A shotgun buy-sell clause lets one shareholder name a single price per share and force the other to choose, within a set window, between selling out at that price or buying the offering shareholder out at the very same price — a mechanism built to make the person setting the price name an honest number, because they cannot know in advance which side of the trade they will end up on.
Our sister firm’s guide to shotgun clauses in Ontario shareholder agreements describes the trigger mechanically: “one shareholder (the triggering party) names a price per share and offers to either buy the other shareholder’s shares at that price, or sell their own shares to the other shareholder at that same price.” A companion Ontario guide summarises the logic in one line: “A shotgun lets one shareholder name a price at which they will either buy the other out or sell out themselves, which produces honest pricing.”
The receiving shareholder does not get an open-ended amount of time to decide. As the same guide puts it, “Some variants allow a short window for the receiving shareholder to decide, while others set a longer period to allow for financing arrangements.” A shotgun that gives too little time to arrange purchase financing can quietly favour whichever party has readier access to cash — a drafting point worth checking before signing, not after a clause is triggered.
Because a shotgun is almost always written into a unanimous shareholder agreement rather than the public articles, it binds a later purchaser of either party’s shares in the same way any other USA term does — a buyer who takes shares subject to the agreement is deemed a party to it under CBCA section 146(3).
Two 50/50 shareholders reach a deadlock over whether to reinvest profits or take a distribution. One triggers the shotgun at $180 a share against the company’s 10,000 shares. The other has whatever window the agreement itself sets to decide: buy out the triggering shareholder’s 5,000 shares for $900,000, or sell their own 5,000 shares for the same $900,000. Naming too low a price risks losing the company for cheap if the other side elects to buy; naming too high risks having to pay it if they don’t — which is exactly the discipline the clause is built to impose on whoever pulls the trigger.
See also: Unanimous shareholder agreement · Tag-along right · Right of first refusal.
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