Private Equity @ Gowlings - May 19, 2011

Edited by Alan James

Shareholders Agreement Uncertainties

By Michael Herman and Myron Dzulynsky

Corporate management and exits are key considerations in private equity fund acquisitions of portfolio companies, and are often the subject of a "unanimous" agreement between all of the shareholders of the portfolio company.   It is important to note, however, that there may be some uncertainty relating to how such provisions operate under Canadian law. 

(a) Decision-Making

One of the key issues with respect to corporate management is the way in which directors and shareholders can make decisions in respect of the business and affairs of the portfolio company. Under Canadian law, the analysis of this issue can be fundamentally altered if the agreement between all of the shareholders is also a "unanimous shareholders agreement" under the applicable corporate statute, as further described below (for purposes of this article, we will refer to the provisions of