What Is a Shareholder Agreement?

A shareholder agreement or also called as the stockholders’ agreement is a written contract among the company's shareholders. The purpose behind the contract is to be certain that all the shareholders are treated equally and at the same time, their certain rights will be protected. Another significant objective of having a shareholders' agreement in your company is to outline each and everyone's role, task, and obligations. This written legal agreement is very important plus it offers a great help, especially when the corporation only has a limited number of active shareholders. According to victorialaw.ca, it is stated that there are 43% of self-employed business owners carried on business through a corporation.

How to Write a Simple Shareholder Agreement

shareholder agreement template

A simple shareholder agreement plays an important role in your company. This will create a huge impact on how decisions are made in the corporation. Always remember that when writing an agreement it must be detailed, it will also describe how you will run the business, how a dilemma must be managed and must state or clarify the responsibilities and privileges of every shareholder.

1. Identify your Shareholders

A shareholder agreement is also called a business contract so, therefore, it must identify the legal names of every shareholder, their recent address, and lastly the phone number of every shareholder. Aside from that, you must also select a batch of officers and nominate someone who is going to be the managing shareholder.

2. State the Responsibilities of the Shareholders

The main purpose of having a well-written agreement is to avoid arguments between your shareholders. That is why you must state the responsibilities of everybody and at the same time, you must set the rules and regulations to avoid conflicts. This agreement must be strict regarding the actions of any shareholder that can take the name of the corporation so that whenever an issue arises, you will know how to handle the problem by determining the steps stated in your sample agreement.

3. Legal Obligations of Each Party in the Agreement

Aside from stating the responsibilities in your shareholders' agreement, you must also discuss the obligations of each party involved. You must state in your agreement the legal obligations of every individual who signs the contract.

4. The Proper Distribution of Shares

Dividing the shares in your corporation is an important part of every shareholders' agreement that is why you must state it in your contract. Remember that you must divide shares fairly to avoid misunderstanding between your shareholders.

5. Develop the Exit Strategy

If you want your shareholders' agreement to be successful then you must develop a proper exit strategy. An exit strategy is very essential in creating an agreement and it will also determine what will happen next in the business that you want to render. Always keep in mind that the shareholders' arrangement is one of the heart and soul of your business so when you write your shareholders' agreement badly, then it will cause the individuals to lose their interest in the business.

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