Shareholders’ Agreement – Do I need one?
Shareholders’ agreements are generally a good idea wherever you have a company with more than one shareholder.
A shareholders’ agreement can set the expectations of the parties as to how the corporation will operate, can outline how important decisions will be made and can limit actions that shareholders can take with their shares.
A shareholders’ agreement is like a form of insurance. If the parties are getting along, it is likely that they will never look at the shareholders’ agreement, but if things do not go as planned, they can look to the agreement to hopefully settle any disagreements in an orderly fashion.
For example, a shareholders’ agreement can address the following matters:
- The election and composition of the board of directors
- What constitutes a fundamental matter, and who gets to approve them
- When a shareholder can transfer their shares, and restrictions relating to that transfer
- Right of first refusal
- Drag along
- Tag along
- Pre-emptive rights
- What happens if a shareholder dies or becomes disabled and unable to work in the business
- Shot-gun clause
Future blog posts will look at each of these features in turn. Stay tuned!
Thinking of putting a shareholders’ agreement in place for your company? Contact us today.