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Contingency Planning in Business: Are You Prepared for the Unexpected?

Contingency Planning in Business: Are You Prepared for the Unexpected?


Posted May 21, 2019

When you are busy building a business, planning and preparing for the unexpected may be the last task on your long to-do list.  It is a task that is easy to push into the future when there are seemingly more pressing and urgent matters to manage and address.  Succession and contingency planning, however, is something that should be addressed from the outset of your business and should be reviewed throughout the life of your business, to ensure your plan continues to reflect the growth and changes to your business.

What are the unexpected circumstances you should be planning for?

In this blog we will address the most common unexpected circumstances you should plan for:

  • Separation and Divorce
  • Serious illness
  • Incapacity
  • Death

Why is having a contingency plan important?

A contingency plan will provide certainty, stability and protection in a moment of crisis.  When any of the above scenarios occur, a contingency plan will ensure:

  • Key people are in place and have the authority required to make decisions;
  • There are rules and agreements in place in advance to avoid costly litigation;
  • Your business will continue to operate with little to no interruption, protecting its value and reputation.

Developing your contingency plan

There are key documents you should consider having in place as part of your business contingency plan:

  • Shareholder’s Agreement;
  • Cohabitation Agreement or Marriage Contract;
  • Power of Attorney for Property;
  • Will, including possibly double wills to address corporate assets

In addition to the above, various types of insurance policies are an important part of any contingency plan.

Shareholders’ Agreement

In simple terms, a shareholder agreement is a contract between the shareholders and, in some situations, between the shareholder(s) and the corporation to structure the relationship amongst the shareholders of a corporation. As shareholder agreements can take many different forms and each can address many different issues, in the context of a contingency plan it’s critical that the death and incapacity of each shareholder should be addressed in such document.

In the event of the death or the incapacity of one of the shareholders, the corporation, the surviving shareholders or the shareholders that are not incapacitated may automatically purchase the shares in accordance with the conditions and procedures often pre-established in such provisions in the shareholders’ agreement. This type of clause prevents the deceased shareholder’s heirs from becoming shareholders themselves during such events or, in the case of the incapacity, prevents the legal representatives to act for a shareholder in any corporate decision after a period of time as agreed between the parties. As you can see, having such a document in place could help to provide the corporation and the other shareholder with stability, certainty and protection in a moment of crisis.

Cohabitation Agreement or Marriage Contract

Whether you are in a common law relationship, getting married, or even if you have been married for years, a Cohabitation Agreement or Marriage Contract can help you to protect your business in the event of separation or divorce by agreeing in advance how business interests will be treated.  Many Shareholder’s Agreements require shareholders to have these kinds of agreements in place to protect the value of the business in the event of a shareholder experiencing a breakdown in their relationship.  If the shareholder does not have the required agreement in place, there may be repercussions set out in the Shareholder’s Agreement.

Why is a Marriage Contract important for business owners?  In Ontario, if you have an interest in a business and you are getting married, the growth in that interest will be shared with your spouse in the event of a separation or divorce.  If you owe your spouse an equalization payment and there are no other assets from which you can pay it, your interest in the business may be at risk and, in turn, may impact your ability to continue the business as a going concern.  A Marriage Contract can either exclude your business from equalization or provide rules to ensure that the operation of the business is not going to be negatively impacted in the event that an equalization payment is owed.  This may include providing for the equalization payment to be paid over time or prohibiting the ability to force a transfer of shares to satisfy the payment.

Power of Attorney for Property

In the event of serious illness, which keeps an individual away from his or her day-to-day duties of running a business, or in the event of the incapacity of a business owner, a Power of Attorney for Property will grant an individual the authority to make decisions about the grantor’s assets.  This may include stepping into the person’s role as a shareholder and voting in the place of the incapable person.


In the event of death, your will names the individual(s) who will administer your estate which may include the estate trustee stepping into the deceased person’s shoes as a shareholder.  Proper estate planning can also protect the value of your business and ensure that your desired succession plan is carried out. Having a secondary will to deal with corporate assets may also further protect the value of your business.

This blog post was co-written by Kate Wright and Robert Bissonnette.   Kate is a member of the Family Law, Wills and Estates and Litigation teams.  She can be reached at 613-369-0383 or at  Robert is a member of the Business Law team, and is licensed in both Ontario and Quebec.  Robert can be reached at 613-369-0365 or at


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