With a shareholder agreement, the rights and responsibilities are set forth as is how the company will be set up and managed. With a well-drafted shareholder agreement, you can reap many benefits as you set forth the terms that will govern how your company is run and the roles your shareholders will play. Let’s take a look at all that you can accomplish with a shareholder agreement and the significance it will play in your business.
The Significance of Shareholder Agreements
In business, you may be anxious to jump towards whatever is next. You are filled with ideas and want to act on them as soon as possible. We get this. We also know, however, that taking the time to plan and protect your business on the front end will not only end up making your life easier, but it will help promote a sustainable business model set up for continuous, unimpeded growth.
Taking the time to put a strong shareholders agreement in place, for instance, can help prevent issues from arising down the road and can help minimize the impact issues have on the business if they do end up arising. Take, for instance, the fact that a shareholder agreement will identify shareholders, identify their rights regarding things like whether or not they can transfer their interests in the company, and detail their responsibilities to the company. These are terms that manage the expectations of the shareholders. Other terms, such as those pertaining to dispute resolution, will make it clear that, should a problem arise, this is the prescribed method for dispute resolution. It takes the guesswork out of things. Speculation will often lead to needless disputes arising.
A comprehensive shareholder agreement can also set forth:
- Who may become a shareholder
- Who must remain a shareholder
- The voting rights of shareholders and management
- When remaining shareholders may acquire an existing shareholder’s shares in the company
- The authority of management, the board, and shareholders to determine certain issues
- The succession plan should there be a change in company ownership or management
- How and when dividends and other distributions will be made
You see, these are important terms dictating how a company will run and be managed. Issues pertaining to these terms are likely to arise at some point or another. A shareholder agreement is the touchstone. It is the foundation of the company and something that everyone will be able to reference whenever there are questions as to how things should or should not proceed.
Business Law Attorneys
Set your business up for continued success. The team at Jones, Gregg, Creehan & Gerace will work with you to establish a strong shareholder agreement that reflects your vision for your company and how it will be managed. We are committed to serving businesses even before they officially lift off the ground. We are here to help with all of it. Contact us today.