Drafting a shareholders agreement is a complex affair. You need the advice of a legal expert experienced in business law. When drafting a shareholders agreement, a business lawyer identifies areas where potential disputes may arise. Once a corporation’s shareholders agree on a solution to each of the potential conflicts, this will then be documented on the shareholders agreement.
Shareholders are identified as they become part of the agreement. Some shareholders may not need to sign the agreement, as in the case of large corporations. But in general, SMEs shareholders will sign a company’s agreement.
The legal terms used in an agreement have to be specified at the outset of the document. All definitions need to be explained. Some of the terms requiring definition and clarity are: articles, board, shareholders, shares and director’s resolution.
The document will disclose in detail the company’s structure. It will identify the board of directors, how often they meet and how directors are recruited or chosen. It will also identify the officers and respective titles as well as any compensation due.
Roles have to be specified and those authorized to carry out certain tasks need to be identified, including any financial matters which should be disclosed in detail. Procedural rules need to be outlined and they need to be consistent with the bylaws.
If you are thinking of drafting a shareholders agreement, please give us a call and we’ll offer an initial consultation with no obligation. SG
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