Shareholder Agreement Term-Sheet Builder
Answer a short, plain-language interview and watch a shareholder agreement term sheet build itself — share classes, founder vesting, transfer restrictions, and deadlock terms — ready to hand to a lawyer.
Company
Discussion term sheet — NOT a binding contract
Shareholder Agreement
Term Sheet
the Company · July 11, 2026
1.The Company & Shareholders
1.1This term sheet records the terms on which the shareholders of the Company intend to enter a formal shareholders' agreement.
1.2the Company will be incorporated under the Ontario Business Corporations Act (OBCA).
1.3The shares of the Company are held as follows: Shareholder 1 — [ %] of the shares; Shareholder 2 — [ %] of the shares.
2.Share Capital
2.1The company will have a class of common shares that carry equal voting, dividend, and liquidation rights, held in the proportions set out above.
3.Founder Vesting
3.1Founder shares vest over 4 years with a 12-month cliff (no shares vest until a founder has served 12 months). After the cliff, the remaining shares vest gradually over the balance of the vesting period.
3.2If a founder leaves the company before their shares have fully vested, the company or the other shareholders may buy back the unvested shares at a nominal price. Fully vested shares are retained by the departing founder, subject to the transfer restrictions below.
4.Decision-Making & Reserved Matters
4.1Ordinary, day-to-day decisions are made by the directors or officers in the normal course of business.
4.2The following decisions are reserved matters that require the approval of a special majority (typically two-thirds of the votes) before the company may proceed:
–issuing new shares, options, or other securities (which can dilute existing owners)
–selling the company, or a material part of its business or assets
5.Transfer Restrictions
5.1Right of first refusal: before selling shares to an outside party, a shareholder must first offer them to the other shareholders on the same price and terms.
5.2Tag-along (piggyback) right: if a controlling or majority shareholder sells to a third party, the other shareholders may require the buyer to purchase their shares too, on the same terms.
6.Exit, Buy-Sell & Deadlock
6.1Shotgun (buy-sell) clause: to break a serious deadlock, one shareholder may name a single price per share and serve it on the other, who must then either buy the initiator's shares at that price or sell their own shares at that same price.
6.2Dispute resolution: disputes that the shareholders cannot resolve themselves will go first to mediation and, if mediation fails, to binding arbitration, rather than to court.
6.3Share valuation: where shares must be valued for a buyout (for example, on a departure, deadlock, or death), their value will be determined by fair market value, determined by an independent business valuator.
7.Status of This Term Sheet
7.1This document is a discussion term sheet only. It is intended to help the shareholders align on key terms — it is not a binding contract and creates no legal obligations.
7.2A lawyer should prepare the formal shareholders' agreement based on these terms. Statutes are referred to by name only; specific mechanics, definitions, tax planning, and thresholds will be set out in the final agreement.
Note: This tool produces a discussion term sheet, not legal advice or a binding agreement. It refers to statutes by name only and skips firm-specific mechanics. Have a lawyer prepare and review the final shareholders' agreement.
Turn this into a signed agreement
Our corporate lawyers draft tailored shareholders' agreements — vesting, buy-sell, drag-along, and deadlock terms built around your business.
Free ConsultationLegal Guide
What should be in a shareholder agreement?
A shareholder agreement is the rulebook for how owners share control, money, and the exit. Here is what belongs in one — and how the clauses above fit together.
Who decides what
A shareholder agreement sets out how decisions get made — day-to-day calls versus 'reserved matters' that need a special majority or unanimous sign-off, so no one is blindsided by a big move.
Transfer restrictions
Rights of first refusal, tag-along, and drag-along clauses control who can end up owning shares — keeping outsiders out and making sure minority owners are treated fairly in a sale.
The shotgun / buy-sell clause
When owners hit an irreconcilable impasse, a shotgun clause lets one name a price and forces the other to buy or sell at it — a blunt but effective way to end a deadlock cleanly.
Founder vesting & leavers
Vesting ties founder shares to time served. If someone walks away early, leaver provisions let the company buy back unvested shares so departed founders don't keep a windfall.
Valuing & funding a buyout
Whenever shares change hands, someone has to price them. The agreement fixes the method — an independent valuator, a formula, or the latest statements — and can require life insurance to fund a buyout on death.
Breaking deadlock
A mediation-then-arbitration ladder keeps disputes out of court and confidential. Paired with a deadlock mechanism, it gives a stuck company a defined path forward instead of paralysis.
What is a shareholder agreement?
A shareholder agreement is a private contract among a company's owners that sets the rules of ownership — how decisions are made, how shares can be bought and sold, what happens when someone wants out, and how disputes get resolved. It sits alongside the company's articles and by-laws but goes much further, protecting each shareholder (including from one another). It is not filed publicly and can be tailored to whatever the owners agree to.
What should be in a shareholder agreement?
The must-have clauses are share ownership and classes, how major decisions are approved (reserved matters), transfer restrictions like a right of first refusal, tag-along and drag-along rights, founder vesting and leaver provisions, a buy-sell or shotgun mechanism for deadlock, a share-valuation method, and a dispute-resolution ladder. Together these answer the predictable questions: who controls the company, who can become an owner, and how does someone exit. This builder walks you through each of these in plain language.
What is a shotgun clause?
A shotgun (or buy-sell) clause is a deadlock-breaker. One shareholder sets a single price per share and serves it on the other; the recipient must then either buy the initiator's shares at that price or sell their own at that same price. Because the person who names the price could end up on either side of the deal, it pressures them to pick a genuinely fair number. It is powerful but blunt, and can disadvantage an owner who lacks the cash to buy.
Is a term sheet the same as a signed shareholder agreement?
No. A term sheet is a short, plain-language summary of the deal points the owners intend to agree on — a negotiation and alignment tool. A shareholder agreement is the full, legally binding contract a lawyer drafts from those points, with precise definitions, mechanics, and protections. The output of this tool is a discussion term sheet only; it is not a binding contract and should not be signed as one.
Do two 50/50 owners really need a shareholder agreement?
Yes — arguably more than anyone. A 50/50 split has no tie-breaker built in, so a single disagreement can freeze the company completely with neither owner able to act. A shareholder agreement adds a deadlock mechanism (such as a shotgun clause or arbitration), defines each owner's role, and sets out what happens if one wants to leave, gets sick, or dies. Putting it in place while everyone is on good terms is far cheaper than litigating later.
Is a shareholder agreement legally required in Ontario?
No statute requires one — a corporation can exist under the Ontario Business Corporations Act or the Canada Business Corporations Act without it. But without a shareholder agreement, disputes fall back on default corporate law and the courts, which is slow, costly, and rarely gives owners the outcome they wanted. For any company with more than one shareholder, an agreement is strongly recommended.