What to Put in a Shareholders Agreement

A shareholder agreement is a vital document that outlines the terms and conditions that govern the relationship between shareholders in a company. The agreement typically covers aspects related to the governance of the company, decision-making, ownership, and transfer of shares, among others. When drafting a shareholder agreement, it is essential to ensure that it is comprehensive and covers all the necessary aspects. This article outlines what to put in a shareholder agreement.

1. Share Ownership and Transfers

The agreement should indicate the share ownership structure of the company and the number of shares owned by each shareholder. It should also outline the process for transferring shares and the restrictions that apply to such transfers. For instance, the agreement can specify that the company has a right of first refusal to purchase shares in case a shareholder wishes to sell.

2. Decision-Making and Governance

The agreement should outline the process for making decisions and the role of shareholders in governance. It should indicate the frequency of shareholder meetings and the voting process. The agreement should also specify the board of directors` composition and the powers they have, including the appointment of officers and the company`s general management.

3. Shareholder Obligations

The shareholder agreement should outline the obligations of shareholders regarding capital contributions and other financial obligations such as paying taxes and fees. It should also outline the responsibility of shareholders concerning the ongoing management of the company, including attending meetings and fulfilling any other obligations that may arise.

4. Confidentiality and Non-Disclosure

The agreement should specify that shareholders have an obligation to keep confidential any information they receive concerning the company’s operations. It should also include provisions for non-disclosure of any confidential information obtained during the shareholders’ period of ownership.

5. Dispute Resolution

The shareholder agreement should outline the process for resolving disputes between shareholders. Alternative dispute resolution methods such as arbitration or mediation can be included to avoid resorting to litigation. The agreement should also indicate circumstances that may trigger a dispute, such as a breach of the agreement or disagreements over the company`s management.

6. Exit Strategies

The shareholder agreement should outline exit strategies for shareholders, including the sale of shares, mergers, and acquisitions. It should also specify the terms of any buyout agreements between shareholders.

In conclusion, a comprehensive shareholder agreement is critical for the governance and management of a company. It helps to establish clear lines of responsibility and ownership, and provides a roadmap for decision-making and dispute resolution. When drafting a shareholder agreement, it is essential to ensure that it is precise and covers all the necessary aspects as outlined above.