DEATH / DISABILITY IN A SHAREHOLDERS AGREEMENT

LEGAL COUNSEL FOR SHAREHOLDERS AGREEMENTS

Shareholders agreements are absolutely essential to the long term success of any corporate enterprise that is owned by more than one individual. Yet, it is highly unfortunate that far too many companies either fail to have a unanimous shareholders agreement or have an agreement that is inadequate its ability to carry-out the shareholders' true intent. For a shareholders agreement needs to properly reflect the shareholders' current collective intention for the company's operations and exit strategies. Without such coherence in this legal document, the corporation will find itself facing significant legal turmoil in the future as most attempt to overcome the agreement's deficiencies, will creating unnecessary tension and animosity amongst the shareholders, in an often futile and costly effort to achieve some form of resolution, with which no one is almost ever happy with.

As such, it makes sense to retain experienced legal counsel and properly negotiated and execute your company's shareholders' agreement such that it conforms to your requirements, or is otherwise acceptable in light of what has been bargained for with your fellow shareholders and other parties having a stake in your business enterprise. 

At Neufeld Legal P.C., we assist corporate shareholders in making the appropriate decisions with respect to the drafting and implementation of unanimous shareholders agreements. Contact us at by telephone at 416-887-9702 (Toronto area) / 403-400-4092 (Calgary) or via email at Chris@NeufeldLegal.com.

Dealing with Death as per Statute (A.B.C.A.)
Dealings with registered holders and transmission on death
50(1) A corporation or a trustee as defined in section 81(1) may, subject to sections 133, 134 and 137 and the Civil Enforcement Act, treat the registered owner of a security as the person exclusively entitled to vote, to receive notices, to receive any interest, dividend or other payments in respect of the security, and otherwise to exercise all the rights and powers of an owner of the security.
(2) Notwithstanding subsection (1), but subject to a unanimous shareholder agreement, a corporation whose articles restrict the right to transfer its securities shall, and any other corporation may, treat a person as a registered security holder entitled to exercise all the rights of the security holder the person represents if that person furnishes evidence as described in section 87(3) of the Securities Transfer Act to the corporation that the person is
(a) the executor, administrator, heir or legal representative of the heirs of the estate of a deceased security holder,
(b) a guardian, committee, trustee, curator or tutor representing a registered security holder who is an infant, an incompetent person or a missing person, or
(c) a liquidator of, or a trustee in bankruptcy for, a registered security holder.
(3) If a person on whom the ownership of a security devolves by operation of law, other than a person described in subsection (2), furnishes proof of the personís authority to exercise rights or privileges in respect of a security of the corporation that is not registered in the personís name, the corporation shall treat that person as entitled to exercise those rights or privileges.
(4) A corporation is not required to inquire into the existence of, or see to the performance or observance of, any duty owed to a third person by a registered holder of any of its securities or by anyone whom it treats, as permitted or required by this section, as the owner or registered holder of the securities.
(5) If an infant exercises any rights of ownership in the securities of a corporation, no subsequent repudiation or avoidance is effective against the corporation.
(6) A corporation shall treat as owner of a security the survivors of persons to whom the security was issued if
(a) it receives proof satisfactory to it of the death of any joint holder of the security, and
(b) the security provides that the persons to whom the security was issued are joint holders with right of survivorship.
(7) Subject to any applicable law relating to the collection of taxes, a person referred to in subsection (2)(a) is entitled to become a registered holder or to designate a registered holder, if the person deposits with the corporation or its transfer agent
(a) the original grant of probate or of letters of administration, or a copy of it certified to be a true copy by
(i) the court that granted the probate or letters of administration,
(ii) a trust company incorporated under the laws of Canada or a province or territory, or
(iii) a lawyer or notary acting on behalf of the person referred to in subsection (2)(a),
or
(b) in the case of transmission by notarial will in the Province of Quebec, a copy of the will authenticated pursuant to the laws of that province,
together with
(c) an affidavit, statutory declaration or declaration of transmission made by a person referred to in subsection (2)(a), stating the particulars of the transmission, and
(d) the security certificate that was owned by the deceased holder
(i) in the case of a transfer to a person referred to in subsection (2)(a), with or without the endorsement of that person, and
(ii) in the case of a transfer to any other person, endorsed in accordance with section 29 of the Securities Transfer Act,
and accompanied with any assurance the corporation may require under section 87 of the Securities Transfer Act.
(8) Notwithstanding subsection (7), if the laws of the jurisdiction governing the transmission of a security of a deceased holder do not require a grant of probate or of letters of administration in respect of the transmission, a legal representative of the deceased holder is entitled, subject to any applicable law relating to the collection of taxes, to become a registered holder or to designate a registered holder, if the legal representative deposits with the corporation or its transfer agent
(a) the security certificate that was owned by the deceased holder, and
(b) reasonable proof of the governing laws, of the deceased holderís interest in the security and of the right of the legal representative or the person the legal representative designates to become the registered holder.
(9) Deposit of the documents required by subsection (7) or (8) empowers a corporation or its transfer agent to record in a securities register the transmission of a security from the deceased holder to a person referred to in subsection (2)(a) or to any person that the person referred to in subsection (2)(a) may designate and, subsequently, to treat the person who thus becomes a registered holder as the owner of the security.

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