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Shareholder Agreement

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Shareholder Agreement


This Shareholder Agreement ("Agreement") is entered into as of [Date], by and among the shareholders listed below (individually, a "Shareholder" and collectively, the "Shareholders") of [Company Name], Inc., a corporation organized under the laws of the State of [State].


1. Purpose

The purpose of this Agreement is to govern the relationship among the Shareholders, regulate the transfer of shares, and set out the rights and obligations of each Shareholder.


2. Share Ownership

The current Shareholders and their respective ownership percentages are as follows:

  • [Shareholder A Name] – [XX]%

  • [Shareholder B Name] – [XX]%
    (Additional names as needed)


3. Management and Voting

3.1 Board of Directors – The Shareholders agree to vote their shares to appoint the following persons as initial directors: [Names].
3.2 Voting Rights – Each Shareholder shall be entitled to one vote per share.
3.3 Major Decisions – The following actions require [unanimous/majority] shareholder approval:

  • Issuance of new shares

  • Sale or transfer of major assets

  • Mergers or dissolution

  • Amendment of bylaws or articles


4. Transfer of Shares

4.1 Restrictions – No Shareholder shall transfer any shares without first offering them to other Shareholders.
4.2 Right of First Refusal – If a Shareholder receives a third-party offer, the other Shareholders shall have the right to purchase those shares on the same terms.
4.3 Tag-Along Rights – If a majority Shareholder sells their shares, minority shareholders may join and sell a proportional amount.
4.4 Drag-Along Rights – If a majority agrees to sell the company, all Shareholders may be required to sell on the same terms.


5. Dividends

Dividends, if any, shall be declared and distributed at the discretion of the Board in proportion to share ownership.


6. Confidentiality

All Shareholders agree to keep confidential any non-public business information relating to the company.


7. Dispute Resolution

In the event of a dispute under this Agreement, the parties agree to attempt mediation before initiating arbitration or litigation.


8. Termination

This Agreement shall terminate upon the dissolution of the company, or upon written consent of all Shareholders.


9. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of [State].


10. Entire Agreement

This document constitutes the entire agreement between the parties regarding the subject matter and supersedes all prior agreements.


IN WITNESS WHEREOF, the Shareholders have executed this Shareholder Agreement as of the date first written above.


Shareholder A Signature
Name:


Shareholder B Signature
Name:

(Add more lines as needed)


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Shareholder Agreement

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SHAREHOLDER AGREEMENT FAQ


What is a Shareholder Agreement?

A shareholder agreement is a legally binding contract among a company’s shareholders that defines their rights, responsibilities, and obligations in relation to the ownership and management of the business. It typically addresses governance rules, voting rights, dividend policies, share transfer restrictions, and procedures for resolving disputes. This document works alongside a company’s articles of incorporation but offers more specific protections tailored to the shareholders’ needs.


Why do you need a Shareholder Agreement?

You need a shareholder agreement to provide clarity and structure in how the company will operate, particularly in situations where multiple owners are involved. It helps prevent misunderstandings by outlining decision-making processes, profit distribution, share valuation, and exit strategies. Additionally, it safeguards minority shareholders’ rights and can protect the company from unwanted external influence by restricting share transfers to third parties.


When should you use a Shareholder Agreement?

You should put a shareholder agreement in place when establishing a corporation with more than one shareholder, or whenever a new shareholder is brought into the company. It is equally valuable for startups, family businesses, and established corporations seeking to maintain harmony among owners and ensure smooth governance.


How to write a Shareholder Agreement?

When drafting a shareholder agreement, clearly identify the shareholders and the number of shares held by each. Define voting rights, dividend policies, restrictions on share sales, procedures for issuing new shares, and processes for resolving disputes. Include exit provisions such as buy-sell clauses and rules for valuing shares. The agreement should be signed by all shareholders and reviewed by a qualified business attorney to ensure it complies with relevant laws.


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