Corporate Shareholder Agreement Governance-Override Requirements in Ohio

At a glance

Requirements one by one

Qualification requires three exact elements

Ohio's label “close corporation agreement” describes the qualifying agreement; Section 1701.591 does not require a separate close-corporation election. Every person who is a shareholder when the agreement is adopted—including a holder without voting rights—must assent in writing. The agreement must be in the articles, the regulations, or another written instrument and must state that it is governed by Section 1701.591 (Ohio Rev. Code § 1701.591(A)).

For this purpose, Ohio Rev. Code § 1701.01(F) generally includes a subscriber within “shareholder” unless the listed governing record provides otherwise.

A separate written instrument must be entered in the shareholder-proceedings minutes. Failure to do that does not itself invalidate the agreement, but the recording duty remains (Ohio Rev. Code § 1701.591(A)-(B), (F)(4)).

The agreement binds the corporation and can replace board defaults

A qualifying agreement binds the corporation and all shareholders. Its twelve- item menu includes management, shareholder dissolution rights, voting obligations and thresholds, officer and director designation, multi-office execution authority, employment terms, distributions, board elimination or delegation, expanded inspection, limits on new share issuance, deadlock arbitration, and dispensing with the annual meeting subject to a shareholder's timely request (Ohio Rev. Code § 1701.591(C)).

That authority does not erase mandatory law. The agreement cannot eliminate or change a required Secretary of State filing and cannot waive or alter the listed Chapter 1701 provisions except as Section 1701.591(D) expressly permits. A filing certificate for an otherwise unavailable action must recite that a close corporation agreement authorizes it (Ohio Rev. Code § 1701.591(C)-(D)).

Amendment has an unusually high class-by-class floor

The default amendment or termination rule is the affirmative vote or written consent of all outstanding shares of each class held by persons then party to the agreement. The agreement may state a lower threshold, but never below four- fifths of each class (Ohio Rev. Code § 1701.591(E)(1)).

If fewer than all shares consent in writing, the corporate secretary must mail the amendment or termination notice to each nonconsenting shareholder. An articles-based agreement amendment is ineffective until filed as an articles amendment. A qualifying agreement that existed on December 31, 1993 and never specified a threshold uses four-fifths of each class (Ohio Rev. Code § 1701.591(E)-(F)).

Certificate notice, later holders, and uncertificated shares

Every share certificate must conspicuously note the agreement's existence. A purchaser or transferee taking such a certificate conclusively receives notice. Gift, bequest, and inheritance transferees, and any purchaser or transferee with knowledge or notice, are bound and become agreement parties (Ohio Rev. Code § 1701.591(G)-(H)).

Ohio does not allow uncertificated shares while the agreement is effective. The adoption itself instructs the corporation to replace existing uncertificated securities with appropriate certificates (Ohio Rev. Code § 1701.591(L)).

A protected purchaser gets a rejection-and-buyback sequence

A purchaser or transferee who did not take by gift, bequest, or inheritance and received a certificate without knowledge or notice may reject the agreement. The written rejection must reach the corporation by the earlier of 90 days after first receiving notice or three years after transfer or issuance (Ohio Rev. Code § 1701.591(I)(1)(d)).

The corporation then has 30 days to offer in writing to buy the shares for the full amount paid. The acquirer has 30 days to accept. After certificate and proof-of-payment delivery, the corporation has seven days to pay. Failure to complete the required response can invalidate the agreement; failure by the acquirer to meet a clock leaves the agreement valid and supplies no statutory payment right (Ohio Rev. Code § 1701.591(I)(1)-(3)).

Public status and no-board operation have automatic consequences

The agreement becomes invalid if the shares are nationally exchange-listed, registered under Exchange Act Section 12(g), or included in an effective Securities Act registration statement while the corporation must report under Exchange Act Section 15(d). The required termination threshold must authorize the corporation to cause one of those events while the agreement remains in force (Ohio Rev. Code § 1701.591(E),(I)(1)(a)-(c)).

If the agreement eliminates the board, shareholders are deemed directors and receive director liabilities, immunities, defenses, and indemnification for corporate action or inaction. A shareholder denied the right to vote or assent on the matter is not liable as a director for it (Ohio Rev. Code § 1701.591(G)).

What trips people up

“Close corporation agreement” does not mean Ohio requires the corporation to file a separate close-status election. The qualifying act is the agreement's own three-part Section 1701.591(A) compliance. Conversely, merely calling a document a shareholder agreement is not enough; the all-shareholder written assent, permitted instrument, and governing-section statement are mandatory.

Public-status invalidity is broader than an initial public offering. Exchange listing, Exchange Act Section 12(g) registration, and the stated Securities Act/Section 15(d) combination are each independent triggers. Unless the agreement provides otherwise, terms that remain valid under other law survive the close agreement's invalidity (Ohio Rev. Code § 1701.591(I)(1),(4)).

Common questions

Must nonvoting shareholders assent at adoption?

Yes. Every person who is a shareholder at adoption must assent in writing, whether or not entitled to vote (Ohio Rev. Code § 1701.591(A)(1)).

Can the agreement set a simple-majority amendment rule?

No. It may reduce the default unanimity only to a proportion of at least four- fifths of the outstanding shares of each class held by then-parties (Ohio Rev. Code § 1701.591(E)(1)).

Does every transferee have the purchaser-rejection right?

No. Gift, bequest, and inheritance transferees are bound, as are purchasers or transferees with knowledge or notice. The rejection sequence protects the specified certificated-share acquirer without knowledge or notice (Ohio Rev. Code § 1701.591(H)-(I)).

What remedies does the statute name?

A court exercising equitable powers may grant an injunction, specific performance, or other relief it considers fair and appropriate. Section 1701.591 also preserves other lawful agreements among two or more shareholders (Ohio Rev. Code § 1701.591(J)-(K)).

Statutes and sources

• Ohio Rev. Code §§ 1701.01 and 1701.591(A)-(B) — definitions and the three qualification requirements plus minute-entry rule. Official enrolled S.B. 21 PDF (accessed 2026-08-27).
• Ohio Rev. Code § 1701.591(C)-(F) — binding effect, permitted subjects, mandatory limits, amendment/termination thresholds, legacy rule, notices, filing, and validity protections. Official enrolled S.B. 21 PDF (accessed 2026-08-27).
• Ohio Rev. Code § 1701.591(G)-(I) — no-board liability, certificate notice, successor parties, public-status invalidity, purchaser rejection, buyback response, and surviving terms. Official enrolled S.B. 21 PDF (accessed 2026-08-27).
• Ohio Rev. Code § 1701.591(J)-(N) — equitable remedies, other agreements, certificated-share mandate, annual-meeting report consequence, and remedial legacy dates. Official enrolled S.B. 21 PDF (accessed 2026-08-27).