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Shareholder Agreements – Part Eight
Shareholder Agreements: 8) Other agreements with shareholders Employment Contracts If a shareholder will be running the business, an employment contract is a good idea. A clause can be added so that a breach of the employment contract triggers a default under the shareholders’ agreement. Non-Competition, Non-Solicitation and Confidentiality Agreements In general, shareholders should not be [...]
Located in: Corporate and Commercial Law
Shareholder Agreements – Part Seven
Shareholder Agreements: 7) Death of a shareholder The death of a shareholder can paralyze a company that has not prepared for it. Surviving shareholders will likely not want to be in business with the heirs of the dead shareholder, as they may not have the necessary experience or interest, or simply may not be compatible [...]
Located in: Corporate and Commercial Law
Shareholder Agreements – Part Six
Shareholder Agreements: 6) Defaulting shareholders A shareholder agreement can provide remedies in the event that a shareholder defaults in his or her obligations to the company, or if the circumstances of a shareholder change fundamentally. For example, if a shareholder quits his or her job with the company, goes bankrupt, or becomes physically or mentally [...]
Located in: Corporate and Commercial Law
Shareholder Agreements – Part Five
Shareholder Agreements: 5) Shotgun clause A simple and effective way to facilitate a buy out is to add a “shotgun clause” to an agreement. Under a shotgun clause, one shareholder offers to buy the other shareholder’s shares. The other shareholder can either accept the offer or buy out the offeror’s shares on the same terms. [...]
Located in: Corporate and Commercial Law
Shareholder Agreements – Part Four
Shareholder Agreements: 4) Restrictions on Share Transfer Shareholders generally want some control over who the other shareholders will be. At the same time, this expectation needs to be balanced with allowing shareholders to leave the company when they choose, and for a fair price. A shareholder agreement normally allows shareholders to sell to outsiders only [...]
Located in: Corporate and Commercial Law
Shareholder Agreements – Part Three
Shareholder Agreements: 3) Participation in management and protection of minority shareholders Without a shareholder agreement, a simple majority of the directors can decide on major decisions such as: • major capital expenditures; • borrowing or granting security for capital expenditures; • distributing profits; • remuneration of key employees; • contracts between the company and shareholders; [...]
Located in: Corporate and Commercial Law
Shareholder Agreements – Part Two
Shareholder Agreements: 2) Distribution of Profits Earnings can be paid out by way of salary, dividends, interest payments on shareholders’ loans, repayment of shareholders’ loans or return of capital. Most companies retain part of their earnings and declare dividends with the rest. However, shareholders may hold very different views on what should be done with [...]
Located in: Corporate and Commercial Law
Shareholder Agreements – Part One
If your company has more than one shareholder, you should have a shareholders agreement. While they can be costly and a pain to negotiate, they anticipate problems, prevent misunderstandings and generally pay for themselves many times over when difficulties arise. In this eight-part blog on shareholder agreements, we will cover areas such as financing, distribution [...]
Located in: Corporate and Commercial Law
