SHAREHOLDER’S AGREEMENT
W W W. ACCO UN T IN G A ND R EFUND S .CO M Accounting Firm in Stone Mountain, GA
SHAREHOLDER BASICS An agreement between shareholders is aimed at fair treatment of shareholders and protection of their rights. The contract contains a section that specifies a fair and legal price for the shares (especially at the time of sale). In addition, shareholders can make decisions about whether external parties can become future shareholders and provide security for minority status. The shareholder agreement includes a date, the number of shares issued, a capitalization table showing
WHAT GOES IN A SHAREHOLDER AGREEMENT? Many entrepreneurs setting up a start-up will want to draw up a shareholder agreement for the original parties involved. This is necessary to clarify what the parties originally planned. As the company matures and changes or if a dispute arises, a written consent can guide you and help you resolve the issue. Entrepreneurs can also indicate who can become a shareholder, what happens if the shareholder is no longer able to hold shares (e.g., disabled, dies, resigns or is fired), and who is eligible to serve on the board of directors as a member.
shareholder and ownership interests, any restrictions on share transfers, shareholder rights, and details on payments in the event of a company sale. Shareholders’ agreements are different from the company’s articles of incorporation. The Articles of Incorporation, form the legal backbone of the company and regulate its operation. However, shareholder agreements are voluntary. This document, often produced by and for shareholders, describes certain rights and obligations. This is most useful if your company has a small number of active shareholders.
As with all shareholder agreements, initial
agreements often contain the following sections:
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A preamble, identifying the parties (e.g., a company and its shareholders)
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A list of recitals (rationale and goals for the agreement)
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Details of optional vs. mandatory buy-back of shares by the company in the event that a shareholder gives theirs up
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A right of first refusal clause, detailing how the company has the right to purchase a selling shareholder’s securities before them selling to an outside party
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Notation of a fair price for shares, either re-calculated annually or via a formula
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A potential description of an insurance policy
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