The goal of a shareholders' agreement is to safeguard both the company and its shareholders. It ensures that stockholders are fairly treated. It can also benefit minority shareholders, who typically have little power over the management of the company. It spells forth the shareholders' rights and responsibilities.
Minority shareholders are people who own less than 50% of a company's shares. Minority shareholders typically have minimal authority over the business because most companies operate according to majority decisions. Minority shareholders' interests have been protected by legislation.
What should be included in a shareholders’ agreement?
- Issuing and transferring shares, including restrictions to prevent undesired third parties from acquiring shares, what happens to shares if a shareholder passes away, and how a shareholder can sell shares.
- Any tag-along or drag-along provisions are included.
- Providing some protection to shareholders who own less than 50% of the stock, such as requiring all owners to agree on certain choices.
- Dividends are being paid.
- Managing the business, which includes appointing, removing, and compensating directors.
- the frequency with which the board meets,
- deciding on the company's business, investing big sums of money, etc.
- providing shareholders with management information, banking arrangements, and firm finance
- Restriction on competition
- Procedures for resolving disputes.