Our templates are written in plain English by a lawyer who specializes in commercial drafting and has practical experience in resolving shareholder disputes. Minority shareholders will likely want to have more control over decisions that affect the value of their stake than the law allows by default. If a shareholder violates the agreement, the other parties have the option of mediating, arbitrating or litigating (i.e., finding a solution with the help of a third party or settling a claim in court). A shareholders` agreement is a legally binding document, which means that the parties are contractually obliged to comply with it. A shareholders` agreement is beneficial to both the shareholders who invest in your business and the directors who run your business. and if the substantive dispute cannot be resolved within a reasonable time or through the mediation and arbitration provisions of this Agreement, any shareholder (the « Initiating Shareholder ») may enter into an agreement of forced purchase or sale (the « Firearms Provision »). Decisions on different topics can be made in different ways, depending on the importance of each topic to each shareholder. You can go so far as to completely separate ownership and control: useful when some shareholders may have no experience or knowledge to make effective decisions. For family businesses and companies where some shareholders hold shares only as an investment, this ability to separate ownership from governance is likely to be a useful feature.
We have provided a complete formulation that you can work on based on the transaction you want to enter into with a selling shareholder. Valuing private shares is often a common phenomenon to resolve shareholder disputes when shareholders attempt to go bankrupt, sell part of their shares, for inheritance or for many other reasons. Unlike public companies, whose share prices are widespread, shareholders of private companies must use various methods to determine the value of their shares. Usually, this is done by auditors or an independent accounting firm. A mandatory transfer occurs when a shareholder has to sell his shares to the remaining members. A « forced transfer » can be triggered by one or more of these events if a shareholder: it also takes into account the dispositions of minority shareholders who, due to the circumstances, are likely to be the founders, friends and family of the founders. Reserved matters are matters in which the Company must first obtain the consent of a special majority (which may be unanimous) of the shareholders before making any decision. Examples of reserved questions include: whether you create incentives for individual employees or contractors using a stock option agreement that somehow links the ability to purchase shares at a preferential price to that person`s performance (p.B length of service in the business or the achievement of a milestone that they are involved in achieving). A shareholders` agreement establishes other powers, rights and obligations that the owners have towards each other and towards the company, beyond those that already exist by law or by the articles. No shareholder may sell a majority interest unless the same transaction is offered to the minority. A shareholders` agreement fulfils the role of a company agreement.
It allows you to define the limits of the director`s powers and clarify the issues that must be submitted to the shareholders for decision. This keeps the owners informed and that the most important decisions are made by them as a group and not by the administrators. An agreement can also help resolve the impasse in decision-making between owners as shareholders. Without such provisions, it is possible that a situation that is not beneficial to the business or an owner will continue indefinitely. The reverse is also true. An agreement can also define the decisions that a shareholder director is free to make without the need for a general meeting, allowing for safe and decisive action if necessary. Each agreement will balance shareholder interests in different ways, including: Of course, you can include these and other provisions in the model agreement, but it can be helpful to speak to one of our experts to determine if these are necessary for your business and how they work in practice. Directors are employees who are accountable to the corporation and its shareholders. When directors are also shareholders, as is so often the case, a director may be able to make decisions that are advantageous to him as a shareholder, but that are not in the interest of his co-owners.
These provisions are included in our shareholders` agreement for an institutional investor, as they are the most requested in this situation, but the presence of an institutional investor is not a prerequisite for their use. A new shareholder may prefer to lend money to the company rather than buy shares. It makes sense to record this in a loan agreement, which states whether interest is to be paid on the loan and whether the loan is secured by the company`s assets. All of these model shareholder agreements contain provisions relating to the valuation of an outgoing shareholder`s shares with reference to a valuation based on your instructions to an accountant. The rating depends on the parameters used, so your instructions are essential. For example, you can use a multiple of average EBITDA over a number of years or a multiple of average net worth. This guide will give you an idea of what a shareholder agreement is, why it`s a good idea to have one from the beginning, and how to navigate the model shareholder agreement available in Cooley GO Docs. While you can of course draft the shareholders` agreement at a later date, it makes sense to draft it and agree on it at the beginning to avoid future complications if shareholders change their attitude towards running the business or their expectations of the company. .
