What Is a Shareholders’ Agreement?
A shareholders’ agreement, also called a stockholders’ agreement, is an arrangement among a company’s shareholders that describes how the company should be operated and outlines shareholders’ rights and obligations. The agreement also includes information on the management of the company and the privileges and protection of shareholders.
The Basics of a Shareholders’ Agreement
The shareholders’ agreement is intended to make sure that shareholders are treated fairly and that their rights are protected.
The agreement includes sections outlining the fair and legitimate pricing of shares (particularly when sold). It also allows shareholders to make decisions about what outside parties may become future shareholders and provides safeguards for minority positions.
A shareholders’ agreement includes a date, often the number of shares issued, a capitalization (or “cap”) table, outlining shareholders and their percentage of company ownership, any restrictions on transferring shares, pre-emptive rights for current shareholders to purchase shares and details on payments in the event of a company sale.
Shareholder agreements differ from company bylaws. Bylaws are mandatory and outline the governing of the company’s operations. This document is often by and for shareholders, outlining certain rights and obligations. It can be most helpful when a corporation has a small number of active shareholders.
This is a sample shareholder agreement for a new joint-venture business whereas all statements are mentioned for new business creation.
You are advised to consult with a lawyer or any business law expertise in order to have a transparent shareholders’ agreement.
BIC TEMPLATE LEGAL – 0002 – Shareholders Agreement for joint-venture
