When it comes to running a business, having a shareholder agreement in place is critical for ensuring that everyone involved is on the same page. From outlining ownership percentages to detailing how profits and losses will be distributed, the shareholder agreement serves as a guide for how the company will operate. Here are some key terms that should be included in any shareholder agreement:
1. Ownership Percentage: This is perhaps the most important term in any shareholder agreement. It outlines each shareholder`s percentage of ownership in the company and how it may be divided among multiple shareholders.
2. Board of Directors: The shareholder agreement should also detail how the board of directors will be chosen, how many members it will have, and what their responsibilities will be.
3. Voting Rights: Another important term is voting rights. Shareholders should be clear on how voting will work, including how many votes each shareholder will have and what decisions will require a simple majority or a supermajority.
4. Transferability: The shareholder agreement should also outline the rules around transferring ownership. For example, it might specify that shares can only be sold to other shareholders or that the company has right of first refusal.
5. Profit and Loss Distribution: It`s important to be clear on how profits and losses will be distributed among shareholders. This can be based on ownership percentages, but there may also be other considerations, such as the amount of work each shareholder puts into the business.
6. Death or Disability: Finally, the shareholder agreement should include terms for what happens in the event of a shareholder`s death or disability. This may include buyout provisions or alternatives for transferring ownership.
By including these key terms in a shareholder agreement, businesses can ensure that everyone involved is on the same page and operating with a clear understanding of what`s expected. Whether you`re starting a new business or seeking to formalize an existing one, be sure to consult with an experienced attorney to draft a comprehensive shareholder agreement that works for your company.