Shareholders Agreement Standard Clauses

For example, Pat, Chris and Jean are the founding shareholders (the “founders”) of the company and Mikey is an angel investor; It is important that your shareholders` pact is properly developed so that it is tailored to the needs of your business. If you have questions about drafting a shareholder contract, contact LegalVision`s lawyers at 1300 544 755 or fill out the form on this page. From the definition of management strategies to the presentation of the impact of capital raising on voting rights, to the regulation of loans or debt agreements, a shareholders` pact is intended to provide clear guidance in times of change and uncertainty. In the event of a voluntary transfer, the selling shareholder must ensure that the terms of the takeover offer are extended to other shareholders in proportion to their respective shares. The rights of the tag along exist to protect minority shareholders, so that a majority shareholder, when it sells its shares, grants other shareholders the right to join the transaction. (This full section allows a shareholder to sell his shares to other shareholders, otherwise he can sell them to other parties – with conditions!) Call options in the SHAs haunt shareholders or the entity to compel a shareholder to sell its shares to them or the company at a certain price or a predetermined formula. A call option includes triggers other than automatic transmissions and can be an effective way to remove a shareholder from a company. A call option may be limited and cut to be exercised at a later date or date or caused by certain events such as. B where: shareholders cannot agree on specific issues; it is not possible to reach the level of approval required for specific issues, such as investments or dividends; or a shareholder is simply a problem, causes trouble or is incompatible.

The shareholder agreement can also make drag along and tag along clauses, which defines what happens if a third party wants to buy the entire company. Pull along and tag clauses that define the rights of majority and minority shareholders, if that is the case. Another safeguard clause for shareholders includes restrictions on the transfer of shares. This ensures that the shares cannot be sold to an undesirable third party without the entity first finding a buyer or offering it to other existing shareholders at the same price as that offered to that third party. In share price litigation, an independent valuation or formula can be provided to determine fair value. If the price is less than the price offered, the shareholder may revoke his share transfer notification. In particular, restrictions on the transfer of shares generally do not apply when shares are transferred to a shareholder`s family members or trust. These clauses are introduced to protect the interests of minority shareholders.

In general, minority shareholders cannot block decision-making, such as the appointment and dismissal of directors. In other words, a minority shareholder may hold 49% of the shares, but still does not have the power to influence the composition of the board of directors. In order to mitigate this rigidity, the shareholders` pact may provide a clause allowing a minority shareholder with a minimum percentage to appoint or remove a director.