Early-stage founders tend to treat the shareholder agreement as paperwork to finish before the real work starts.
That’s understandable, since everyone gets along and the company has little value yet. The trouble comes years later, when a co-founder leaves, the business is worth something, and the agreement says nothing about what happens next.
This guide covers:
- Why the gaps only surface later
- The clauses founders leave out most
- Quebec rules that shape the drafting
- The liability that comes with a unanimous agreement
Why the Gaps Surface Late
Most founder disputes aren’t about bad faith at the start. They grow out of events nobody planned for, like a partner who stops contributing, an illness, or an outside offer to buy the company. When the agreement is silent, the parties fall back on the Quebec Business Corporations Act and the articles, which rarely answer those questions the way either side hoped. Litigation then fills the gap, slowly and at real cost.
Most founders only see why an agreements lawyer earns their fee before the dispute starts after the first serious disagreement. Eidelmann Law’s contract lawyers draft agreements with the Civil Code of Québec in mind.
The Clauses That Get Skipped
A short template usually covers share ownership and board seats, then stops. The missing pieces tend to be the ones that decide who stays, who leaves, and at what price. Each gap below has a familiar way of turning into a lawsuit. Adding the clause at the start costs a fraction of fighting over its absence.
| Missing clause | What it prevents |
| Deadlock resolution | A 50/50 company frozen with no way to break a tie |
| Buy-sell or shotgun clause | A partner who wants out with no exit route |
| Valuation method | Years of competing expert reports on price |
| Transfer limits and first refusal | Shares sold to a stranger or competitor |
| Death, incapacity and departure terms | Heirs or a departed founder holding voting shares |
| Dispute resolution | Every disagreement going straight to court |
Growing companies often have a Montreal business law firm review these terms again before bringing in investors.
Quebec Rules That Shape the Drafting
Quebec law affects several of these clauses in ways a generic template won’t catch. A non-competition clause for a founder who’s also an employee must be in writing, in express terms, and limited in time, place and type of work, and the employer has to prove it’s valid. The employer also can’t rely on that clause if it ends the employment without a serious reason. A court can reduce a penalty for breach when the clause is abusive or the creditor gained from partial performance.
Governance clauses raise their own issue. According to the Quebec Business Corporations Act, a unanimous shareholder agreement can restrict or remove the board’s powers, and the shareholders who take on those powers also take on the directors’ rights and liabilities to that extent. Founders who sign one should understand that trade before they do.
The Bottom Line
The clauses founders skip are the ones that govern exits, deadlocks and price. Quebec adds its own rules on non-competes, penalties and unanimous agreements, so a template from elsewhere often misses them.
Key Takeaways
- Add deadlock, buy-sell and valuation terms before the company has real value.
- Draft founder non-competes to meet the Civil Code’s requirements.
- Understand the liability that comes with a unanimous shareholder agreement.
An hour of drafting now can spare years of litigation later.
Frequently Asked Questions
What are the key clauses in a shareholder agreement?
Most cover how decisions are made, board composition, limits on selling shares, rights of first refusal, tag-along and drag-along rights, buyout triggers such as death or departure, valuation, non-competition and dispute resolution. The right mix depends on how many shareholders there are and whether they also work in the business.
Are shareholder agreements mandatory?
No. Quebec law doesn’t require shareholders to sign one, and many small corporations run without it. Without an agreement, the Quebec Business Corporations Act and the articles fill the gaps, and they rarely answer questions like a deadlock or a founder’s exit. A unanimous shareholder agreement comes with its own statutory rules.
Can you provide an example of an entire agreement clause?
A typical version reads: “This agreement constitutes the entire agreement between the parties regarding its subject matter and supersedes all prior negotiations, representations and agreements, whether written or oral.” It aims to stop a party from relying later on side promises. Courts still read it in context, so put the real deal in writing.
What is the standard format for a shareholders agreement?
There’s no required format. Most open with the parties and definitions, then cover governance, share issuances and transfers, buyout events and valuation, funding obligations, restrictive covenants, confidentiality and dispute resolution, and close with general provisions and signatures. Quebec drafters also state whether it’s a unanimous shareholder agreement.
What are the most important clauses to include in an agreement?
For most business contracts, the clauses that matter most are the ones that apply when things go wrong: termination, limitation of liability, payment terms, penalties, confidentiality and dispute resolution. In Quebec, draft them with the Civil Code in mind, since courts can reduce abusive penalty clauses and won’t enforce certain liability exclusions.
