subject: Shareholder Agreement Template (Part 5): The Introductory Clause [print this page] FREE Shareholder Agreement Legal Information
Please keep in mind that this is not legal advice. The information provided herein is for educational purposes only. If you would like to get in touch with a lawyer to help you draft, interpret, negotiate or resolve a dispute about a shareholder agreement or unanimous shareholder agreement, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers). We have Ontario lawyers who can assist you in this regard (I would know, I'm one of them!). If you'd like, you can contact me directly.
So I'm just going to keep on writing about shareholder agreements. I regularly draft these things for clients, and no two are the same. But there are many things you should consider when thinking about entering into or negotiating a shareholders agreement. That's the purpose of these blog posts. So lets get into the nitty-gritty, shall we?
Introductory Clause
The Introductory Clause is the first part of the Agreement. It usually indicates the nature of the agreement being entered into (i.e. shareholder agreement or Unanimous Shareholders Agreement), the date of the agreement, and the parties. I'll briefly discuss each of these in turn.
Date
The date may or may not be important. It all depends on what the terms of the agreement say. For example, if the TERM (i.e. the duration of the agreement) starts from the date set out in the introductory clause, then that date is important! If the TERM is based on some other date or event occurring, then the date in the introductory clause is more for convenience only to show when the parties entered into the agreement. The date may also be important if, at the end of the agreement, the parties acknowledge that they are entering into the agreement on the date "stated in the introductory clause". If this isn't correct, then you'll need to change the language.
The Parties
The parties to a shareholders agreement may include some but not all of the shareholders. In this case, you've got a shareholders agreement, but not a unanimous shareholders agreement. The parties will generally also include the corporation particularly if the corporation has rights and obligations under the agreement.
Each party may need its own lawyer; I realize that this is not the most cost-effective way to draft up, negotiate, and finalize a shareholders agreement, but it will help each party promote their interests and protect their rights. If there is a conflict of interest, then a lawyer representing multiple parties will usually have to withdraw their services (either entirely or for some but not all of the parties). The corporation, if it is part of the shareholders agreement (which it usually will be) should also have its own lawyer. That lawyer will take instructions from those human beings who are authorized to act on behalf of the corporation (e.g. directors, officers, etc.).
The parties should be described using their full legal names. Remember: corporations should be using trade names in addition to their corporation names. Directors, officers, and others who are using trade names and not indicating that corporations are the ones actually entering into the agreement can get into trouble: PERSONAL LIABILITY!
You DON'T need to clutter up the introductory clause by including all the address and contact information of the parties. You can include this stuff in the Notice section at the end of the agreement. Otherwise, your first page is going to look muddled and busy.
On the First Part, On the Second Part
In many commercial agreement, you'll find the words "On the First Part" written after the first party or parties (e.g. the landlord) and "On the Second Part" written after the second party or parties (e.g. the Tenants). I don't find this language particularly useful. It's archaic legal jargon. You can do without it as it adds nothing but space and confusion.
OK, now onto the Background section of the Agreement
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Shareholder Agreement Template (Part 5): The Introductory Clause
