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 between an existing company with a new investor. Please keep in mind that internal content is only a sample term and that internal content is tailored to the situation between the existing business owner agrees with new shareholders, where the agreement contents differ from the new joint venture company.
You are advised to consult with a lawyer or any law expertise in order to have a transparent shareholders’ agreement.