A shareholders' agreement is a vital document that outlines the relationship among shareholders and the company. Here are the key items that should be addressed in a shareholders' agreement:
Parties: Clearly identify all shareholders involved and the company.
Share Ownership: Detail the shareholdings of each party, including the type and number of shares held.
Governance and Voting Rights: Specify how decisions are made, including voting rights, quorum requirements, and any special voting majorities for key decisions.
Board of Directors: Outline the composition of the board, appointment and removal of directors, and their powers and duties.
Issuance and Transfer of Shares: Set rules for issuing new shares, preemptive rights, restrictions on share transfers, right of first refusal, and approval processes for transferring shares.
Dividends and Distributions: Define the policy for declaring and distributing dividends among shareholders.
Financing and Capital Contributions: Describe the mechanisms for future financing, capital calls, and shareholder loans.
Management and Control: Outline the roles and responsibilities of shareholders in the management of the company, including any reserved matters requiring shareholder approval.
Dispute Resolution: Establish procedures for resolving disputes among shareholders, such as mediation or arbitration.
Exit Provisions: Detail the conditions under which shareholders can exit the company, including buy-sell agreements, drag-along and tag-along rights, and exit strategy in case of a sale or IPO.
Confidentiality and Non-Compete Clauses: Include clauses that protect the company’s confidential information and restrict shareholders from engaging in competing businesses.
Deadlock Provisions: Set out mechanisms for resolving deadlocks in decision-making, which may include buyout options or third-party mediation.
Amendments to the Agreement: Define the process for making amendments to the shareholders' agreement, typically requiring a specified majority vote.
Termination: Specify the events that can lead to termination of the agreement and the consequences of termination.
Governing Law and Jurisdiction: Indicate the governing law and jurisdiction for resolving any disputes arising from the agreement.
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