As a shareholder in a company, it is essential to have a shareholders agreement in place. This agreement outlines the rights and responsibilities of each shareholder and ensures that everyone is on the same page. However, not all shareholder agreements are created equal. Here are some things to look for in a shareholders agreement:
1. Clear definition of ownership: The shareholders agreement should clearly outline the ownership structure of the company. This includes the number of shares each shareholder owns and any restrictions on the transfer of shares.
2. Voting rights: The agreement should address voting procedures, including how decisions are made, who has the right to vote, and the percentage of votes needed to pass a resolution.
3. Board composition: The agreement should specify the composition of the board of directors and how they are elected. It should also outline their responsibilities and duties.
4. Management structure: The agreement should address the management structure of the company, including the roles and responsibilities of the CEO and other executives.
5. Dividend policy: The agreement should outline the company`s dividend policy, including how dividends are calculated and distributed to shareholders.
6. Exit strategy: The agreement should address how shareholders can sell their shares and exit the company. This includes any restrictions on the sale of shares and the process for selling shares to third parties.
7. Dispute resolution: The agreement should include a mechanism for resolving disputes between shareholders. This can include mediation, arbitration, or litigation.
8. Confidentiality: The agreement should address confidentiality issues, including the protection of trade secrets and proprietary information.
9. Non-compete clauses: The agreement may include non-compete clauses, which prevent shareholders from competing with the company for a specified period of time.
10. Termination of agreement: The agreement should outline the circumstances under which the agreement can be terminated and the process for doing so.
In conclusion, a well-drafted shareholders agreement is essential for any company with multiple shareholders. It protects the interests of all parties involved and provides a framework for the smooth operation of the business. When reviewing a shareholders agreement, be sure to look for these key provisions to ensure that it meets your needs as a shareholder.