Shareholders Agreement Clauses

When starting a company, it is crucial to establish clear expectations and guidelines for all parties involved in the venture. One of the most important documents to create is a shareholders agreement, which outlines the rights and obligations of shareholders, as well as how decisions will be made and disputes resolved.

However, not all shareholders agreements are created equal. In order to protect the interests of all parties involved, it is essential to include certain clauses that address potential issues that may arise. Here are some key shareholders agreement clauses to consider:

1. Ownership and Transfer of Shares

This clause outlines how shares can be bought, sold, or transferred. It specifies any restrictions on ownership, such as whether shareholders need approval from others before selling their shares. It also addresses what happens in the event of a shareholder’s death or disability.

2. Board and Management Rights

This clause outlines how the board of directors will be appointed and how they will make decisions. It also outlines the duties and responsibilities of management, including the CEO and other executives.

3. Decision-Making Procedures

This clause specifies how decisions will be made by the shareholders, including what percentage of votes is required to approve major decisions such as mergers or acquisitions.

4. Non-Compete Clause

A non-compete clause prohibits shareholders from competing with the company after leaving. This could include starting a similar business or working for a competitor.

5. Dispute Resolution

This clause outlines the procedures for resolving any disputes between shareholders, such as mediation or arbitration. It also specifies the jurisdiction in which any legal actions must take place.

It is important to consult with legal professionals when drafting a shareholders agreement, as they can provide guidance and ensure that the agreement is legally binding. By including these key clauses, shareholders can protect their interests and ensure the long-term success of the company.