Shareholders Agreement
INTRODUCTION
A Shareholders' Agreement is an agreement amongst the shareholders of a company. When a company is created, its founding shareholders determine how a company will be owned and managed. The Shareholders' Agreement establishes rules to govern the relationship between two or more owners of a company. Without a shareholders’ agreement in place, the rules that apply are in the applicable corporate statute. The shareholders’ agreement creates an overlay that addresses issues created or left unanswered by the corporate statute; they work together to create the rules that govern the relationship between the shareholders. In many cases, the structure protects the basic economic interests of the shareholders more effectively than the corporate statute does on its own. A Shareholders’ Agreement provides details of the rights and duties of the stakeholders and the shareholders. It should be reviewed and revised periodically to ensure that it is in line with the current business environment, but it should not be revised to often so as to cause instability. A company which is wholly owned by one person need not have such an agreement. However, as soon as there is more than one owner, such an agreement is essential. Shareholders' Agreement is sometimes referred to in the U.S. as Stockholders' Agreement.
SCOPE OF THE SHAREHOLDERS’ AGREEMENT
The Shareholders’ Agreement attempts to define the following, * Share Distribution: It will include the rights related to the issuance, sale, or subsequent distribution of shares. It will also have the pre-emptive rights and first refusal rights of the directors and management.
* Structure of the Company: This will inform shareholders of the persons who are running the organization and managing their money.
* Distinction in the Ownership of the Shares: This section helps distinguish between the different classes of shareholders. * Rights and Duties of the Shareholders: It informs the
A Shareholders' Agreement is an agreement amongst the shareholders of a company. When a company is created, its founding shareholders determine how a company will be owned and managed. The Shareholders' Agreement establishes rules to govern the relationship between two or more owners of a company. Without a shareholders’ agreement in place, the rules that apply are in the applicable corporate statute. The shareholders’ agreement creates an overlay that addresses issues created or left unanswered by the corporate statute; they work together to create the rules that govern the relationship between the shareholders. In many cases, the structure protects the basic economic interests of the shareholders more effectively than the corporate statute does on its own. A Shareholders’ Agreement provides details of the rights and duties of the stakeholders and the shareholders. It should be reviewed and revised periodically to ensure that it is in line with the current business environment, but it should not be revised to often so as to cause instability. A company which is wholly owned by one person need not have such an agreement. However, as soon as there is more than one owner, such an agreement is essential. Shareholders' Agreement is sometimes referred to in the U.S. as Stockholders' Agreement.
SCOPE OF THE SHAREHOLDERS’ AGREEMENT
The Shareholders’ Agreement attempts to define the following, * Share Distribution: It will include the rights related to the issuance, sale, or subsequent distribution of shares. It will also have the pre-emptive rights and first refusal rights of the directors and management.
* Structure of the Company: This will inform shareholders of the persons who are running the organization and managing their money.
* Distinction in the Ownership of the Shares: This section helps distinguish between the different classes of shareholders. * Rights and Duties of the Shareholders: It informs the