Unanimous Shareholders Agreements: An Important Part Of A Lender’s Due Diligence

Benjamin Franklin once said, "Diligence is the mother of good luck".¹  Although Franklin was obviously not speaking about unanimous shareholders agreements when he made that statement, his words of wisdom still apply in today's corporate lending world.  Unanimous shareholders agreements ("USAs") are one type of document where a little due diligence can bring good luck in the form of avoiding surprises, as USAs may contain clauses that can be problematic for lenders if those clauses are not addressed in the loan and security documents. 

As part of its due diligence review for a new credit proposal, a lender should ask its prospective borrower about the existence of any USAs affecting the borrower, any guarantor or other credit party and the general scope of the terms of each agreement.  Most provincial corporate statutes provide that the terms of a USA may restrict in whole or part the powers of the directors to manage or supervise the management of the business and