What Is a Shareholders' Agreement?
A shareholders' agreement is an arrangement among a company's shareholders, describing how the company should be operated, along with shareholders' rights and obligations. The agreement also includes information on the management of the company and privileges and protection of shareholders, it may include but not limited to below provisions.
- Lock-down provisions (is a specified period when an employee of a company is barred from selling, and occasionally buying, his company's stock. They can also be self-imposed by a corporation as an impetus for employees to retain company stock. restrictions on transferring shares.
- Pre-emption rights
- Issuing shares and transferring shares – including provisions to prevent unwanted third parties acquiring shares and how a shareholder can sell shares
- Compulsory Buyout (A way to end a dispute between shareholders is to provide for a compulsory buyout. This can be open-ended, in which either party can buy out the other, or it can be specific, in which one person's shares are subject to a buyout. A formula for determining the buyout price should be in the agreement, to avoid disagreements later)
- Share transfer on the death of an existing shareholder
- In what circumstances must shareholders’ sell their shares, e.g. a director of a company resign / key employee resign / material breach of shareholder agreement
- "tag-along" right
- "drag-along" rights
- Minority protection provisions
- Manner of control and management of the company
- Imposing requirements to provide shareholders with accounts or other information that they might not otherwise be entitled to by law
- Making provision for the resolution of any future disputes between shareholders, such as arbitration provision.