Shareholder and Buy-Sell Funding for Alberta Business Owners

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?

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

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.

Understand the death provisions, valuation method, purchase obligations and insurance requirements contained in your agreement.

Compare the company’s current value and each owner’s obligations with the life insurance actually in place.

Provide cash to help complete the share purchase without relying entirely on company assets, new debt or extended payments to the family.