares subject to the agreement to be a party to it. Two further rules fill in the detail:

New shares. Under section 108(7), a person who is issued shares while the agreement is in effect is deemed a party whether or not they knew about it, and the issue does not end the agreement. If they bought for value without notice of the agreement, they may rescind within 60 days after actually receiving a complete copy.
Transferred shares. Under section 108(8), a person who acquires existing shares is also deemed a party. Section 108(9) gives a buyer for value without notice, whose seller’s share certificate did not refer to the agreement, 60 days after receiving a complete copy to send a notice of objection. Section 108(10) then lets them either rescind the purchase or require the seller to pay them the fair value of the shares.

The practical lesson is that the share certificates and the securities register should refer to the agreement, and a new investor should receive a full copy before closing. Issuing shares to someone new is covered in how shares are issued in an Ontario corporation.

What changes the answer

A sole shareholder

One owner can still have a unanimous shareholder agreement. Under section 108(3), a written declaration by the registered holder of all the issued shares that restricts the directors’ powers is deemed to be one. It can be useful where the owner is not a director, or where the owner wants a lender or a future investor to see clear limits on the board.

Holding companies as shareholders

Where the shareholders are holding companies, it is the holding companies that are the parties. The agreement often also binds the individuals behind them, as described in what is a holding company.

Professional corporations

Section 3.2(5) makes a unanimous shareholder agreement for a professional corporation void unless each shareholder is a member of the profession, subject to regulations for health professions.

Exit and buyout terms

The same agreement usually also deals with how owners leave, including buy-sell and shotgun provisions, which we cover in buy-sell and shotgun clauses. Because these clauses decide what happens to your shares on death, they should match your will, as explained in estate planning for business owners. A disagreement about how the agreement applies needs separate advice, although the agreement itself can send such matters to arbitration under section 108(6)(b).

Example

For example, imagine three owners of a Markham software company: Arun and Beth hold 40 percent each and Chloe holds 20 percent. Only Arun and Beth are directors. They want Chloe to have a say on the biggest decisions, so all three sign an agreement requiring unanimous shareholder approval to borrow more than an agreed amount, issue new shares or sell the company’s main product line.

Because every shareholder signed and the agreement restricts the board’s powers, it is a unanimous shareholder agreement under section 108(2). For those three decisions, Chloe now carries a director’s duties and liabilities alongside Arun and Beth, as section 108(5) provides. A copy goes into the minute book, and the share certificates are endorsed with a reference to it. Two years later, Beth sells half her shares to a new investor, Dev. Dev is deemed a party under section 108(8), and because he received the full agreement before closing and the certificate referred to it, he has no right to object later under section 108(9).

Common mistakes

Calling an agreement “unanimous” when one shareholder never signed. It must bind all of them.
Moving powers without explaining the liability. Shareholders who take a director’s power take a director’s duties and liabilities with it.
Not referring to the agreement on share certificates. A buyer without notice may then object and rescind or claim fair value.
Leaving it out of the minute book. Section 140(1)(a) requires a copy known to the directors to be kept.
No amendment clause. Without one, changing the agreement may require every party to agree.
Forgetting the agreement when issuing shares. Its terms on new shares and pre-emptive rights can apply.

What to do this week

Find any shareholders’ agreement and check whether every shareholder signed it.
Read whether it restricts what the directors can decide, and list those decisions.
Check that a copy is in the minute book and that share certificates refer to it.
Confirm the shareholders who now hold directors’ powers understand the duties that come with them.
Check the amendment and dispute clauses.
Read our article on what a shareholders’ agreement should cover before your next review.
If you want the agreement drafted or reviewed, a first consultation takes 30 minutes, by video or in person, and you can request one here.

Frequently asked questions

Do we have to have a unanimous shareholder agreement?

No. It is optional. Many companies have an ordinary shareholders’ agreement that deals with transfers and exits without restricting the board.

Can people who are not shareholders sign it?

Yes. Section 108(2) allows an agreement among all the shareholders and one or more people who are not shareholders.

Does a new shareholder have to sign it?

They are deemed to be a party under section 108(4), (7) and (8) whether or not they sign. In practice it is still sensible to have them sign a joinder confirming they have received and agree to it.

Does it replace the articles and by-laws?

No. It works alongside them. Where it requires more votes than the Act for an action, section 5(4) says it prevails.

Is the agreement public?

It is kept with the corporate records under section 140(1)(a) rather than filed with the registry, and shareholders and creditors can generally examine those records under section 145.

Does the federal Act have the same thing?

Yes. Section 146 of the Canada Business Corporations Act provides for unanimous shareholder agreements in federal corporations, with its own wording.

Sources

This page is general information about Ontario law, not legal advice for your situation. It reflects the law as of October 26, 2026.

What is a unanimous shareholder agreement in Ontario?