In this edition of ‘It depends’, associate Sacha Robinson talks about what you should include in the shareholder agreement for your business.
Welcome to the latest edition of It Depends. Today we will be discussing what you should include in the shareholder agreement for your business.
What should I include in a shareholder agreement for my business?
It depends. However, there are some key issues which you should consider covering in your shareholder agreement.
What are some key issues you should consider when preparing a shareholder agreement?
Some key issues to cover in your shareholder agreement are the management and administration of your business, the entry and exit of shareholders, how the value of the shares in your company will be determined, business succession funding arrangements, any pre-emptive rights and tag along drag along provisions, and director guarantees and who will be required to give them. This is not an exhaustive list, and there may be other things that you would like to cover.
Why should the shareholder agreement deal with these issues?
A shareholder agreement which deals with these key issues is important for a number of reasons, including to ensure the smooth operation of a business and cooperation between shareholders and also when transitioning shareholders out of the business.
What should I do next?
It is essential that you get the shareholder agreement for your business correct, especially when you are taking on any new shareholders.