9 Important Questions About Unanimous Shareholder Agreements

6. How can the USA mitigate Involuntary Transfer of Shares?

Shareholders may want to ensure that unwanted parties do not become shareholders involuntarily as a result of a death of an individual shareholder, a bankruptcy or insolvency of a shareholder in which case a creditor may become a shareholder, or a transfer or disposition of assets in the event of matrimonial proceedings. A USA can mitigate involuntary share transfers by:

• Requiring approval by the shareholders of such a transfer.
• Providing that unless a transfer is approved in accordance with the USA, a new shareholder may not vote, receive dividends or exercise any of the usual rights of ownership.
• Rights of other shareholders to acquire shares transferred involuntarily for a fixed period following such transfer.

Any of the above alternatives will be most effective if included in a USA because of the “deemed party” rule.

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