Shareholders Agreement is an important conversation!

Akshu Sarkaria
May 12
3 min read

What Would Happen to Your Business If One Owner Suddenly Could not Continue?

Most business owners spend years building their business and miss protecting their share.

You work long hours, take financial risks, support employees, serve clients and pour your energy into growing something meaningful.

But very few business owners stop to ask:

What happens if one shareholder suddenly passes away?
What if a business partner becomes critically ill or disabled?
What if one owner wants out, but the other cannot afford to buy them out?
What happens to the shares if a shareholder goes through a divorce?
Could your spouse or children suddenly become business partners with someone they barely know?
These are not fun conversations. But they are incredibly important ones.

That is where a Shareholders’ Agreement becomes one of the most valuable business planning tools a corporation can have.

A Shareholders’ Agreement is a legal document that outlines how a business will operate and what happens when unexpected situations arise between owners/ partners.

Think of it as a roadmap for difficult moments.

It can help answer questions like:

• Who can sell shares and to whom?

• How will the business be valued?

• What happens if an owner dies or becomes disabled?

• How are disagreements handled?

• How will surviving shareholders fund a buyout?

Many businesses in Ontario are surprised to learn that without a proper agreement in place, situations can quickly become emotional, expensive and legally complicated.

I often see business owners spend significant time building their corporation, but very little time protecting the structure behind it.

One important area that is frequently overlooked is how a buyout would be funded.

For example:

If two shareholders own a company 50/50 and one owner suddenly passes away, would the surviving owner realistically have enough cash available to buy the deceased shareholder’s shares from the estate?

Life Insurance, Critical Illness Insurance and Disability Insurance are commonly used to help protect businesses from financial disruption and provide liquidity when difficult events happen.

A properly structured plan can help:

• Protect surviving shareholders

• Support business continuity

• Reduce financial strain on the corporation

• Help families receive fair value for shares

• Avoid rushed business decisions during emotional times

As business owners, we insure vehicles, buildings and equipment all the time.

But have you protected the ownership of your business itself?

Here are a few questions worth thinking about today:

If something happened to you tomorrow, would your family know what happens to your shares?
Does your current Shareholders’ Agreement reflect your business today or was it created years ago?
Have you discussed funding strategies with your accountant, lawyer or Insurance Advisor?
Would your business survive a serious illness or unexpected loss of an owner?

These conversations may feel uncomfortable but avoiding them does not make the risks disappear. It simply leaves the business unprepared.

At Glengarry Consulting, I work with business owners to help them understand the insurance side of business continuity planning in practical language.

My goal is not to create fear. It is to help business owners make informed decisions before a crisis happens.

If you are a business owner, incorporated professional or part of a family-run business in Ontario, now is a good time to review: