A shareholders agreement is a legal document that outlines the rights, responsibilities, and relationships between the shareholders of a company. It is essential for small businesses, as it provides a clear framework for governing the company’s operations and resolving potential disputes. This guide will provide you with the key elements to include in a professional shareholders agreement template for your small business.
Essential Elements of a Shareholders Agreement
1. Identification of the Parties: Clearly state the names and addresses of all shareholders involved in the agreement.
2. Definition of Shares: Define the types of shares issued by the company, such as common stock, preferred stock, or voting shares. Specify the rights and privileges associated with each type of share.
3. Capital Contributions: Outline the capital contributions made by each shareholder, including the amount of money, property, or services contributed.
4. Voting Rights: Determine how voting rights will be allocated among the shareholders. This may include provisions for majority or unanimous voting on certain matters.
5. Management and Control: Specify the roles and responsibilities of the company’s directors and officers, including their decision-making authority and fiduciary duties.
6. Dividends: Establish the procedures for declaring and paying dividends to shareholders. Consider factors such as profitability, retained earnings, and dividend preferences.
7. Transfer of Shares: Outline the restrictions and procedures for transferring shares to other parties. This may include provisions for right of first refusal or buy-back options.
8. Dispute Resolution: Specify the mechanisms for resolving disputes between shareholders, such as mediation, arbitration, or litigation.
9. Termination and Dissolution: Address the circumstances under which the company may be dissolved or liquidated. This may include provisions for voluntary dissolution, insolvency, or deadlock.
10. Confidentiality and Non-Compete: Include clauses that protect the company’s confidential information and prevent shareholders from competing with the business.
Design Elements for a Professional Shareholders Agreement
Clear and Concise Language: Use plain language that is easy to understand, avoiding legal jargon whenever possible.
Additional Considerations
Consider Including a Non-Disclosure Agreement: If the agreement involves the sharing of confidential information, include a non-disclosure agreement to protect proprietary information.
By carefully considering these elements and design principles, you can create a professional shareholders agreement that provides a solid foundation for your small business.