What Should A Shareholders Agreement Include?

Each company’s Shareholders Agreement will be different as same needs to be drafted and tailored to fit the company’s unique needs and requirements. However, there are 5 main factors that one should ensure are included when drafting a Shareholders Agreement.

1. Shareholders’ Meetings

Shareholders’ meetings should clearly be stipulated as to the regularity of the meetings, as well as how it is called. Special circumstances should be provided whereby the members could deviate from the general rules, such as where urgent matters need to be addressed immediately without postponing it over till the next meeting.

2. Profit-Sharing

It is of vital importance that profit-sharing is clearly stipulated as to the manner in which the profits are to be shared between the various shareholders.

3. Company Shares

Company shares should clearly be stipulated. The type of shares that are to be issued and allotted to each shareholder, as well as the amount that is to be paid in respect thereof and the manner in which it will be distributed. The shareholders agreement should furthermore provide guidelines to be followed when a Shareholder wishes to sell his/her shares, and provide a process to follow when approving a buyer.

4. Board of Directors

The Shareholders Agreement governs the way in which directors are appointed as well as the maximum number of directors to be appointed to the board. The Shareholders Agreement should also stipulate the manner in which directors are removed and/or replaced, the extent of their duties and how the meetings can be arranged.

5. Deadlocks and Disputes

Disputes between Shareholders are inevitable. It is therefore critically important that each Shareholders Agreement clearly stipulates guidelines to assist Shareholders should a dispute arise. Most Shareholders Agreements subject parties to alternative dispute resolutions, such as mediation, negotiation and arbitration, and only where the dispute is not resolved in that manner, will the parties be allowed to institute legal action.

Contact our legal team for more information on structuring a Shareholders Agreement that will benefit your company’s unique needs and requirements.