Shareholders agreements


A shareholder agreement is a binding contract between shareholders or owners of a company. A shareholder agreement will govern the relationship between shareholders and delineate control, ownership, management, shareholder rights and exits. 

Essential Characteristics

Shareholder agreements should detail the following:

  • Specifying what shareholders will make decisions and whether a distinction applies to the decisions of directors
  • Voting rights of shareholders and directors
  • The rights shareholders possess such as the appointment of board directors or observer rights
  • How directors will be appointed and removed
  • Dividend rights and how amounts will be decided
  • How new shares will be issued, and how ownership interest will be governed or maintained
  • The relationship between capital contributions and shareholdings
  • How existing shares will be sold
  • How the share price will be valued should the business be sold 
  • The circumstances where a shareholder will be forced to sell their shares and leave the company
  • The rights and obligations of employees should they be shareholders via a retention or performance incentive
  • Who approves the business plan and structure of the senior executive.
  • Reporting obligations to shareholders
  • How deadlocks will be resolved
  • How disputes between shareholders will be resolved 
  • Circumstances that will trigger the default and termination of a shareholder
  • The process that will govern the way a shareholder exits in the agreement if they voluntarily choose to do so, retire or pass away
  • Company protections such as Non-competes, restraints and ownership of IP.  
  • Buy-Sell Agreements in the case of insolvency, disability, death or retirement.