Shareholder agreement

What is a shareholder agreement?

A shareholder agreement or a shareholder loan agreement details how exactly a company should run. It will also list the rights and obligations of shareholders and, as a result, will find a common legal ground for the venture between shareholders and the wider company. It can be between all or just some of the shareholders, depending on the circumstances involved. It is usually a good idea to put a shareholder agreement in place when a company is formed or when it issues its first shares. 

How does a shareholder agreement work?

A good sample shareholder agreement will include the aforementioned shareholders’ rights and obligations. It will also outline how the sale of shares in the company can occur and, in that way, regulates such sales. It should also describe as clearly as possible how the company will be run so that there is no room for interpretation. 

Importantly, it will therefore define how important business decisions will be made by the company and outline the rights of minority shareholders and majority ones. In doing so, a good shareholder agreement will provide a good level of protection for any type of shareholder as well as the company itself. In that way, it can also outline what the relationship between shareholders and the company should be. 

Other common ideas that a good shareholder agreement should include are the prohibition of competing business, how intellectual property rights are dealt with, what occurs upon the death of a person that significantly changes the ownership of the company, and what should happen if a breach of contract occurs. Finally, the transfer of shares and how that can occur should a shareholder want to sell or buy their shares should be included. 

Advantages of a shareholder agreement 

Given the number of stipulations that a strong shareholder agreement should outline, one of the main advantages of any shareholder agreement is the clear distinction of obligations by each party. By both sides knowing from the outset what is required of them and what will happen in the event of a breach of contract or transfer of shares, any negative legal fallout is minimized, if not eradicated. 

The business venture and partnership that a shareholder agreement can be seen as is therefore strengthened from the outset, as well as time and cost-saving. By reducing the chances of legal proceedings starting on either side, a more positive relationship can begin that also is less likely to cost each party any money in the form of legal fees in the future. 

Contractbook and shareholder agreement

Contractbook’s resource of contract templates in its library includes a shareholder agreement template or a sample shareholder agreement which can be easily amended and edited. It allows users to complete and fill in data and send it off for signature quickly and easily as well as store the documents online so that the shareholder agreement can become an asset. As opposed to being stored somewhere in a physical format, making it hard to work from in the future, these online contracts are easily found, ready to be used in the future.