A group buying a company together needs the agreement finished before they buy in, not after the first disagreement. CBCA s. 146 gives that agreement real statutory force — if it is written to use it.
Key takeaways
STEP 01 OF 10
CBCA s. 146(1) validates “an agreement among all the shareholders of a corporation… that restricts, in whole or in part, the powers of the directors to manage” the business — the word “all” is load-bearing. A buyout group that leaves one incoming investor off the signature page has not created a unanimous shareholder agreement at all, whatever the document is titled, and loses the statutory force this whole guide depends on.
STEP 02 OF 10
Once shareholders take over powers normally held by the board, s. 146(5) makes the trade explicit: those shareholders “have all the rights, powers, duties and liabilities of a director… and the directors are relieved of their duties and liabilities to the same extent”. Name precisely which decisions move to the shareholders — approving a new debt facility, hiring a CEO, a distribution policy — rather than assigning the whole of the board’s power in one clause. A group that does not want personal director-style liability for day-to-day management should keep the board’s ordinary powers largely intact and restrict the USA to the specific decisions that matter to them.
STEP 03 OF 10
Treadstonelaw’s guidance lists the triggers a buy-sell clause should name individually: voluntary departure, death, disability, employment termination, resignation, insolvency, a matrimonial property claim, and deadlock. A single generic “on exit” clause leaves the group arguing later about whether a given event actually counts — naming each trigger separately, with its own timeline and its own valuation date, removes that argument before it starts.
STEP 04 OF 10
The same guidance names four approaches in real use: a fixed formula (an EBITDA or revenue multiple), book value off the balance sheet, an annually agreed value, or an independent valuation by a business valuator. A fixed formula is fastest to apply but ages badly if the business changes shape; an annually agreed value stays current but only if the group actually revisits it every year, which groups routinely stop doing after the first year or two. Whichever is chosen, name the fallback if it fails — typically, an independent valuation.
STEP 05 OF 10
CBV Institute’s practice standards, effective for engagements beginning on or after 1 January 2026, set the minimum requirements a valuator must meet for a credible and properly supported conclusion of value, including a distinct Expert Report family for a valuator “retained as an expert to provide their independent professional opinion as to the quantum of financial gain/loss.” Naming that standard in the agreement gives every future dispute a known professional floor, instead of negotiating the standard itself under pressure once a disagreement has already started.
STEP 06 OF 10
A buy-sell provision that fixes a price but says nothing about how it gets paid is only half finished. Treadstonelaw’s guidance describes real funding structures: cross-purchase or corporate-owned life insurance for a death trigger, disability insurance providing monthly income or dedicated buy-sell coverage for a disability trigger, and instalment payments over three to five years for a voluntary departure. A group that only prices the shares, without funding the purchase, has written an obligation nobody can actually meet on the day it is triggered.
STEP 07 OF 10
A drag-along right lets the majority compel the remaining shareholders to sell their shares to the same third-party buyer, on the same terms, and treadstonelaw’s guidance notes it “typically requires a supermajority (e.g., 66⅔% or 75%) to be triggered, not just a simple majority.” CBCA s. 2(1) defines a special resolution at exactly two-thirds “a majority of not less than two-thirds of the votes cast… or signed by all the shareholders” — a buyout group can use that same two-thirds figure for consistency with the CBCA’s own baseline, or set a higher bar if smaller investors want more protection against being dragged into a sale they oppose.
STEP 08 OF 10
A tag-along protects the minority the way drag-along protects the majority: it lets minority shareholders sell alongside the majority, on the same terms, when the majority receives a bona fide third-party offer, with no supermajority threshold of its own — it activates whenever the triggering offer exists. Treadstonelaw is direct about the asymmetry: “majority shareholders want drag-along so they can deliver a clean 100% sale when the time is right; minority shareholders want tag-along so they can participate in any premium the majority receives.” A buyout group where every member expects to hold a meaningful stake should not skip this clause on the assumption that only founders need it.
STEP 09 OF 10
If the buyout vehicle is a CBCA corporation, at least 25% of the directors must be resident Canadians, or at least one where the board has fewer than four directors, and s. 105(1) disqualifies anyone under 18, incapable, not an individual, or an undischarged bankrupt. A buyout group with a mixed-residency investor base should confirm the board composition satisfies this before finalizing who sits on it, not after the corporation is already operating.
STEP 10 OF 10
CBCA s. 122(1) sets a baseline every director owes regardless of what the agreement says: act honestly and in good faith with a view to the best interests of the corporation, and exercise the care, diligence and skill a reasonably prudent person would exercise in comparable circumstances — and s. 122(3) confirms no contract, article, by-law or resolution can relieve a director of that duty. If shareholders take on director-style powers under s. 146(5) (Step 2), they inherit this same standard for the powers they hold, whatever the shareholder agreement itself says about limiting their liability.
Suppose a buyout group of three investors sets the share value by annual agreement, reviewed each year at the anniversary of closing. In year one they agree $2,400,000, split three ways at $800,000 each. By year three, none of the three has proposed a revised figure at the anniversary meeting, so the agreement still technically states $2,400,000 — even though the business has since taken on $600,000 of new debt and grown revenue meaningfully. If a buy-sell trigger fires in year three, the stale $2,400,000 figure is what the agreement says applies, not a current estimate of fair value.
This is the practical argument for pairing an annually agreed value with a fallback: name what happens if no new figure is agreed by a fixed date each year — either the prior figure escalates by a stated index, or the clause falls back automatically to an independent valuation. Without that fallback, the shareholders’ own inertia becomes the effective valuation method.
The two methods do not just take different lengths of time; they answer different questions. A fixed formula (say, 4× trailing EBITDA less net debt) is mechanical and fast — anyone with the financial statements can compute it in minutes, with no professional engaged and no dispute about methodology. An independent valuation is judgment-based: a CBV weighs multiple approaches (asset, income, market) and reaches a professional conclusion of fair value, which can differ meaningfully from what a simple formula would produce, particularly for a business whose earnings are volatile or whose value depends heavily on intangibles a formula does not capture.
A buyout group with a straightforward, stable-earnings business often prefers the formula for its speed and certainty. A group anticipating real disagreement — different visions for the company, a founder likely to exit early — gets more protection from naming the independent-valuation route from the start, even though it costs more and takes longer each time it is used.
No public filing is required under the CBCA — it lives with the corporation's own records, though it becomes part of what a diligence buyer's counsel expects to review. See legal diligence on a private Canadian corporation for what else belongs in that folder.
Yes, but it needs to be done correctly — under s. 146(2), a sole beneficial owner's written declaration is deemed a USA, and under s. 146(3) a purchaser of shares subject to an existing USA is automatically deemed a party to it. Confirm the new investor received proper notice; a purchaser given no notice has 30 days to rescind under s. 146(4).
No — treadstonelaw's guidance notes drag-along typically needs a supermajority to trigger, while tag-along has no comparable threshold of its own; it activates whenever the triggering third-party offer exists.
They can, and it matters which forum applies — see buying out a partner in an existing company for how a negotiated buy-sell price and a court-ordered oppression buyout are valued differently.
Name the standard, not a specific individual — a valuator named by title in a document meant to last years is likely to have moved on, retired, or developed a conflict long before the clause is ever used. Naming Standards 310/320/330 and letting the group appoint a specific CBV at the time of the dispute keeps the mechanism usable indefinitely.
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