Expanding a business is the goal of many small business owners. It is an indication that your business ideas and decisions are viable. Adding shareholders is often part of the growth process and drafting a comprehensive shareholder agreement before implementing a growth plan is vital.
Defining Shareholder Agreements
Shareholder agreements can vary considerably depending on the intentions of the parties involved as well as their business needs, but the basic goal remains the same—to aid the parties in memorializing their rights and obligations, as well as providing guidance through unexpected situations and resolving disputes which may arise. Inside each document, you typically find detailed information regarding the relationship the company has with shareholders as well as the privileges and protections afforded to each of the parties.
Shareholder agreements are an added layer of protection for your small business. Unlike the articles of incorporation and other constitutional documents of a company, they can be kept strictly confidential and can typically be amended more easily than the company’s other controlling documents. Such agreements may include provisions which dictate:
- who can be a shareholder;
- who can serve on the board of directors;
- what happens if one of the shareholders becomes disabled or dies, files personal bankruptcy, resigns, retires or is fired;
- how much shares of stock are worth;
- whether the corporation will be required to purchase the shares of a shareholder who’s leaving;
- and how much will be paid for the purchase of such shares.
Such provisions can protect a company from being dissolved or facing an unwanted takeover.
Is Your Company Ready?
Not every company needs to hire a business attorney to draft this essential document. If, however, your company meets any of these criterion, a shareholder agreement is a critical component in our plan:
- You are adding more than one investor to your company, especially if the investors are unrelated and not close family members, such as a husband and wife.
- There is a need to create rules to help govern disputes between company owners.
- You are already a shareholder in a company and you wish to protect your interests.
The attorneys at Gehres Law Library have the knowledge and experience to assist you in drafting your corporate and business documents. Contact us today for a free evaluation.