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Shareholder Agreements

Shareholder agreements range from simple agreements covering only certain corporate matters to general agreements regulating the operation of a corporation in detail. A “unanimous shareholders agreement” is one binding on all the shareholders of the corporation.

Some matters that can be included in a shareholders’ agreement are:

An agreement as to who will be the director(s), officer(s), and auditor(s) of the corporation.
An agreement as to how the directors and shareholders will vote on certain issues, and what type of contracts and business the corporation will conduct.
An agreement limiting share transfers to new shareholders. For example, it might allow transfers only if approved by all the shareholders. It might require that those shares first be offered to the remaining shareholders at an arranged price. It might require the remaining shareholders to purchase the shares at an arranged price so that departing shareholder can plan for the value of their shares before retiring (or plan the value of their estate on their death).
The agreement might also require shareholders to take insurance on the others’ death or incapacity, so that the departing shareholder’s estate will be fully paid for those shares.
The agreement might require arbitration or mediation if there are other disputes, thus saving the cost of any court action. It might require a shareholder to transfer shares to the others if the arbitrator concludes that the shareholder has seriously breached the shareholders’ agreement.