When starting a new business venture, it`s important to have a clear understanding of ownership and the rights and responsibilities of shareholders. That`s where a shareholder agreement comes in – this document outlines the terms and conditions of a company`s ownership structure and can help prevent disputes down the line.
But what exactly should be included in a shareholder agreement? Here are some key provisions that are often found in sample shareholder agreements:
1. Ownership percentage: This outlines each shareholder`s ownership percentage in the company, which will be used to determine voting rights, profit distribution, and more.
2. Rights and responsibilities: Shareholders should have a clear understanding of their rights and responsibilities within the company, including the ability to vote on key decisions, attendance at meetings, and the ability to sell or transfer their shares.
3. Dividends and distributions: The shareholder agreement should outline how profits will be distributed among shareholders, whether dividends will be paid out, and how much each shareholder is entitled to.
4. Restrictions on share transfers: The agreement may include restrictions on the sale or transfer of shares, including `right of first refusal` clauses that give existing shareholders the opportunity to buy shares before they are sold to a third party.
5. Dispute resolution: In the event of a dispute among shareholders, the agreement should outline how disagreements will be resolved, whether through mediation, arbitration, or another method.
6. Board of directors: The shareholder agreement may outline the composition of the board of directors, including the number of directors, how they are appointed, and their responsibilities.
7. Confidentiality and non-compete clauses: To protect the company`s intellectual property and prevent conflicts of interest, the shareholder agreement may include confidentiality and non-compete clauses that limit what shareholders can do with company information and prevent them from starting a competing business.
While every shareholder agreement is unique and tailored to the needs of the specific business, these provisions can serve as a starting point for drafting a comprehensive and effective agreement.
In conclusion, having a well-drafted shareholder agreement can help protect the interests of all parties involved in a business and prevent disputes down the line. If you`re in the process of starting a new business or revising an existing shareholder agreement, it`s important to consult with legal and financial professionals to ensure that your agreement is comprehensive and effective.