April 18, 2013
Everyone should have a Will. We all know it but what does it mean within the context of your corporation?
A Will determines what happens to the assets that become part of your estate upon death. This includes the shares you own in your corporation.
A Will can also help ensure you are replaced as a director as quickly as possible. The directors of a corporation have the power and authority to manage the corporation’s business. They are at the very top of management and without them a corporation can be paralyzed — unable to act, with authority. If you’re the only director of your corporation then making sure there is a quick way to replace you will be an important step towards keeping business operations moving with minimal disruptions.
Powers of Attorney:
What happens if you’re no longer able to act as director as a result of something other than death. For example, what if you sustain a mental incapacitation.
Your Will applies only if you die so in this case it will be no help. So then what?
A Power of Attorney can give some else the power to vote your shares and replace you as a director while you are still alive. However, for the Power of Attorney to be effective during your incapacitation it must be an enduring Power of Attorney by its terms.
A shareholder agreement can provide mechanisms to carry out your wishes upon your death if there is more than one shareholder. For example, a shareholder agreement, which is an agreement amongst a corporation and its shareholders, can provide that your shares should be purchased from your estate upon your death by the other shareholder(s) and/or the corporation and may require that life insurance be obtained on your life so that the insurance proceeds can be used for that purpose. Or a shareholder agreement can help ensure that the person of your choice is permitted to step in your shoes as a shareholder and director and continue in that a capacity together with the other shareholder(s), as agreed. These are just a couple of examples of what a shareholder agreement can provide.