What makes a shareholders agreement complete?
As the name
suggests, the shareholders agreement is an agreement that deals with the rights
and obligations of the shareholders in a particular company. There are some
obvious advantages of the shareholders agreement (flexibility, low administer
costs, confidentiality, increased protection of the shareholders) and
unfortunately, some disadvantages (problems with bankruptcy, monopolistic
practices).
However,
all shareholders agreements would normally contain the following things:
ownership and voting rights section, control and management section, dispute
resolution and other features. The ownership section states how shareholders
can trade the shares and outlines any restrictions that they might have. For
example, some shares are not allowed to sell for some period – that can be a
week but it can be a year as well. Or you can sell them, but you pay a fine for that.
Other shares explicitly require approval by the Board and just then can be
sold. Remember that before going for a shareholders agreement it is essential to know how to establish successful business relationships.
There are shares that can substitute for obligations or even for real estate assets. In general, most shares can be sold freely but companies design different kinds of shares to meet their needs. There are more than 500 different types of shares according to many sources and it will take a while to describe all of them. It is also mentioned in this chapter, how interest on shares is formed. Some shares also give the right to vote while others do not. Many people are also given the opportunity to change the type of their shares. It is also very important to describe the per-emption rights here. This is the exclusive right to buy newly issued shares before anyone else. It is normally granted to current shareholders and it is meant to keep the control of the company. Minority shareholders also get protection in this section.
There are shares that can substitute for obligations or even for real estate assets. In general, most shares can be sold freely but companies design different kinds of shares to meet their needs. There are more than 500 different types of shares according to many sources and it will take a while to describe all of them. It is also mentioned in this chapter, how interest on shares is formed. Some shares also give the right to vote while others do not. Many people are also given the opportunity to change the type of their shares. It is also very important to describe the per-emption rights here. This is the exclusive right to buy newly issued shares before anyone else. It is normally granted to current shareholders and it is meant to keep the control of the company. Minority shareholders also get protection in this section.
