A shareholders agreement template can save your business a lot of time, effort, and conflict. In this article, we will take a look at what exactly a shareholder agreement is, what benefits it has, and how to use a shareholders agreement template.
Here’s a sample Shareholders Agreement template that can be easily customized and adapted to meet your requirements. It’s free to download and use.
What is a shareholders agreement?
In simple terms, it is an agreement that is made among the shareholders within a company that describes the rights and responsibilities of each party involved. This agreement is a crucial part of any business because it serves as protection for shareholders.
The purposes of a shareholders agreement are to:
- Clearly state business arrangements
- Determine the relationship between shareholders
- Determine the rights of the shareholders as well as their obligations
- Manage the sale of shares
- A shareholders agreement is essential for businesses that are in the process of being formed. This is a good way to make sure that everyone is on the same page and will bring to light everyone’s expectations of the business.
Why is a shareholders agreement important?
The most important thing about this agreement is that it offers protection to shareholders. Whether you are a majority shareholder, a minority shareholder, or whether you own 50% of the shares, your rights and interests will be protected.
A great aspect of this agreement is that it gives some power and a voice to minority shareholders. If you are a part of a shareholders agreement that allows everyone (including minority shareholders) to play a role in decision making, you will receive the same benefits and return on your investment that a majority shareholder will receive.
Why is it good to use a shareholders agreement template?
Using a solid template to create an agreement can make things a lot easier for you. A simple shareholders agreement template provides you with the basis of the agreement. Every shareholder's agreement has certain general terms that be included and using a template will ensure that these terms are included.
A template can be altered to suit the needs of your business or agreement and specific terms and conditions can be added or removed as needed.
What should be included in a shareholders agreement?
- Even though this is largely dependant on the number of shareholders, some basic terms should be included in every shareholder's agreement. These include:
- Anything related to the sale of shares by either a shareholder or the company. To sell shares to an outside party, either the company or the shareholder who wants to sell their shares has to offer the shares at the same price to the other first. The other party always has the first right to buy the shares before another potential buyer can.
- Transferring of the shares either between those involved in the agreement or a legally valid party such as a shareholder spouse.
- Anything related to running the company. This includes terms that indicate what the procedure is when making decisions such as nominating directors, board meetings, or finance issues.
- What the rights are of each shareholder and the company as well as any obligations each party has.
Creating a shareholders agreement early on in your business means having solutions in case any disputes arise in the future. Entering into an agreement like this will also help you to determine the quality of the relationships between you and the shareholders.
Whether the shareholders are people you have known for a long time like family or friends, or people with whom you have a strictly business relationship, making decisions together on key issues is a very good way to see what their intentions are and what the future might hold for your business.