What is it? This is an agreement put in place between shareholders of a business. The agreement states what would happen between shareholders in agreed circumstances. It is always best to have a shareholder agreement in place when starting a business or in a change of circumstances. This gives clarity and something for shareholders to refer to when making a decision.
The agreement will usually contain the following terms: - How the business will operate. - The amount of directors and the process to appoint new ones. - The responsibilities and rights of their role. - How to distribute funding. - A right of first refusal to other shareholders when selling their share of the business. - The insurances to have in place for when one of them die and how the proceeds will be distributed. - How the business will continue to operate in the event of a shareholder dying or being incapacitated. - The agreed procedure on how to deal with disputes.
An effective shareholder agreement needs to be drafted by an experienced lawyer. Contact David Houston today.