Shareholder’s Agreement

June 11, 2019

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What is a Shareholder Agreement?

It is an arrangement among a company’s shareholders that describes how the company should be operated and outlines shareholders’ rights and obligations. The agreement also includes information on the management of the company and privileges and protection of shareholders.

What is the need of a Shareholder’s Agreement?

Helps in resolving all disputes amongst the shareholders.
Maintain a healthy relationship among between the shareholders and the company.
Protects the investment made by then shareholders.
Lays down the rules and regulations for the shareholders and any other party related to the company.

Essentials of the Shareholder’s Agreement

Proportion in which a shareholder is going to hold he shares.
Different classes of shares
Different categories of shareholders
If there is a new issue of shares in the market should the existingshareholders get the privilege of getting those shares first?
Power of Board of Directors in issuance of shares and if they can stop the transfer of such shares.
Rules of transferring of shares.

Things to be Kept in Mind while Drafting a Shareholder’s Agreement

Understand the need of the agreement.
Make it as unambiguous as possible.
There should be a clear listing of rights and obligationsof both parties i.e. the shareholders and the company.
Clear procedure when a shareholder wants to leave.
Method of dispute resolution including the mode, place, powers and duties etc.
Restriction on transfer of shares should be clearly mentioned.