Shareholders’ agreements for privately held corporations create rights and obligations for both the corporation and the shareholders. While the focus of a shareholders’ agreement is generally the contractual relationship between the shareholders, their degree of influence over the corporation, and the corporation’s operations themselves, a number of different provisions of the Income Tax Act come into play. While these provisions are intended to be of general application and not to apply specifically to shareholders’ agreements, the treatment of many transactions envisaged by a shareholders’ agreement will be greatly influenced by the treatment afforded by the provisions of the Act. As well, the status of a corporation for purposes of the Act will be influenced by a shareholders’ agreement. This article reviews the application of a number of provisions of the Act as they relate specifically to the rights and obligations created by shareholders’ agreements. The article also considers the degree of influence that shareholders’ agreements may have on the application of certain provisions of the Act.

type Selected Income Tax Issues of Particular Relevance to Shareholders’ Agreements