Starting off your own company can be high risk, for much more reasons than you think. If you decide to incorporate your business, and there tend to be several reasons why you should, you should make sure that the interests of the shareholders (SH's) are usually protected.
Whenever a corporation is formed which involves 2 or more shareholders, those people in the corporation usually enter into an agreement to define the business relationship between some as well as each of them. Such an agreement is known as a "Shareholders' Agreement" (SHA). If the agreement is between all of the SH's of the corporation, the agreement is normally referred to as a "Unanimous Shareholders' Agreement".
While there are generally numerous topics inside a SHA that might be addressed in the corporation's Articles of Incorporation, there usually are reasons where it's more suitable to address those concerns in a separate document. One main reason is that the Articles of Incorporation happen to be public documents while a SHA is mostly private as between those involved to that agreement.
A SHA usually operates to change, clarify as well as elaborate on the rights of the parties to that particular agreement below statute or common law. The reason behind entering into a Shareholders' Agreement is usually to manage or stay away from disputes and to supply mechanisms for responding to them as they arise. When thinking about an SHA, there are 2 areas where differences usually arise in between the involved parties:
The direction along with control over the corporation; and
The means through which the involved parties may exit from the corporation (as well as liquidate their investment.
The affairs of a corporation are generally monitored by the board of directors. In a closely held corporation, minority shareholders may not always be properly protected with a board composed just of representatives of the majority.
SH's might want to make sure that their interests are represented and that absolutely no one shareholder or perhaps group may exert unnecessary influence on the direction of affairs of the corporation. A SHA may end up being drafted to tackle this. Should there be a dispute among SH's, occasionally the only way of solving a dispute is actually for a member to exit the corporation.
Exit mechanisms and also procedures are generally a critical portion of a Shareholder Agreement. There are usually many forms of exit procedures which can end up being provided for such as buy-sell (shotgun) provisions, the right of first refusal, right of first offer, a put/call, in addition to provisions on the death or incapability of a shareholder.
There are generally numerous additional important provisions that should end up being considered in an SHA and it's constantly preferable to seek assistance of a lawyer along with experience with this area.
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