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Drafting of Shareholder Agreements - Canest

Canest > Drafting of Shareholder Agreements

Overview

A shareholder agreement is a legal document that creates the regulations by which a corporation is run. When starting a business that involves more than one person who is investing money in the company, a shareholder agreement is an essential foundation on which to build a corporation. A shareholder agreement should be detailed. It should describe how the business will be run, how problems between shareholders will be handled, and clarify the responsibilities and benefits of each shareholder.

ADVANTAGES OF SHAREHOLDERS AGREEMENT
  • IMPROVES CLARITY: The agreement involves a detailed description of the nature of work and relationships among shareholders and with the company that will avoid confusion.
  • GUARDS THE PARTIES: The parties express their will, rights, and duties in an agreement which reduces the scope of disputes between the parties in the future.
  • PROOF: it acts as evidence that expresses the duties and rights which the parties have agreed on.
  • SCOPE OF CONFIDENTIALITY: the Agreement involves clauses that state the compliance with any confidentiality that the parties may prescribe in their contract.
  • INTELLECTUAL PROPERTY RIGHTS: The ownership rights and usage rights of trademark or trade name (if any) will be clearly distinguished in the shareholder’s agreement that will establish the rights of parties very clear.

Contents For Shareholders Agreement

  • Name and details of parties.
  • Date of the agreement.
  • Purpose of the agreement.
  • Distribution of shares.
  • Management and control.
  • Shareholding( before and after).
  • Confidentiality Clause.
  • Dividend.
  • Director’s loan (if any).
  • Penalties and remedy for non-compliance.
  • Provision for transfer of shares.
  • Shareholder’s rights and duties during the dissolution of the company.
  • Signatures of parties.

 

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