Picture this: You have a great idea for a business or you join an up-and-coming business or even an established business, and, at the start everything seems great with the other shareholders of the Corporation. You believe that your business will be everything you imagined, and you have invested your time, energy, and/or money into this business hoping that it will take off and grow into a huge success. However, after years of work, you realize that you and your business partners do not see eye to eye any longer and you now want out of the business. You think to yourself “what do I do?”
Unfortunately, this is a common situation for many Shareholders in closely held corporations, even family-owned businesses.
In order to set expectations from the start and minimize legal disputes, all Shareholders in closely held corporations should consider signing a Unanimous Shareholder Agreement before the business commences. The shareholders agreement will outline the resolution mechanisms should they not get along in the future. A Unanimous Shareholder Agreement is essentially the equivalent of a prenuptial agreement for a corporation. The Unanimous Shareholders Agreement should outline the mechanism of valuation for the business and set out how the parties can exit the Corporation in the future. It is prudent that a Corporate Lawyer assists with drafting the Unanimous Shareholder Agreement early in the formation of the business, particularly to avoid any disputes regarding the value of the shares.
That being said, hindsight is 20/20. It is not uncommon for Shareholders without a Unanimous Shareholder Agreement to want out of the business, and the other shareholders not allowing them to exit the Corporation at a fair price. If a Shareholder is unable to resolve their dispute with the other shareholders, then they will have to consider litigation to resolve the issue. In order to get out of the business with the assistance of the court, a Shareholder will have to consider whether the following types of claims are available to them: