A shareholder agreement is an agreement between a company’s owners that sets out the rights and obligations of the company’s owners.
A shareholder agreement will generally set forth:
- How and when a shareholder can sell his/her shares.
- What decisions require unanimous consent of the shareholders.
- Can a shareholder start another business that competes with the company?
- How and when the company can borrow money from the shareholders.
- How disputes will be resolved.
The process of negotiating a shareholder agreement enables you to have a frank discussion about real-life topics that might only come up if there is a dispute. It is better to have those discussions at the outset of the company’s formation to be sure that you and your partners genuinely see eye to eye.