Shareholder Agreements

Shareholder Agreements

 Shareholder agreements range from simple agreements covering only certain corporate matters to general agreements regulating the operation of a corporation in detail. A unanimous shareholders agreement (a “USA”) is one binding on all the shareholders of the corporation. A USA is an agreement that is among all the shareholders of a corporation restricting the powers of directors to manage, or supervise the management of, the business and affairs of the corporation.

Matters that Can be Included in a Shareholders’ Agreement

  • Who will be the director(s), officer(s), and auditor(s) of the corporation?
  • How will the directors and shareholders vote on certain issues?
  • What type of contracts and business the corporation will conduct?
  • How will share transfers to new shareholders be limited? For example, the agreement might allow transfers only if approved by all the shareholders. It might require that those shares first be offered to the remaining shareholders at an arranged price. It might require the remaining shareholders to purchase the shares at an arranged price so that departing shareholder can plan for the value of their shares before retiring (or plan the value of their estate on their death).
  • Will shareholders be required to take insurance on the others’ death or incapacity, so that the departing shareholder’s estate will be fully paid for those shares?
  • Will arbitration or mediation be required if there are disputes, thus saving the cost of any court action?
  • Must a shareholder transfer shares to the other existing shareholders if the arbitrator concludes that the shareholder has seriously breached the shareholders’ agreement?

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