Shareholder Agreement

What is a Shareholder Agreement?

A shareholder agreement is a legally binding document between the shareholders of a corporation. This agreement outlines the shareholders' rights, responsibilities, and obligations, and provides the rules for the operational management of the company.

It sets forth policies on critical issues such as the distribution of dividends, the management of the company, shareholders' rights to transfer shares, dispute resolution, and what happens upon the death of a shareholder.

What are the benefits of creating a Shareholder Agreement?

Protection of Shareholders: A shareholder agreement can protect both majority and minority shareholders. It ensures that majority shareholders can't force decisions without minority shareholder approval, and it can prevent minority shareholders from selling their shares to outsiders without offering them to existing shareholders first.

Operational Stability: By outlining clear processes for decision-making and dispute resolution, a shareholder agreement helps prevent conflicts and ensures the smooth running of the company.

Investor Attraction: A well-drafted shareholder agreement can make the company more attractive to potential investors, as it shows that the company is well-managed and has plans in place to handle future challenges.

Confidentiality: A shareholder agreement often includes confidentiality clauses, protecting the company's sensitive information.

Dispute Resolution: In case of disagreements or disputes among shareholders, the shareholder agreement provides a roadmap for resolution, reducing legal costs and preventing damage to the company's operations.