It is essential for every corporation with more than one shareholder to have a Shareholders’ Agreement establishing the rights and obligations of the shareholders of a corporation.
Propulsio 360 legal team will draft a custom standard shareholders’ agreement for you. In this written agreement, a corporation’s shareholders agree to respect certain rules they have chosen in order to govern their relationship. It also provides ways of dealing with certain situations which could occur during the existence of the corporation such as the arrival of a new shareholder or the departure of another.
Why do I need a shareholders’ agreement?
There are many situations in which a shareholders’ agreement can get you out of trouble or provide for a solution other than that prescribed by law. Here are a few:
- when an unfortunate event occurs, such as a conflict with one of the shareholders, disability, the bankruptcy or death of a shareholder, etc.
- when the shareholders want to maintain equal shareholding among them throughout the corporation’s existence.
- when the shareholders want to participate in certain decisions, such as the introduction of new partners into the corporation.
- when it has been decided that certain specific situations require an increase in the number of votes required with respect to shareholder voting.
When is the right time?
Ideally, your shareholders’ agreement should be entered into before the corporation’s activities begin. The more you wait before signing an agreement, the more difficult it will be to obtain the signatures or consent required of the other shareholders. Over time, the number of shareholders may have increased. Consent may also be more difficult to obtain because there is tension between
the shareholders or because a conflict has arisen between them.
Clauses you may wish to include in your agreement
- first refusal : Ensure that shareholders have some say over the sale of a shareholder’s shares to a person who is not already a shareholder of the corporation.
- Mandatory offer due to death: Provide what will happen upon the death of a shareholder.
- Mandatory offer due to withdrawal from business: Provide for situations or events which could lead to the withdrawal of a shareholder from the corporation’s business, such as bankruptcy, a change of career, illness, etc.
- Pre-emptive right: Safeguard the rights and interests of the shareholders among them, in order to circumvent the provisions of the law saying that all new shares must be issued by the Board of Directors, without consulting the shareholders.
- Shot-gin clause: Provide for the consequences of a disagreement between the shareholders.
- Working conditions: Set out the working conditions for shareholders who work for the corporation.
- Voting: Require shareholders to elect each other as directors