Shareholder and Buy-Sell Funding for Alberta Business Owners
What Does Your Shareholders’ Agreement Actually Say Happens When an Owner Dies?
Some business owners have no written agreement. Others have a Unanimous Shareholders Agreement but have never reviewed the death provisions—or do not realize the agreement requires life insurance to fund the purchase of an owner’s shares.
Ask yourself:
- Does your company have a current Unanimous Shareholders Agreement?
- What does it require the owners or company to do when a shareholder dies?
- Who is required to purchase the deceased owner’s shares?
- How will the shares be valued—and is that valuation current?
- Does the agreement require life insurance to fund the purchase?
- Is the required coverage actually in place?
- Has the company’s growth created a gap between its value and the insurance?
- Who owns the policies, pays the premiums and receives the proceeds?
If the Agreement Is Not Funded, Where Will the Money Come From?
Without sufficient life insurance proceeds, the surviving owners or company may have to:
- Use company cash needed for payroll, operations or growth
- Borrow money when the business is already under pressure
- Sell equipment, property or other company assets
- Pay the deceased owner’s family over several years
- Bring the deceased owner’s spouse or estate into the business
- Sell the company because the share purchase cannot be funded
- Renegotiate the agreement during an already difficult time
Cash When It Is Needed Most—At the Worst Possible Time
The death of an owner is already a crisis. It should not also create a cash-flow problem, ownership dispute or forced sale.
A properly written and adequately funded agreement can provide the surviving owners with the cash needed to purchase the shares while helping the deceased owner’s family receive fair value.
Do not let an unfunded agreement make a bad situation worse—or put everything you worked to build at risk.
Review My Shareholder Funding
Bring your Unanimous Shareholders Agreement, current company valuation and existing life insurance information. In 20 minutes, Fusion can help identify what the agreement requires, whether the funding is in place and whether the coverage has kept pace with the business.
Fusion does not provide legal or tax advice. Shareholders should have their agreement, valuation method and insurance structure reviewed by qualified legal and tax advisors. Insurance availability is subject to eligibility, underwriting and policy terms.
Confirm What the Agreement Requires
Understand the death provisions, valuation method, purchase obligations and insurance requirements contained in your agreement.
Identify the Funding Gap
Compare the company’s current value and each owner’s obligations with the life insurance actually in place.
Protect the Business and Family
Provide cash to help complete the share purchase without relying entirely on company assets, new debt or extended payments to the family.
BOOK A 20-MINUTE CALL
Know What the Agreement Says
Confirm what happens when an owner dies, who must purchase the shares and how the price is determined.
Find the Funding Gap
Compare the company’s current value and purchase obligations with the life insurance actually in place.
Have Cash When It Matters
Provide money for the buyout without draining company cash, borrowing unexpectedly or forcing the sale of business assets.
A Business Owner’s Guide to Shareholder & Buy-Sell Funding
Learn what an unfunded agreement could mean for the surviving owners, the company and the deceased owner’s family—and which questions should be reviewed now.
Download the Free Guide