When forming a corporation, one of the most important and impactful steps you take is the creation of a detailed, thoughtful shareholder agreement. This document establishes your intent for how your business will be run, how to address problems, and what the responsibilities and benefits of being a shareholder are. A carefully crafted shareholder agreement will answer all of the questions most likely to arise in order to avoid confusion or misconceptions in the future.

Each shareholder agreement should include certain basic elements. These are:

• The legal names and contact information of the corporation’s shareholders, including distinctions regarding officers and managing shareholders
• The responsibilities of the shareholders, including how officers are appointed and terminated and rules regarding actions taken in the name of the corporation
• What the voting rights of the shareholders are, what percentage of votes will be required to move forward for different types of decisions, and which decisions will not be left to shareholders
• How decisions regarding the corporation should be made in specific circumstances including acquisition of property, repayment of loans, and more. The more detailed and inclusive this aspect of the shareholder agreement, the less chance of disagreement in the future.
• The requirements for making changes to the shareholder agreement, including what percentage of a shareholder agreement is required for different circumstances
• A description of how corporate stock can be sold or transferred in order to control and protect shareholders from outside influence and address transfer of stock in cases of death, divorce or other similar circumstances
• The legal obligations for all parties to the agreement
• The financial responsibilities of the corporation’s shareholders
• How dividends are to be distributed
• Details of the requirements for dissolving the corporation

The shareholder agreement will be the guiding document as your business moves forward, and you want to make sure that its language is a reflection of careful thought and consideration. In examining each of these aspects of the agreement and assessing how each should be addressed, it is necessary to have open dialogue with all stakeholders, meeting with them to establish priorities and ground rules and then consulting with legal experts about best practices and the right way to move forward. For knowledgeable and experienced legal assistance with writing a shareholder agreement, contact us today.